What is Proof of Stake (PoS)?
Proof of Stake is a consensus approach that links the economic collateral of validators to the security of the network.
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What is Proof of Stake?
Proof of Stake, abbreviated as PoS, is an approach that uses deposited crypto assets as economic collateral for block production and validation on the network. In Turkish, it is referred to as “hisse ispatı.” The “stake” (hisse) here does not mean a share of ownership in a company. A participant joins validation tasks by depositing the asset specified by the protocol and can receive rewards or penalties based on the rules.
On Ethereum, validators can propose new blocks and send validation messages about the blocks they see. The protocol determines who is assigned tasks and when. The deposited ETH ensures there is an economic cost for malicious behavior. Not every PoS network uses the same selection, reward, or penalty structure.
Why is staking not bank interest?
Staking yields are linked to network tasks and reward rules. The market price of a token may drop; while earning rewards, the TL equivalent may decrease. For example, if your number of tokens increases by 4 percent over the year but the unit price drops by 20 percent, you would not preserve your initial TL value. Furthermore, deductions, service provider fees, and protocol-specific waiting periods can change the outcome.
A product offered by an exchange under the name “staking” is not the same as operating a validator yourself. It is important to know who manages the assets, how withdrawals are processed, and whether additional contract risks are present.
The difference between penalties and slashing
Being offline may lead to missed rewards or small penalties on some networks. Slashing, however, is the deduction of a portion of the deposited collateral due to specific violations. For example, signing conflicting validation messages could be such a violation. Not every deduction is considered slashing. The current rules of the network being used determine which behavior is penalized and how; a single rate cannot be applied to all PoS networks.