Different Types of Proof of Stake and Staking
If you think of proof of work like ice cream, there are a lot of flavors of proof of work and they may use different algorithms , incentives , pools and other things. But at the end of the day they are all ice cream.
If you think of Proof of stake like Ice cream there are also many flavors. But Proof of stake is more of a “frozen dessert treat” than ice cream. Regular POS has all the different flavors such as randomized block selection , coin age based selection , inflation amount , and a variety of other factors.
But in this proof of stake analogy there are also different types of “frozen dessert treats”. There is frozen yogurt, gelato, Sherbet, and a few different subcategories under “frozen dessert treats” which are like ice cream, but different enough they are in a different category.
These variations are not always clear and could cause some confusion when purchasing proof of stake coins. So we decided to break down the “ different types of staking ” in a very general way so you can know the difference and how it applies to you, the investor.
Different Types of Staking
(Regular) Proof of stake
Regular proof of stake uses the same blockchain we are all familiar with. The difference being instead of proof of work like Bitcoin, in Proof of stake ( PoS ) the creator of the next block is chosen via various combinations of random selection and wealth or age ( i.e., the stake) not by computing power.
Simple Definition: Coins that anyone can stake with their own wallet.
This consensus mechanism was created by Daniel Larimer in order to solve Bitcoin’s perceived scaling problems . DPOS has proven to scale and is the consensus mechanism behind the 3 most active blockchains running today. It is similar to a democratic process where around 20 representatives are selected as the block producers for a blockchain. If you want to learn more ( follow this link ).
Simple definition: 20 of the top wallets/people are selected via votes to do staking
Leased Proof of stake
This consensus mechanism allows for effective pool mining in a regular staking setting. Any user is able to “lease” their coins to quality, well connected nodes which are similar to masternodes. In that, their needs to be a minimum amount leased. The ability for small users to lease their tokens to larger nodes and get more frequent rewards incentivizes small players to participate in this system.
Simple definition: Regular proof of stake except you users can lease staking ability to someone else.
Masternode Proof of Stake
A masternode is a well connected node with a set minimum (usually large amount) that must be staked to become a masternode. Masternodes are significantly invested with their large amount at stake so they are considered more trustworthy than a regular node like a Proof of stake consensus mechanism. Masternode staking is usually paired with regular proof of stake or Proof of Work like in DASH.
Simple definition: large stakers get extra privileges and rewards over normal stakers or POW
Zerocoin staking is specific to PIVX cryptocurrency (for now). It is essentially regular proof of stake except its completely anonymous.
Simple definition: anonymous proof of stake.
Hopefully these quick explanations of the different categories of staking is helpful in your investment decisions.
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