Proof-of-stake is a consensus algorithm similar to proof-of-work. Unlike proof-of-work, a blockchain network that uses the proof-of-stake algorithm does not rely on traditional mining to validate transactions and determine who gets to add a new block to the blockchain - at least, not in the same way as bitcoin and other digital currencies using the proof-of-work model. Instead, the network assigns specific users to serve as "validators" - users who create blocks and validate changes made to the blockchain based on how much of the network's cryptocurrency they hold in their possession. Ethereum creator Vitalik Buterin described this theoretical model in detail on his website. The idea is that the more of a network's cryptocurrency you have, the higher your stake in that system. The higher your stake, the more likely you are to be chosen by the system to create a new block. Another key difference is that, rather than "discovering" cryptocurrency tokens in a blockchain, all the tokens already exist - they are simply parsed out over time by the network.
- A (Short) Guide to Blockchain Consensus Protocols. Coindesk.
- Validator Ordering and Randomness in PoS. Vitalik Buterin's Website.
- Taxation Of Cryptocurrency Proof Of Stake Transaction Fees. Forbes.