A cryptocurrency consensus mechanism used to develop new blocks in a blockchain and process transactions.
The Long Explanation
Proof of Stake (PoS) is a consensus mechanism used by blockchain networks to verify and validate new cryptocurrency transactions. As blockchains are decentralized and have no centralized governing authorities, proof of stake is used to assure that the data saved on the blockchain network is valid.
In this process, participants or validators lock up their stake – a particular amount of crypto tokens or cryptocurrency – in a smart contract on the blockchain network. What they get in return is the ability to validate new transactions and get a reward, which is usually new crypto. However, if the validation is not done genuinely, or fraudulent methods are used, the validators are likely to lose some amount or their entire stake as penalty.
Proof of Stake was developed as an alternative to Proof of Work (PoW), which was the original or the first iteration of the consensus mechanism used for the validation process and to add new blocks to a blockchain.