In cryptocurrency terms, the term “proof of stake” refers to a system in which cryptocurrency held in digital wallets is tracked. Wallets must be connected to the network to allow the system to track changes. This means that much smaller amounts of new data must be generated when transactions occur and new blocks are created and added to the blockchain.
Transactions are computed on all connected devices which hold the relevant cryptocurrency, removing the need for large-scale cryptocurrency mining. This greatly reduces the energy consumption involved in powering the cryptocurrency.
Proof of stake cryptocurrencies differ from proof of work currencies in that control of the currency is based on the amount of currency owned and not on the amount of computing power provided. Many cryptocurrencies use a combination of the proof of stake and the proof of work models.
Most proof of stake cryptocurrencies reward users which allow the network to access their wallets with interest paid in the corresponding cryptocurrency. This interest forms part of the supply of new cryptocurrency. The process of generating coins for the payment of interest in proof of stake systems is known as “minting”.