What is Proof of Stake (PoS)?

In Proof of Stake networks, you put up your own crypto to secure a blockchain, and the network pays you to do it.

You don't need mining equipment or expensive electricity bills. Validators lock up their coins, the network selects one to propose the next block. Honest validators get rewarded; those who cheat lose their stake.

That's the whole idea. The rest is just details.

How Proof of Stake works

Let's walk through the process step by step.

1. Validators stake their crypto

To participate, you lock up some of your crypto on the network. That's staking.

On Ethereum, you need 32 ETH. On Solana, much less. The exact amount depends on the network.

The crypto you stake acts as insurance. It says: "If I do my job honestly, I earn rewards. If I screw up or try to cheat, I lose this."

2. The network chooses who validates next

The network doesn't pick the person with the most money. It randomly selects from all active validators, usually giving slightly better odds to those who've staked more.

This randomness is intentional. It prevents any one participant from taking over just because they're rich.

3. Validators propose blocks

The chosen validator creates the next block of transactions. They verify that transactions are legitimate, package them together, and propose the block to the network.

Other validators review the proposal. If the block is valid, they attest to it (basically saying "I agree, this block is good").

4. Honest behavior = rewards

Do your job right, and you get paid. Usually the payout comes from newly created tokens plus transaction fees.

On Ethereum, validators earn around 3-4% per year on their staked ETH. Not bad for just running software honestly. Though validators still need decent hardware, not just any old laptop, it's a fraction of the hassle and cost of a mining rig.

5. Cheating = financial punishment

Try to propose a fake block or double-spend coins, and the network will catch you. When it does, a portion of your stake gets burned. This is called "slashing."

Lose enough and you're kicked out automatically. The penalty is harsh enough to discourage cheating, but if you follow the rules, you face no risk.

Pro tip: if you also want to start earning rewards from staking, you can do it directly in NOW Wallet. For a detailed step-by-step on how to stake each one, check out our separate staking guide

Why blockchains use Proof of Stake

There are a few very concrete reasons why networks are making the leap

1. Energy efficiency

Proof of Work is an energy nightmare. Miners compete to solve puzzles, and only one wins. All that computational power from everyone else? Wasted.

Proof of Stake doesn't need that competition. Validators just propose blocks and earn rewards based on their stake. Energy consumption drops by over 99%.

When Ethereum switched from PoW to PoS in 2022, they went from using as much electricity as a small country to using about as much as a website. That's the difference.

2. Lower barrier to entry

Mining requires expensive gear and tons of electricity. Staking requires crypto and a computer (or a cloud server).

More people participating means a more decentralized network. That's good for everyone.

3. Faster finality

With Proof of Work, a transaction isn't truly final for a while. You usually wait for 6 blocks to stack on top of yours just to be sure. That takes time.

With PoS, validators attest to blocks. Once enough validators agree, the block is final. Happens faster.

How PoS differs from Proof of Work

At their core, they're two different ways to secure a blockchain:

Proof of Work makes you solve complex puzzles to earn the right to add blocks. Whoever solves it first wins. It's energy-intensive but very secure — Bitcoin uses it.

Proof of Stake lets you propose blocks based on how much crypto you've staked. It's much more efficient and gives validators a direct financial incentive to behave honestly. Most new blockchains use it.

Both work. They just make different trade-offs.

For a detailed breakdown of how these two work side-by-side, read our guide. It covers the practical differences for crypto holders.

Common misunderstandings about PoS

”PoS is less secure than PoW”

Both are secure, just in different ways. PoW security comes from how expensive it is to solve puzzles. PoS security comes from how expensive it is to own enough crypto to attack the network.

If you attack a PoS network, you lose your stake. That's expensive. If you attack PoW, you waste electricity but keep your hardware.

PoS actually creates stronger incentives not to attack.

"Validators don't do any work"

They do. Validators run nodes, verify transactions, propose blocks, and participate in consensus. It's different from mining, but it's still work.

"Rich people control PoS networks"

Possible in theory, harder in practice.To seriously attack the network, on average, you'd need to control more than a half of all the staked crypto on it. That's an astronomical amount of money — and the moment anyone sees one entity getting too big, other holders have a strong incentive to stake their own coins too. Why? Because it dilutes that person's control and protects the value of everyone else's holdings. It's a self-correcting system.

Also, if you misbehave, you lose funds at the same rate. A validator with 1,000 ETH and one with 32 ETH get punished equally if they cheat.

"You can't lose money by staking"

You can. If your validator misbehaves, you lose a portion of your stake through slashing. If the network is attacked in certain ways, you can lose funds even if you follow the rules.

That said, on major networks, if you stake and don't break anything, the risk is tiny. You'll earn more in rewards than you'd lose in penalties.

"PoS and staking are the same thing"

Close, but not quite. PoS is the consensus mechanism — how the network validates blocks. Staking is the action of locking up crypto to participate in PoS.

You can use PoS without staking (you just earn nothing), but you can't validate without staking.

Which blockchains use Proof of Stake?

Most large networks now use PoS:

Ethereum switched from PoW to PoS in 2022. This was a big deal. Ethereum was (and still is) the second-largest blockchain by market cap. Proving that PoS could scale at that level changed everything.

Solana uses a modified version called Proof of History. Validators propose blocks based on their stake and timestamp data.

Cardano was built on PoS from day one.

Polygon uses PoS with delegated validators. You can stake through validators instead of running one yourself.

Polkadot uses a PoS variant with multiple parallel chains.

Bitcoin is the big exception. It still uses Proof of Work and has no plans to switch.

The economics of Proof of Stake

When you stake crypto, you're trading liquidity for rewards.

You lock up your funds (you can't trade them). In return, the network pays you to secure it.

The rewards vary:

- Ethereum: ~3-4% annually
- Solana: ~5-8%
- Cardano: ~2-5%
- Polkadot: ~11%-15%

These rates aren't fixed. They depend on network conditions, inflation, and how much total crypto is staked.

When more people stake, rewards get distributed among a larger number of participants, so each person's share is smaller. When fewer stake, each participant gets a larger share.

Why this matters

Proof of Stake changed how blockchains operate.

Energy usage dropped significantly. Participation opened up to anyone, not just large mining operators. And validators earn rewards by being reliable, not by having the fastest hardware.

That's why most new blockchains use PoS or something close to it. It's simply more practical.

FAQ

What's the minimum amount needed to stake?

It depends on the blockchain. Ethereum requires 32 ETH. Solana and Cardano have lower minimums. Some networks let you stake any amount.

Can I lose my staked crypto?

Yes, through slashing if your validator misbehaves or the network is attacked in specific ways. For well-behaved validators on major networks, the risk is minimal. You earn more in rewards than you'd lose in penalties.

How quickly can I unstake?

It varies. Ethereum has a queue system — you might wait days or weeks to withdraw. Other networks are faster. Check the specific network.

Do I need to run my own validator?

No. You can stake through delegated validators (where you give your crypto to someone else to validate) or through staking services. This is easier for most people.

What happens if the validator I choose misbehaves?

If it's a delegated validator, you lose rewards. If it's slashed, you lose a portion of your staked amount. You can unstake and delegate to a different validator.

Is PoS more secure than PoW?

Both are secure in different ways. PoW security comes from computational cost. PoS security comes from economic cost. They're equally valid, just different approaches.

Why did Ethereum switch to PoS?

Energy efficiency, primarily. Ethereum as PoW used as much electricity as a small country. PoS reduced this to negligible levels while maintaining security.

Can Proof of Stake be attacked?

It can be, but attacks are expensive. You'd need to control a majority of the staked crypto, and you'd lose that stake if the attack is discovered. This economic penalty makes attacks impractical.