User:Breadblade/sandbox

A proof-of-stake (POS) system is an economic measure to deter malicious attack on a cryptocurrency network by requiring a service requester to show ownership of a certain amount of currency. It is distinct from proof-of-work schemes that use computational resources to validate electronic transactions. It is used as a supplement to proof-of-work in Peercoin, Novacoin and a few smaller electronic currencies.

Coin age
Currently, the only proof-of-stake scheme working in practice makes use of the concept of "coin age," which is the product of currency amount times holding period. When generating a proof-of-stake block, the user sends some money to themselves, consuming their coin age in exchange for a preset reward. The probability that this minting transaction succeeds is proportional to the input coin age, which increases over time until a valid block is found. This process gradually produces new coins over time without significant computational overhead.

Usage
Peercoin uses a combination of proof-of-stake and the SHA-256 proof-of-work model employed by Bitcoin. Both proof-of-work and proof-of-stake blocks are used, although the main blockchain is determined by the highest total consumed coin age (from proof-of-stake generation) instead of the total combined difficulty of the chain (determined by proof-of-work blocks, as in Bitcoin). Peercoin's developer claims that this makes a malicious attack on the network more difficult. Novacoin uses a similar proof-of-stake protocol, but with a different hashing protocol for proof-of-work blocks.