As cryptocurrencies keep evolving, more projects are taking shape in providing the necessary services to crypto investors. Cryptocurrency projects use either Proof of Work (PoW) or Proof of Stake (PoS) to validate transactions on the blockchain network. At the moment, PoW has lesser popularity due to low speed, high fees, and higher demand placed on the environment. Consequently, there is a large number of people flocking into PoS crypto projects.
The idea of Proof of Stake (PoS) projects came into light in 2011 on the Bitcointalk forum, where issues of PoW were being addressed. Even though both have the same goal, the process of achieving the goal is quite different. PoS necessitates that potential validators “stake” their network tokens with no mining involved. Participants stake crypto to gain rewards by either designating reliable validators or becoming validators themselves.
Innovative PoS Projects
Despite there being several projects, some PoS projects are more innovative than others. Let’s explore:
Neo(NEO)
As a blockchain network, Neo is similar to Ethereum except that Ethereum runs on PoW while Neo is a PoS network. Neo operates mainly in China. It is a blockchain-based platform supporting its own money and enabling digital assets and smart contracts to be developed. It parallels the US-based blockchain Ethereum network in this regard.
The development of its innovative system of consensus is one of these elements. From the outset, Neo has used the dBFT 1.0 adaptation, which allows quick one-block finality of pBFT (Practical Byzantine Fault Tolerance). In other words, the definition of a single block indicates that confirmed transactions in the next block become irrevocable.
The two token schemes, NEO and GAS, is another aspect of Neo which grabs attention. NEO allows holders to manage and decide on the network (e.g., modifications to parameters). On the other hand, GAS works as a network utility token (e.g., pay for transactions, smart contract deployments, and invocations). Note that at the launch of the MainNet, 100 million NEO were minted.
Tezos
One of the most efficient and technically sound platforms among blockchain initiatives implementing PoS is Tezos. Tezos uses a variation dubbed liquid evidence of stake of the delegated protocol. The mining or validation process in Tezos is termed baking. Also, the algorithm selects an array of eligible nodes to create a block (bakers).
An open pool of bakers is one of the main reasons that Tezos shines through its liquid PoS protocol. Everyone can be turned into a baker with a bet of 1 roll or greater (8,000 XTZ), even if a more significant stake increases the chances of getting selected.
Another thing about Tezos is that if a baker discovers a node to spend two times, they can report that to the next cycle. However, it is only with proof that the malpractices are prevented because bakers need to lock some stake to participate in the baking process. The same goes for certifiers that may lose a part of the tokens they have locked when they act maliciously.
Elrond
Elrond proposed an upgrade that reduces latency to allow the consensus group members (block proposers and validators) to be identified. It does so by identifying each node in the shard at the start of the round. It is achievable since the randomization component of the last block is the aggregated signature.
Unlike Algorand’s approach, where selecting random committees can take up to 12 seconds, Elrond significantly reduces the time needed to select the consensus group randomly. It’s usually estimated under 100 ms).
Moreover, Elrond refines its consensus system by introducing a so-called rating additional weight element. The chance of selecting the node in the consensus group takes account of both the stake and evaluation, which promote meritocracy.
Elrond employs the multi-signature system of Bellare and Neven to eliminate the signing algorithm with one communication round.
BNB
The Binance Smart Chain uses the consensus architecture of Proof of Authority (PSA). It combines Proof of Authority (PoA) and Delegated Proof of Stake (DPoS). It can handle a short block duration and a minimum charge, and just 21 validators need to operate.
Validators are, in turn, creating blocks. They effectively power the BSC network by processing transactions and signing blocks. They are redeemed for their efforts in BNB coins. Meanwhile, stake management must be re-elected daily to be a part of the validator set.
A validator must spin the hardware node, run a complete BSC node and have at least 10,000 BNB involved. These requirements stands as the only threshold for candidates’ elections.
Also, a validator candidate must become elected to start creating blocks. The top 21 validators with the most voting power are the ones elected. You may check them out on the top validator list on the Binance website every 24 hours through a continuous election process.
Flow Token
Flow stems from Dapper Labs, which has decided to handle its challenge front-on by designing a solution designed for gaming. For all its projects, including NBA Top Shot, Dapper now uses Flow, but this is also open to other developers.
Flow uses a Proof of Stake mechanism where validators must participate in the network using a particular number of FLOW tokes.
However, validation works are unusual among blockchains. Flow divides validation responsibilities into four different kinds of nodes: consensus, verification, speed, and collection. The validation of each transaction involves all four node types.
Dapper believes that task division makes transaction processing more efficient than alternative blockchains. It is an alternative way to distribute or expand a blockchain’s stock and computing needs to various nodes. In doing so, Dapper states that Flow maintains the atomic, consistent, isolated, and durable (ACID) transactions. Moreover, it allows developers to build upon the work of each other.
Exceptional PoS Projects: The Verdict
Many PoS projects are available, and this article only focuses on the best few in terms of innovation. However, remember to do extensive research before rushing into any investment.
Proof of Stake is better for energy efficiency and provides more options for punishing bad actors. However, that doesn’t mean it will win against a group of miners who have a lot invested in Proof of Work.
Lastly, note that the PoS token offers two different ways of generating cash. The first is to acquire and keep the underlying token then watch over the price. It is a method most crypto-investors apply in long-term investments. Also, you can use the same tokens that you purchased in exchange for passive income like a bond or a dividend.
It’s this second stream of revenue for investors which makes PoS so attractive. It’s something PoW cryptos can’t give as well. In addition to any value of the underlying token itself, PoS staking can create another 10 to 30% annual benefits.