In the early days of cryptocurrencies, the Proof of Work system was the popular consensus mechanism for confirming transactions on the blockchain without a third party. This was not surprising; it is what the creator of Bitcoin, Satoshi Nakamoto used. Since other early blockchain projects copied Bitcoin, most of them too used the POW system. While this was great to an extent, it was not without its problems, including the high energy consumption and its lack of scalability due to limits on the number of transactions it can perform simultaneously.
These challenges led to the development of other consensus mechanisms. Of all the other alternatives, one stood out as the best: the Proof of Stake model. In 2012, Sunny King and Scott Nadal created it, citing the high energy costs needed to sustain Proof of Work on Bitcoin. In recent years, there have been more calls from all quarters as the energy consumption continues to get higher, and we are starting to see more Proof of Stake blockchain. Even Ethereum is already working on shifting to a Proof of Stake model.
But before Proof of Stake became the popular solution, one blockchain has been the pioneer, NXT. NXT blockchain is the first pure POS coin. The blockchain, written in Java, was launched in November 2013, in the early days of the Proof of Stake model and way before every other crypto project saw the light. Unlike some that combined proof of work with proof of stake, NXT was completely proof of stake blockchain from the onset which meant there was no mining at all.
Of course, it is important to point out that before NXT, Peercoin had also implemented PoS, only that it did it in combination with Proof of Work which means it was not a true Proof of Stake blockchain like NXT. However, sunny King created Peercoin in 2013, and by combining Proof of Work with Proof of Stake, Peercoin was able to address the challenges of the initial distribution.
Another pioneer blockchain that soon followed NXT is Blackcoin. Blackcoin was different from NXT in that it had a much simpler protocol and the initial distribution was fairer. Created by Pavel Ashkin and launched in Febuary 2014, Blackcoin used a temporary PoW phase for its initial distribution. It also removed the coin age protocol which was added to Peercoin to minimize the monopolization of rewards by rich coin stalkers.
Soon after these two, other cryptocurrencies also started adopting Proof of Stake mechanisms with variations. One of the first was Bitshares. The platform introduced the Delegated Proof of Stake algorithm that many consider more efficient and democratic than PoS. With DPOS, there is a limit on how many people can validate a transaction and it is the token holders that will elect block producers.
Other projects such as Lisk, Ark, EOS, and Steem also adopted the DPOS algorithm. Both EOS and Steem were developed by Daniel Larimer and uses what is referred to as the Larimer’s Delegated Proof of Stake. Tezos also uses a similar DPOS algorithm but calls it Liquid Proof of Stake.
With time, more crypto projects have turned their attention to Proof of Stake. This is mostly because the proof of work model has been receiving many criticisms in recent years due to its energy consumption. Even one of the most prominent cryptocurrencies, Ethereum, is already considering switching to PoS. Its PoS variant is a Byzantine Fault Tolerance (BTF) PoS. In this version, Validators will get random block rewards, but for a consensus to be formed, every validator must vote for a chain. However, Ethereum is still using the proof of work model, and no one can tell when it will eventually migrate to it since it has postponed making the switch on numerous occasions already.
There are also other crypto projects such as Cardano, NEO, Polkadot, Dash, Algorand, Cosmos, etc., that have adopted the Proof of Stake model. Cardano implements a PoS system known as Ouroboros. On the Polkadot network, anyone can nominate Validators, but most times, it’s POS-as-a-service operators that validate transactions. On the other hand, Neo uses a Delegated Byzantine Fault Tolerance (BTF) PoS system in which validators can reach a consensus even when one or more participants is unreliable.
Recently, new altcoins such as Shiba Inu and SafeMoon have also adopted the Proof of Stake algorithms. These cryptocurrencies were introduced in early 2021, and their actual usefulness and potential are yet to be determined. For instance, Shiba Inu is a meme coin that mimics Doge coin and SafeMoon is also similar. In fact, many in the crypto community are still skeptical about these tokens with some even considering them to be Ponzi schemes.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
