5.1.1. Proof-of-Stake Consensus Mechanism

Future Gold consensus mechanism is Proof-of-Stake (PoS), an alternative to Bitcoin’s Proof- of-Work (PoW) consensus mechanism. With PoW, miners solve hard mathematical problems that are easy to verify, in order to make sure that the network cannot be spammed by malicious clients.

Miners create new blocks of transactions by validating the transactions and putting the work of solving the mathematical problem in, hence the name. The first miner that finds a correct solution to the current block of transactions gets to collect the block reward, which consists of the transaction fees paid by senders and newly available coins.

PoS on the other hand allows holders of coins to stake them, which means that they receive the transaction fees paid by senders for helping the network with validating transactions. PoS blockchain clients do not have to prove that they put work in, because there is a different incentive that makes spamming the network or manipulating it unattractive: if a client is identified as a malicious actor, he loses his staked coins.

This is by far more energy efficient than PoW systems. Users can even stake their coins on a Raspberry Pi using only 2W of power. As a result, this maximizes the profits that users make when staking. The Future Gold blockchain pays 7% percent interest per annum to stakers. This is substantial enough to make a profit considering the hardware requirements are not as exaggerated as on PoW-based blockchains.

Here is a quick comparison of PoS and PoW. It should become clear why we decided to employ PoS instead of PoW: