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Ethereum 101

Proof Of Stake

Instead of wasting energy to prove authenticity, a staking model would allow network participants with substantial Ether holdings to stake these coins as collateral. While this proposal is still in the early stages, other cryptocurrency networks such as Tezos have successfully implemented staking as a way to streamline block production.

A: Proof-of-Work B: Proof-of-Stake

C: The probability of mining a block is dependent on how much work is done by the miner. D: Person can 'mine' depending on how many coins they hold.

E: Payouts becomes smaller and smaller for Bitcoin miners. There is less incentive to avoid a 51% attack. F: The POS systems makes any 51% attack more expensive.

G: POW systems have powerful mining communities, but tend to become centralized over time. H: POS systems are more decentralized, but must work hard to build communities around their coins.

As the network grows, it is anticipated that a Proof-of-Stake based system would provide a less wasteful solution, while also enabling greater scale of block production. In the meantime, Proof-of=Work has proven to be a suitable solution for most applications.

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