PoW vs. PoS

A consensus mechanism can be structured in a number of ways. PoS (proof-of stake) and PoW (proof-of-work) are the two best known and in the context of cryptocurrencies also most commonly used. Incentives differ between the two systems of block generation.

The algorithm of PoW-based cryptocurrencies such as bitcoin and ethereum uses mining; that is, the solving of computationally intensive puzzles to validate transactions and create new blocks. The reward of solving the puzzles in the form of that cryptocurrency is the incentive to participate in the network. The PoW mechanism requires a vast amount of computing resources, which consume a significant amount of electricity.

The fundamental idea behind PoS is that the validators (the equivalent of PoW’s miners) use their stake in the system instead of computational power to validate transactions. With PoS there is no need for ‘hard Work’. Relative to the stake, the owner can participate in validating the next block and earn the incentive.

Elrond relies on a sharded state architecture and a secure Proof of Stake consensus mechanism.

Validating Blocks

The creation of new blocks in PoS is different between various implementations, but the general idea is that a validator gets the opportunity to create a new block with the same probability as its part of the total validating pool. Consequently, this can be compared with gaining interest on its stake. The specific technique for validation in PoS system is that validators bet their coins to validate transactions and get rewards in the form of transaction fees if they end up confirming the transactions that reach consensus among the validators.

Validation details on Elrond

To become a validator on Elrond network are required to provide a stake (an amount of EGLD locked as collateral for the good behavior of the validator). Also to operate nodes in the network, there is a significant amount of technical experience.

Requirements:

• minimum 2500 eGLD as stake
• Technical skills: running a Linux server, implementing a monitoring solution
• Server (physical or virtual) with the following requirements / node: 2 x CPU, 4 GB RAM, 100 GB storage, 100 Mbit/s connection

Economics:

Delegating

The Delegated Proof of Stake, or DPoS, is a further development of the Proof of Stake consensus algorithm, where the staking balance, by which the block producers are selected, is formed by other wallets, instead of the block producer’s own balance.

Delegation details on Elrond

To become a delegator on the Elrond network are required to have a stake, but not a minimal amount of EGLD to be locked, for the security of the network. Delegate your balance to a validator (Staking Provider), in this case ARC Staking Solutions, you will earn up to 29% APR. After 31.01.2021, the delegation and the validation reward will be changed, due to the increase of nodes that support the network. Delegate to Elrond through your best Staking Partner.

Requirements:

• any amount of eGLD as stake
• deposit the stake to our Elrond Staking Smart Contract

ARC Staking Solutions will do the work for you in exchange for a small commission that covers the node operating costs. Find out here the current APR’s for delegating with us.

Economics:

Find out more about staking on Elrond: https://docs.elrond.com/welcome/welcome-to-elrond/

ARC Staking

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