The Purposes & Benefits of Staking

Following Peercoin's lead, several other cryptocurrencies embraced the Proof of Stake model in the early days:

1. Nxt (2013): Nxt was one of the first pure Proof of Stake cryptocurrencies without any Proof of Work component.
2. BlackCoin (2014): BlackCoin was another early adopter of Proof of Stake and introduced the concept of "stake minting" to reward validators based on their staked coins.
3. Qtum (2016): Qtum combined the Ethereum Virtual Machine (EVM) with a Proof of Stake consensus mechanism, allowing for the creation of decentralized applications (dApps) on a PoS blockchain.
4. Cardano (2017): Cardano, founded by Charles Hoskinson, one of the co-founders of Ethereum, is a prominent Proof of Stake blockchain platform that aims to be a more secure and scalable alternative to Ethereum.

These early adopters paved the way for the wider adoption of Proof of Stake in the cryptocurrency ecosystem, with many other projects, such as Ethereum (transitioning from PoW to PoS), EOS, and Tezos, following suit.

While Proof of Stake challenges some of the physical features of Proof of Work, it also introduces new challenges, such as the "nothing at stake" problem and potential centralization concerns. However, ongoing research and experience in the field continue to refine and improve the Proof of Stake mechanism(s), making PoS an increasingly adopted option for securing newer blockchain projects. There are now several types of PoS, and we’ll dive into a few below.

1. Network Security: Stakers play a vital role in validating transactions and ensuring the security and integrity of the blockchain. By locking up their coins, they have a vested interest in maintaining the network's proper functioning.  
    
2. Block Validation: In a PoS system, validators are selected to create new blocks and validate transactions based on factors such as their coin holdings, coin history/staking duration, and other network-specific criteria.  
    
3. Minting New Coins: Validators receive additional cryptocurrency tokens as rewards for their participation. These rewards can include transaction fees and newly minted coins, like those in Proof of Work systems.  
    

Staking allows crypto holders to actively engage in network maintenance while earning passive income through ‘block-rewards’. 

Staking is emerging as one of the digital economy’s new ways to produce ‘dividends’, or ‘passive income’, from large-cap cryptocurrencies, such as those using PoS consensus like Ethereum, Solana, and Cardano. With Ethereum's successful transition to proof-of-stake and an ETF approval still fresh, staking is becoming increasingly mainstream. 

Stay tuned for the upcoming drop of Part 3 where we wrap the series by exploring notable similarities and differences between PoS implementations on Ethereum, Solana and Cardano.

To find out more or get started; visit our staking page today. 

Further Readings

• Proof of Stake: Origins, Evolution and Opportunities
• Similarities & Differences between the Proof of Stake Implementations
• Understanding Annual Percentage Yield in Cryptocurrency