In 2020, the total market cap of all Proof of Stake (PoS) coins reached $14.5 billion and the staking rewards are getting more compelling. New coins are launching 100% PoS. Old coins are shifting to PoS. PoS is rapidly becoming the de facto consensus mechanism keeping blockchain networks secure while giving dividends to its users.

There’s no doubt that PoS is a technical improvement beyond Proof of Work (PoW). It reduces the energy requirements of running a network to a minimum which is very important from an environmental standpoint. 

Anyway, PoS doesn’t necessarily solve the scalability problems of PoW. In order to reach fast transactions and scale efficiently protocols started to sacrifice their network decentralization. EOS and Libra are limiting their networks to a small number of nodes. Tezos and Waves are criticized for “rich get richer” economics. And the worst is that new coins are following the leaders into implementing similar mechanisms. It’s true that Ethereum and Near Protocol proposed new technical solutions, but, until today, these remained just theoretical proposals. Except one:

Harmony is the first blockchain to successfully combine Sharding and Proof of Stake, making its network scalable without sacrificing decentralization and offering to its users the opportunity to earn annual yields ranging from 45% to 15% in the first year.

We’ll talk more about why combining these two technologies, sharding and PoS gives the best outcome and why Harmony’s staking rewards can outclass if the most profitable networks. But first, let’s understand how PoS works, what are its problems, and what it needs to run at its best.

Proof of Stake – Why is it better?

Most likely you are familiar with the Proof of Work (PoW) consensus system where users are mining cryptocurrency (i.e. Bitcoin) using their computers. You can look at it as using hardware devices to transform electricity into virtual currency. It made sense a decade ago…

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