Cardano ( ADA )
What is Cardano:
Cardano is a public blockchain platform. It is open-source and decentralized,
with consensus achieved using proof of stake. It can facilitate peer-to-peer
transactions with its internal cryptocurrency, ADA.
What is Proof of Stake:
Proof of stake is a consensus mechanism used to verify new cryptocurrency
transactions. Since blockchains lack any centralized governing authorities,
proof of stake is a method to guarantee that data saved on the network is valid.
Instead, the network relies on an army of participants to validate incoming
transactions and add them as new blocks on the chain. Proof of stake opens the
door to more people participating in blockchain systems as validators. There’s
no need to buy expensive computing systems and consume massive amounts of
electricity to stake crypto. All you need are coins.
Proof of Stake
Requires validators to hold some of the blockchain’s token or cryptocurrency.
Doesn’t require significant computing power for transaction validation.
It’s a newer approach than proof of work, with less adoption as a consensus
mechanism.
Cryptos that use proof of stake might be more attractive for an ESG portfolio
because of the lower environmental impact.
Risks
Certain implementations of proof of stake could leave blockchains more
vulnerable to different kinds of attacks than proof of work, such as low-cost
bribe attacks. Susceptibility to attacks decreases the overall security of the
blockchain.
Validators who hold large amounts of a blockchain’s token or cryptocurrency may
have an outsized amount of influence on a proof of stake system.
Migrating a cryptocurrency from proof of work to proof of stake is a complicated
and highly deliberate process. Any crypto that wants to change consensus
mechanisms will have to go through an arduous planning process to ensure the
blockchain’s integrity from start to finish and beyond.