Cryptocurrencies require a method of transaction verification because they are decentralized and independent of financial institutions. Proof of stake (PoS) is one technique that many cryptos employ.

Cryptocurrency transactions are verified via a form of consensus process called proof of stake. With this approach, cryptocurrency owners can stake their coins, giving them the authority to review and add new blocks of transactions to the blockchain.

Proof of work, the first cryptocurrency consensus mechanism created, is a substitute for this process. Proof of stake has grown in popularity as concern over how crypto mining impacts the environment has increased because it is significantly more energy-efficient.

Staking is the act of pledging your coins for use in transaction verification. While you stake your coins, they are locked up, but you can unstake them if you want to swap them.

The proof-of-stake mechanism of the cryptocurrency will pick a validator node to examine a block of transactions when it is ready to be processed. The block’s transactions are examined by the validator to determine their accuracy. If so, they upload the block to the blockchain and are rewarded with cryptocurrency. However, as a punishment, a validator loses some of their staked holdings if they suggest adding a block that contains false information.