Blockchain networks have many consensus mechanisms such as Proof of Stake (PoS), Proof of Work (PoW), Proof of Burn (PoB), Proof of History (PoH), and Delegated Proof of Stake (DPoS). With these mechanisms, final decisions are made on factors such as the overall structure of the network, the mining method, the mining rewards and how they are distributed, and how to mine cryptocurrencies. All elements of a blockchain network are subject to consensus mechanisms. Consensus mechanisms also contribute to network security and integrity.

What Is Proof of Stake?

Proof of Stake is a consensus mechanism developed as an alternative to the Proof of Work consensus mechanism. Unlike Proof of Work, this consensus mechanism relies on cryptocurrency ownership and volume to ensure the sustainability of the network, rather than using transaction power. Other consensus mechanisms based on Proof of Stake consensus have emerged over time.

What Is Liquid Proof of Stake?

Liquid Proof of Stake refers to token investors and holders lending state, such as the right to verify blocks, to other users and earn a return. Although Liquid Proof of Stake appears to be similar to Delegated Proof of Stake, crypto asset investors on the Liquid Proof of Stake blockchain network have the freedom delegating their verification rights to other users and share their crypto assets. In addition, the active and validating nodes in the Liquid Proof of Stake consensus are dynamic. This is one of the most important differences from Delegated Proof of Stake.

In the Liquid Proof of Stake consensus, users and miners are free to participate in the blockchain network or not. For instance, investors with a large amount of cryptocurrencies can become block validators by staking their own cryptocurrencies, without any external validation. Other investors who do not have the necessary volume of crypto assets to validate blocks can support investors with more cryptocurrencies than themselves. At the same time, these traders with relatively small amounts of crypto assets could also try to join together to form an effective group. Each users could then perform block verification by staking when they have the required volume. In addition, with Liquid Proof of Stake consensus, block validation rights are fluid, making the blockchain network malleable.

As a result, users within a blockchain network using the Liquid Proof of Stake consensus mechanism have a high level of flexibility in terms of network participation. For instance, large holders of cryptocurrencies can stake their own funds and become block validators without the need for external verification. Smaller holders of cryptocurrencies can form their own influential coalitions, rather than supporting large holders. At the same time, in the Liquid Proof of Stake consensus mechanism, verification rights can change a lot and can be easily rearranged. This allows to minimize the risk of any majority coalition taking over the entire blockchain network. Thus, any security risk to the network can be avoided with the Liquid Proof of Stake consensus mechanism.