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Proof of Stake (PoS) Mining - A Green Alternative

Syntropy Cloud Mining is constructing from the ground up a new type of ‘Proof of Stake’ mining network. This advanced network is not built on a ‘Proof of Work’ template, as many others; this structure is being created as ‘the green alternative’ to those high energy consuming PoW frameworks.

A completely new approach is essential in response to an urgent appeal and an immediate demand in this phenomenal new industry. Meeting that need is, by its very nature, a bit stressful and challenging because nothing done right in the world of coding happens very quickly.

The need, as we see it, is really twofold:

  1. increase the energy efficiency and
  2. boost the security of the mining networks.

Proof of Stake cryptocurrencies are much more energy efficient than those based on Proof of Work algorithms. Incentives also differ between these two systems of block generation. Using Proof of Work systems, miners may not always own their coins and may seek only to maximize their own gains.

In Proof of Stake systems, miners "staking" the coins always own the coins, and this leads to lowering security risks. The end result of Proof of Stake networks is to achieve a distributed consensus, where the creator of the next block is chosen by various combinations of random selection. i.e., the percentage of ‘stake’.

In Proof of Stake a person can mine or validate block transactions according to how many coins he or she holds. This means that the more coins owned by a miner, the more mining power he or she has. And ultimately the more devoted they are to the advancement of the network.

Proof of Stake mining was created as an alternative to the PoW networks to tackle the inherent issue of the huge amount of computing power necessary to run the different cryptographic calculations to unlock the computational questions.

This computing power translates into a vast amount of electricity and power needed. It is estimated that one PoW transaction now requires the amount of electricity used to power 1.57 American households per day.

To pay the electric bill, miners usually sell their awarded coins for fiat money, this leads to a downward movement in the value of the cryptocurrency.

Proof of stake networks address this issue by attributing mining power to the proportion of coins held by a miner. This way, instead of using more and more energy to answer PoW puzzles, a PoS miner is limited to mining a percentage of transactions that is reflective of his or her ownership stake.

For instance, a miner who owns 3% of the coins available can theoretically mine only 3% of the blocks. This distributes the power consumption and requirements across the network and reduces the total electric power used exponentially.

Proof of Stake networks also address the commitment to security; a PoW system is susceptible to potential fraudulent transactions. At a future point in time when there are fewer miners available due to little or no block reward from mining, the only earnings would come from transaction fees.

These fees diminish over time as users opt to pay lower fees for their transactions. With fewer miners than required mining for coins, the network becomes more vulnerable to a 51% attack. A 51% attack is when a miner or pool controls 51% of the computational power of the network and creates fraudulent blocks of transactions for himself, while invalidating the transactions of others in the network.

With a more protected and stable strategy, in a PoS network, the attacker would need to obtain 51% of the cryptocurrency to carry out a 51% attack. Proof of stake networks avoid this security issue by making it extremely disadvantageous for a miner with a 51% stake in a coin to attack the network.

Although it would be difficult and expensive to accumulate 51% of a reputable digital coin, a miner with 51% stake in the coin still would not have incentive to attack a network in which he holds a majority share.

If the value of the cryptocurrency falls, this means that the value of his holdings would also fall, and so the majority stake owner would be more incentivized to maintain a secure, smoothly running network.