Proof of Stake or PoS is a type of consensus algorithm by which a cryptocurrency blockchain network aims to achieve distributed consensus
among validators. In PoS based cryptocurrencies the creator of the next block is chosen via various combination of random selection and wealth or age.
=> In contrast, the algorithm of proof-of-work based cryptocurrencies such as bitcoin uses mining that is, the solving of computationnaly
intensive puzzles, to validate transactions and create new blocks.
Block selection variants
In order to be efficient, Proof of Stake algorithms must develop a way of defining the next valid block not solely relying
on the account balance of the different validators in order to avoid the situation where the single richest validators would benefit of a permanent advantage allowing him to
corrupt the network.
1st method : Randomized block selection
Here the idea is to use randomization to predict the following generator by using a formula that looks for the lowest hash values in combination with
the size of the stake. Indeed, since the stake are public, each node can predict with reasonable accuracy which account will next win the right to forge a block.
For example of this method you can go and have a look at the BlackCoin and Nxt projects.
2nd method : Coin age base selection
In this case the idea is a bit more subtle as we combine randomization with the concept of "coin age", a number derived from the product of the number of
coins multiplied by the number of days the coins have been held.
In this sense, through the coin age based selection, coins that have been unspent for at least 30 days begin competing for the next block. Older and larger sets of
coins have a greater probability of signing the next block. However, once a stake of coins has been used to sign a block, it must start over with zero "coin age" and thus wait at least 30 more
days before signing another block.
Also, the probability of finding the next block reaches a maximum after 90 days in order to prevent very old or very large collections of stakes from dominating the
blockchain.
For example of this method you can go and have a look at the PeerCoin project.
Advantages and risks
Incentives differ between the two systems of block generation. Under PoS miners may potentially own none of the currency they are mining and thus seek only to
maximize their own profits. It is unclear whether this disparity lowers or raises security risks. Under proof of stake, however, those "guarding" the coins always own the coins, although several
cryptocurrencies do allow or enforce the lending of staking power to other nodes.
Nonetheless, some authors argue that proof of stake is not an ideal option for a distributed consensus protocol. Indeed, one issue that can arise being the
"nothing-at-stake" problem, wherein block generators have nothing to lose by voting for multiple blockchain histories, thereby preventing consensus from being achieved because unlike in
proof-of-work systems, there is little cost to working on several chains
