What is Proof-of-Stake?
Proof-of-stake (PoS) is a type of consensus mechanism used by blockchain networks to maintain the integrity of a cryptocurrency. Users can mine or validate block transactions according to the number of coins in possession. Using a pseudo-random selection process, the proof of stake algorithm selects validators based on a combination of factors, including staking age, randomization, and node wealth. A consensus can be reached when the nodes are selected without using up large amount of power in the process of winning the blocks. Nodes or stake pools are chosen based on the size of the “stake” it holds. The stake pool that has more coins will most likely be chosen to forge blocks and get rewards. PoS is created as an alternative to the Proof of Work (PoW), a system that is energy-consuming as it requires massive computational power to achieve consensus in a decentralized manner to prevent spam or launching of denial-of-service attacks.
Who is Behind Proof-of-Stake?
The first idea was presented in a thread back on July 11 2011, by a BitcoinTalk user, QuantumMechanic, providing suggestions to lower transaction fees and speed up confirmation.
QuantumMechanic’s Bitcoin Talk Thread (Sourced from BitcoinTalk)
PoS was then proposed in a paper by Sunny King and Scott Nadal in 2012, aimed at solving Bitcoin mining’s high energy consumption, as it cost Bitcoin $150,000 per day to maintain the network. Sunny King the creator of PoS created Peercoin (PPC), which became the first-ever cryptocurrency to implement PoS, while maintaining PoW. Peercoin is then followed by other Proof-of-Stake projects such as NXT, Blackcoin, BitShares, Decred, Steemit, and many more. However, the most notable news that caused a buzz in the cryptocurrency is Ethereum’s transition from Proof-of-Work to Proof-of-Stake.
What are the strengths and drawbacks of PoS?
Firstly, PoS eliminates the requirement of expensive hardware or specialized computers to seize the opportunity to win block rewards so validators could use a normal desktop or laptop instead. Thus, less computational power is required, and it is environmentally friendly. This brings energy efficiency, thereby incentivizing more people to run nodes based on return on investment (ROI) and making the network more decentralized. However, PoS leads to monopolization. The validators with a large amount of coins can earn more rights to create more blocks and receive more rewards. Even with the coin age selection method, this problem cannot be fully avoided. Miners with larger staked coins would have more power. To simply put, the rich get richer.
What is Staking?
Similar to mining, staking means locking cryptocurrencies to receive rewards. It acts as a powerful governance system that strengthens network security and validates proof-of-stake blockchain transactions. Staking rewards and transaction fees will be given out as rewards to the users who contributed by holding up their coins to ensure the underlying PoS network operates securely and efficiently. A transaction fee is carried in each transaction to assist the nodes in prioritizing the selection of transactions that enter the blocks. It is essential to note that staking rewards differ from bond investments as the rewards received in the staking process are not derived from earnings but the proportion of newly minted tokens.
Simplified Staking (Sourced from Medium)
The Top 10 Proof-of-Stake Tokens
Cardano (ADA)
Cardano, a blockchain platform with a cryptocurrency called ADA, uses an exclusive proof-of-stake system on the blockchain, known as Ouroboros. Cardano was founded in 2017 by Charles Hoskinson, one of the co-founders of Ethereum. It was developed based on peer-reviewed research and is scalable enough to accommodate global and robust systems. The ADA Token can be traded on Coinbase, Bittrex, Coinmama, Binance, eToro, etc. It is very sustainable as it consumes only 6 gigawatt-hours (GWh) of power. According to Charles Hoskinson, it is 1.6 million times more energy-efficient than Bitcoin. Cardano will implement smart contracts soon once hard fork occurs.
Cardano’s Market Cap from September 2020 to July 2021 (Sourced from CoinMarketCap)
At the time of writing this article, Cardano ranks #5 with a market cap of $42,356,980,077 USD, which increased by 0.58% in the last 24 hours. It has a circulating supply of 32,081,210,042 ADA coins and a maximum supply of 45,000,000,000 ADA coins. Its market cap reached the highest point, exceeding $80.00 billion USD in mid-May 2021.
Cardano’s Price from September 2020 to July 2021 (sourced from CoinMarketCap)
Cardano’s price is $1.32 USD, and it increased 0.90% in the last 24 hours. Its 24-hour trading volume is $1,426,977,912 USD. It reached its highest price point in mid-May 2021.
Algorand (ALGO)
Algorand (ALGO) is one of the recognized public blockchain platforms founded by Silvio Micali, a professor of computer science at MIT. Its mainnet went live in 2019, and it delivers the highest finality using Pure Proof of Stake (PPoS) where risks of micro forks are reduced to zero as the consensus mechanism used does not admit forks at all. As a result, Algorand would only need 5 seconds to create blocks and process thousands of transactions per second, achieving finality in seconds. This makes Algorand one of the fastest, high-throughput blockchains in the market. Algorand can be purchased on Coinbase, Binance, OKEx, Kraken, Huobi, etc.
Algorand’s Market Cap from September 2020 to July 2021 (Sourced from CoinMarketCap)
At the time of writing, Algorand ranked #41 with a market cap of $2,651,502,743 USD, which has increased 1.78% since the last 24 hours. It has a circulating supply of 3,171,989,980 ALGO.
Algorand’s Price from September 2020 to July 2021(Sourced from CoinMarketCap)
Algorand is currently priced at $0.8336 USD has increased by 1.24% in the last 24 hours. Its 24-hour trading volume is $62,112,334.50 USD. It reached the highest price point in early February 2021, exceeding $1.60 USD. According to GOV capital, ALGO’s price is estimated to reach $3.11 USD while entering 2022.
Tezos (XTZ)
Tezos is a Switzerland-based blockchain platform that claims itself as “secure, upgradable and built to last” and was developed and co-founded by ex-Morgan Stanley Analyst Arthur and Kathleen Breitman in 2014. It uses a PoS consensus mechanism called Liquid Proof of Stake (LPoS). XTZ can be traded on major exchanges such as Binance and Coinbase.
Besides, Tezos is unique because participants can get involved with the network governance through baking (the term for staking on Tezos), where 8,000 XTZ can be staked, allowing it to create a financial incentive to act honestly. Tezos boasts a native smart contract language, called Michelson, which facilitates formal verification, a methodology commonly used in mission-critical environments such as the aerospace, nuclear, and semiconductor industries. This creates a more secure, stable architecture that lowers the barrier to entry for potential application developers, allowing the network to achieve growth and evolve. The formula to calculate how much bakers (Tezos validators) earn is:
The amount of XTZ you hold x Bakes per cycle = Rewards
Market cap of Tezos from January 2021 to August 2021 (Sourced from MarketCap)
Tezos is ranked #41 with a market cap of $2,659,266,098 USD, which has decreased 09.2% in the last 24 hours. It has a circulating supply of 854,542,127 XTZ coins. It reached its highest market cap in early May 2021.
Tezos’ Price from September 2020 to July 2021 (Sourced from CoinMarketCap)
At the time of writing this article, Tezos price is $3.13USD, which has increased 0.7% since the last 24 hours where the opening price is $3.03 USD, and the highest price reached $3.18 USD. Its 24-hour trading volume is $163,456,789.85USD.
EOS
EOS operates its open-source blockchain known as EOSIO, which was developed in 2018 by the company Block.one which allows develops to build decentralized apps (or DApps in short). EOS was launched by Dan Larimer, who is also the founder and creator of established platforms like Bitshares and Steem. Using a smart contract operating system, it is known for its user-friendliness and emulates the attributes of a computer, which provides familiarity. EOS can be traded on Binance, Coinbase, Kraken, and other exchanges. The EOS ecosystem is composed of two key elements: the EOS.IO and the EOS tokens. Profits can be earned when EOS are staked through running a Block Producer with an annual reward of 1.74% or by running a standby Block Producer with annual reward of 1.76% EOS uses a DPoS consensus mechanism which aims to overcome the flaws of the PoS and PoW systems as seen on Etheruem, by providing an open and accessible framework, offering speed, scalability and flexibility. The main unique feature is that EOS does not charge transaction fees, which means there is built-in inflation in the EOS ecosystem.
EOS’ Market Cap from September 2020 to August 2021 (Sourced from CoinMarketCap)
EOS ranked #29 with a market cap of $3,850,204,033 USD, which decreased by 2.21% in the last 24 hours. It has a circulating supply of 955,735,794 EOS coins. The market cap reached its highest price in early May 2021, exceeding $12.00 billion USD.
EOS’ Price from September 2020 to July 2021 (Sourced from CoinMarketCap)
The EOS price is $4.03USD, with a 24-hour trading volume of $883,613,766 USD. The price has decreased by 1.91% since the last 24 hours, with the lowest price of $3.88 USD and the highest price of $4.11 USD. It reached its highest price point in early May 2021, exceeding $12 USD.
NEO
Neo, formerly known as AntShares, is a crypto founded in China by Da Hongfei and Erik Zhan in 2014. It is also known as the Ethereum of China. Neo’s network has a lot of unique features, such as the oracle system that is used to feed external information to the decentralized storage system. Neo also uses a variant of the PoS protocol known as the Delegated Byzantine Fault Tolerance (dBFT), which allows validators of a transaction to reach consensus even when one more of participants are involved and deter untrustworthy participants from taking part. NEO describes its Smart Economy as (Digital Assets + Digital Identity + Smart Contract = Smart Economy). NEO supports two crypto coins, NEO and GAS. NEO serves as an investment token, whereas GAS is used to pay for the transactions that are being completed on the network. NEO can be purchased on Binance, Poloniex, and HitBTC. Currently, the top exchanges for trading NEO are Binance, OKEx, FTX, CoinTiger, and Huobi Global. However, it is not supported by Coinbase. NEO supports programming in all mainstream languages, including C#, Java, Go, Python, and Kotlin, facilitating a large community of developers to contribute to its platform easily.
Neo’s Price from February 2021 to August 2021 (Sourced from CoinMarketCap)
When this article is written, Neo’s price is $42.43 USD with a 24-hour trading volume of $437,094,559 USD. Neo is down 4.66% in the last 24 hours. Neo’s price decreased $1.76 USD or 3.99% in the last 24 hours. As seen above, the NEO prices peaked and exceeded $120 USD in mid-April and mid-June 2021.
NEO’s market cap from February 2021 to August 2021 (Sourced from CoinMarketCap)
NEO ranked #34 with a market cap of $3,014,791,679 USD as of writing. It has decreased 2.81% in the last 24 hours. It has a circulating supply of 70,538,831 NEO coins and a maximum supply of 100,000,000 NEO coins. Based on the chart above, NEO’s market cap reached the highest point, exceeding $8.00 billion USD in mid-April and at the beginning of May.
COSMOS (ATOM)
Cosmos claims itself as " The Internet of Blockchains.". It aims to create an interoperable platform to connect all the different blockchains via the central protocol. Cosmos is founded by the co-founders of Tendermint, Jae Kwon, Zarko Milosevic, and Ethan Buchman, in 2016. The challenge is to optimally align all security standards as well as the individual use cases. The respective blockchains that are connected to the central network are referred to as zones. They are managed and controlled by the Tendermint BFT consensus algorithm. The first zone, Cosmos Hub, serves as the central docking point where the external blockchains come together. Cosmos is available across several of major exchanges such as Binance, Coinbase, and OKEx. Cosmos uses Delegated Proof of Stake (DPoS), where delegators and validators operate.
Cosmos’ Market Cap from September 2020 to July 2021 (Sourced from CoinMarketCap)
Cosmos ranked #41 with a market cap of $2,630,918,858 USD at the time of writing, and it has decreased 3.42% in the last 24 hours. Its market cap reached its highest point, exceeded $4.80 billion USD at the beginning of May 2021. It currently has a circulating supply of 219,126,688 ATOM.
Cosmos’ price from September 2020 to July 2021 (Sourced from CoinMarketCap)
Cosmos’ price is $11.98 USD at the time of writing and it has decreased $0.2882 USD or 2.35% in the last 24 hours. The prices reached its highest point, exceeding $24 USD in the beginning of May 2021.
VeChain (VET)
VeChain (VET) was founded in 2015 by Sunny Lu, the former chief information officer of Louis Vuitton China, and Jay Zhang. VeChain is a blockchain-powered supply chain platform that aims to use distributed governance and Internet of Things (IoT) technology to create an ecosystem that solves some of the major problems with supply chain management. Vechain offers two coins, VET and VeThor (VTHO). This dual system seeks to prevent fee fluctuations and network congestion. VET holders automatically generate a small amount of passive income in VTHO, while 70% of the VTHO used in a VET payment is destroyed. Apart from implementing a PoS token, proof-of-authority is used by the authority masternode operators to maintain the protocol in their own interest . The VET token can be traded on a wide range of exchanges such as Binance, LAToken, OceanEx, and many more.
VeChain’s Market Cap from September 2020 to July 2021 (Sourced from CoinMarketCap)
VeChain ranked 22, with a market cap of $5,367,570,904 USD, which has decreased 4.77% in the last 24 hours. Its market cap exceeded $16 billion USD in mid-April 2021. It has a circulating supply of 64,315,576,989 VET coins and a max. supply of 86,712,634,466 VET coins.
VeChain’s price from September 2020 to July 2021 (Sourced from CoinMarketCap)
VeChain’s price is $0.083457 USD with a 24-hour trading volume of $485,903,984 USD. Its price has decreased $0.003391 USD or 3.79% in the last 24 hours. Its price reached the highest point in mid-April 2021 by exceeding $0.24 USD.
DASH
DASH, which originates from the term “digital cash”, was launched by Evan Duffield and Kyle Hagan as “Xcoin” in 2014, serving as a fork for the Bitcoin protocol. DASH implemented unique features such as PrivateSend or InstaSend to provide fast and secure transactions, a two-tier network with incentivized nodes called “masternodes”, and decentralized governance. HODLers can earn dividends by running a masternode. However, HODLers would need to have a minimum of 1,000 DASH units to run a masternode, where 1 unit of DASH is approximately $300 USD. HODLers will receive approximately 5.72 annual reward rate (check Staking Rewards for the latest rate). DASH can be purchased on major exchanges including Binance, Coinbase Pro, Huobi Global, Kraken, and OKEx. DASH is accepted globally along with fiat currencies, and it can be sold on spot and derivatives markets.
DASH’s Market cap from July 2020 to July 2021 (Sourced from CoinMarketCap)
DASH ranks #60 with a market cap of $1,597,095,999 USD, which decreased 3.90% in the last 24 hours. It has a circulating supply of 10,263,548 DASH coins and a maximum supply of 18,900,000 DASH coins. It reached $4.00 billion USD at the beginning of May 2021.
DASH’s prices September 2020 until July 2021 (Sourced from CoinMarketCap)
The Dash price for today is $155.61 USD, with a 24-hour trading volume of $229,709,284 USD. Its price decreased $5.41 USD or 3.36% in the last 24 hours. Based on the figure above, Dash reached its highest price point in early May 2021 by exceeding $400 USD.
ICON (ICX)
ICON is a general-purpose blockchain protocol based on its native cryptocurrency ICX that runs smart contracts, adopts the DPoS (Delegated Proof-of-Stake) protocol and the economic governance protocol called Delegated Proof-of-Contribution (DPoC). The ICON blockchain is powered by loopchain, which was designed by ICONLOOP based in South Korea. ICON uses a delegated point of sale consensus mechanism to select the nodes that will be added to the blockchain. Users can earn more by staking ICX coins, running a P-Rep subnode, and running the P-Rep masternode. From these three methods, staking gives the highest return, which is as much as 13% ROI. It can be traded on major exchanges such as Binance, OKEx, Tokocrypto, Huobi Global, and CoinTiger.
ICON’s Market Cap from September 2020 to July 2021 (Sourced from CoinMarketCap)
ICON ranked #98 with a market cap of $641,350,531 USD, which increased 0.86% in the last 24 hours. It has a circulating supply of 653,822,898 ICX coins. It reaches its highest price point by exceeding $1.60 billion USD at the end of March in 2021.
ICON’s price from September 2020 to July 2021 (Sourced from CoinMarketCap)
The ICON price at the time of writing is $0.980924 USD with a 24-hour trading volume of $58,412,998 USD. ICON is up 0.84% in the last 24 hours. It reached its highest price point by almost exceeding $3.20 USD.
WAVES
Waves is an open-source blockchain platform that supports DApps and smart contracts, founded by Ukrainian-born scientist Alexander Ivanov in 2016 following the initial coin offering (ICO). It uses Leased Proof-of-Stake (LPoS) and the optimization protocol Waves-NG, which is based on Bitcoin-NG, serializes transactions, and offers important improvements in the transaction latency. Waves’ native token is WAVES, and it can be traded on Binance, OKEx, Tokocrypto, FTX and Huobi Global. One of the key features is that it allows non-technical users to create digital assets called smart assets. Waves currently offer 2.9% annual returns.
Waves’ Market Cap from September 2020 to July 2021 (Sourced from CoinMarketCap)
Waves ranked #57 with a market cap of $1,683,419,985 USD, which decreased 0.30% in the last 24 hours. It has a circulating supply of 105,800,944 WAVES coins. It reached its highest point in early May 2021 by exceeding $3.20 billion USD.
Waves’ prices from January 2021 to July 2021 (Sourced from CoinMarketCap)
At the time of writing, Waves’ price is $15.91 USD with a 24-hour trading volume of $120,406,720 USD which decreased 0.10% in the last 24 hours. The figure above shows that it reached its highest price point in early May 2021 buy exceeding $32 USD.
Conclusion
The PoS mechanism is forwarding the nature of blockchain technology, making it both desirable and usable to organizations and institutions as it is energy efficient, has low barriers to entry, stronger immunity, and centralization. Moreover, it is a great way to earn passive income with Proof-of-Stake currencies. As you can see, there are a variety of coins that are profitable is many ways that were not mentioned above and we only discussed and selected the best ones based on our opinion.
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