Like Proof-of-Work (PoW), Proof-of-Stake offers validators a monetary reward for updating the blockchain. However, it does not impose a monetary cost, such as that incurred from solving PoW problems. Hence, the Nothing-at-Stake problem, detractors assert, implies that validators will always update the ledger, even if it unnecessarily perpetuates disagreement. 

Nothing-at-Stake problem

Validator fraud happens when a validator is able to steal coins from other users.

Validator fraud

Wealth concentration is the concern that Proof-of-Stake will lead to the rich getting richer, causing a concentration of wealth.

Wealth concentration

A double-spending attack is when an attacker uses native coins to purchase a physical good, but then attempts to reverse the transaction to regain possession of their coins. 

Double spending

Staking pools are organizations of individual stakeholders join together to share rewards from validation.

Staking pools

- Nothing-at-Stake problem
- Validator fraud
- Wealth concentration
- Double spending
- Staking pools

University of Minnesota - Twin Cities

This consensus mechanism depends on selecting validators by their proportion of holdings. Cardano is an example of a blockchain that uses Proof of Stake.

Proof of Stake Protocol

Saleh, Fahad. (2021). Blockchain Without Waste: Proof-of-Stake. Wake Forest University. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3183935


Blockchain Without Waste: Proof-of-Stake

Concerns regarding Proof-of-Stake

- Restricting access to update the blockchain
- Sufficiently low block rewards
- Sufficiently modest block reward schedule

Conditions for generating consensus with Proof-of-Stake

- Ability to generate consensus with low block rewards
- Scalability without incurring greater computational costs

Advantages of Proof-of-Stake

- Follow-the-Satoshi (FTS) algorithm
- Digital Signature Scheme (DSS)

Implementations of Proof-of-Stake

- Peercoin blockchain
- Nxt blockchain
- Decentralized applications (dApps)
- Algorand


Proof-of-Stake in practice

The Follow-the-Satoshi algorithm divides time into periods called time slots. Only one block can be added to any blockchain branch in any given slot.

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