Glossary · P
Proof of Stake (PoS)
A consensus mechanism in which validators are chosen to create blocks in proportion to the cryptocurrency they have 'staked' (locked as collateral). Ethereum uses PoS since 'The Merge' in September 2022. Validators earn staking rewards for honest participation and risk having their stake 'slashed' for dishonest behaviour.
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How Proof of Stake works in practice
Proof of stake selects block producers according to how much they have staked, replacing the energy expenditure of proof of work with capital at risk. Misbehaviour is punished by slashing the stake, so the security budget is the value of what can be destroyed.
Worked example
A validator stakes 32 ETH. Proposing and attesting correctly earns rewards; double-signing results in part of the stake being destroyed and the validator ejected.
Figures are illustrative and chosen to be checkable, not live market data.
The mistake that costs people money
Delegating to a staking provider does not remove slashing risk — it transfers operation, not liability. Concentration is also a live concern: a small number of providers controlling a large share of stake is a centralisation risk regardless of how many individual delegators there are.
Proof of Stake: common questions
- What is Proof of Stake?
- A consensus mechanism in which validators are chosen to create blocks in proportion to the cryptocurrency they have 'staked' (locked as collateral). Ethereum uses PoS since 'The Merge' in September 2022. Validators earn staking rewards for honest participation and risk having their stake 'slashed' for dishonest behaviour.
- How does Proof of Stake work in practice?
- Proof of stake selects block producers according to how much they have staked, replacing the energy expenditure of proof of work with capital at risk. Misbehaviour is punished by slashing the stake, so the security budget is the value of what can be destroyed.
- Can you give an example of Proof of Stake?
- A validator stakes 32 ETH. Proposing and attesting correctly earns rewards; double-signing results in part of the stake being destroyed and the validator ejected.
- What do people get wrong about Proof of Stake?
- Delegating to a staking provider does not remove slashing risk — it transfers operation, not liability. Concentration is also a live concern: a small number of providers controlling a large share of stake is a centralisation risk regardless of how many individual delegators there are.