Proof-of-stake is a cryptocurrency consensus mechanism for processing transactions and creating new blocks in a blockchain. A consensus mechanism is a method for validating entries into a distributed database and keeping the database secure. In the case of cryptocurrency, the database is called a blockchain—so the consensus mechanism secures the blockchain.
An alternative consensus mechanism, and a key feature of Ethereum 2.0, in which the staking of an asset on the next block replaces the mining of blocks as in proof of work (PoW). In PoW, miners need to spend on electricity and equipment to win a block. In proof of stake, validators commit some capital (the stake) to attest that the block is valid. Validators make themselves available by staking their cryptocurrency, and then they are randomly selected to propose a block. The proposed block needs to be attested by a majority of the other validators. Validators profit by both proposing a block and attesting to the validity of others’ proposed blocks. If validators act maliciously, there is a penalty mechanism whereby their stake is slashed.
