What is Proof of Stake?
Proof of Stake (PoS) is a type of consensus mechanism that allows validators to verify transactions on a blockchain. The PoS is a verification method used by blockchains that have smart contracts.
These smart contracts are protocols that automated and used for locking tokens for a given duration of time. PoS follows PoW or Proof-of-Work consensus model which requires computational power.
However, PoS switched to token reserves as warranty for ensuring validity of validators. Nodes on a PoS blockchain can lock their token reserves in the smart contract to become validators.
Blockchain allot transaction verification options to validators depending on their total token reserves.
What is Nominated Proof of Stake (NPoS)?
Nominated Proof of Stake (NPoS) works in the same manner as PoS but in this system network the blockchain awards block verification task to nominated nodes only. This system promotes goodwill and discourages bad actors.
In the event that a validator on the blockchain attempts to validate a fraudulent transaction, it is penalized and loses a portion of their staked tokens.
This is a security check that ensures security for the blockchain users and maintains integrity for validated transactions. NPoS assigns block verification task to only honest and reliable nodes so that they can contribute in the development of the blockchain ecosystem.
NPoS is a popular method for achieving consensus among blockchains since it harbors all benefits of PoS with added advantage of election from stakeholders.
Types of Nodes in Nominated Proof of Stake
Nodes participating in the Nominated Proof of Stake blockchains can be divided into two options based on their function:
Validators perform block verification and maintain validity of new blocks. They are responsible to adding new blocks that after completing verification process. Validator nodes on the blockchain have to stake maximum amount of tokens as part of the PoS model.
However, validators on NPoS blockchain must also be nominated by nodes. Once a node is validated by their peers they are allowed to validate new blocks and earn rewards.
Nominators are the nodes that cast a vote in favor of a validator on a blockchain. A validator node on an NPoS blockchain must receive a nomination from another node or nominator in order to verify blocks.
Nominators play an important role in the NPoS blockchain ecosystem since they make sure that only trustworthy and reputable nodes are allowed to validate new blocks.
Nominated Proof of Stake Blockchains
Here are some blockchain projects that are NPoS networks:
Cosmos is a decentralized network that operates as a network of various blockchains. It uses a 100-validator node network for consensus. The blockchain network is based on appchain system. It is also called the internet of blockchains and works as an open-sourced and interoperable blockchain for streamlining transactions on connected network.
Polkadot is also an interoperability solution provider that enables cross-chain transfers. Polkadot bridges blockchains using parachains and parathreads. These chains are connected and secured by Polkdot Relay Chain and they also connect with foreign networks using bridges.
In this manner, this blockchain enables the transfer of data and assets in addition to tokens. It is a layer 0 blockchain where layer 1 blockchains are deployed. This blockchain network also has Substrate framework allowing developers to generate a custom blockchain in minutes.
EOS blockchain was launched in 2017. It is a decentralized platform for industrial scale decentralized applications. Businesses can use suitable tools for building decentralized applications. It is a scalability solution that addresses issues like gas inflation and TPS.
EOS has smart contracts, cloud storage dApps, and user authentication. EOS runs thousands of transactions per second and benefits such as removal of transaction fees and supporting millions of transactions per second.
NPoS has become a popular blockchain consensus model as it offers many benefits such as energy efficiency and insurance of network integrity. It is used by blockchains that offer interoperability, scalability, and security solutions for the blockchain sector.