The advantages of a blockchain-based on a Proof-of-Stake algorithm

The Proof-of-Stake (PoS) algorithm is the most common alternative to the more well-known Proof-of-Work algorithm, used in the Bitcoin blockchain. PoS systems are designed to solve some of the problems and inefficiencies that afflict PoW-based blockchains.

No to miners, yes to validators

PoS completely removes miners and introduces the concept of “validators”: unlike miners, who use computational power to solve complex mathematical problems, the validators “bet” their funds on blocks deemed valid.

A validator can therefore be anyone who is willing to prove he owns a certain amount of cryptocurrency on the network. An algorithm determines which validators will be chosen for each block.

While miners try to increase their chances of solving complex mathematical problems through additional computing power, validators increase their chances of being selected for the validation of a block by betting more money on it.

51% attacks: PoW vs. PoS

One of the main issues with PoW systems is the possibility of a so-called 51% attack: this attack occurs when a single entity gets hold of over half of the overall computing power on the network (51%). This allows the attacker to validate any operation he or she wishes, including double-spending.

However, in a PoS system the attacker would not need 51% of the computing power but more than half of all the coins in circulation. This is obviously very unlikely, because few would trust a blockchain with such a centralized model. A PoS algorithm also solves the problem of excessive energy consumption typical of PoW blockchains, since it does not require computers running 24/7.

One of the main criticisms directed at PoS is that it still allows for some form of centralization. A higher number of cryptocurrencies owned means having more weight during the validation process: this results in a greater reward, which provides even more weight and so on. On the other hand an excessive amount of validators could slow down the network, because the time needed to reach consensus is directly related to their number.

Takamaka is entirely built on a Proof-of-Stake algorithm

Takamaka is built on a Proof-of-Stake algorithm that addresses potential PoS security problems. It’s an adaptive algorithm, which sets unique and specific conditions in order to mine a block:

- The balance sheet rankings of each node must be clear;

- You cannot spend more than what you have;

- The paid coinbase is set at 1 Green Token;

- Nodes create blocks only in their assigned slots;

- If a block is created outside its assigned slots, the block is discarded.

Thanks to this algorithm, participants are able to join the blockchain through a “bootstrap from genesis” process, using only the trusted copy of the genesis block and client, without having to know the entire history of the chain.