Proof of Stake

Blockchain networks rely on consensus mechanisms to validate and incorporate new data into the blockchain accurately. Consensus involves two core components:

  1. Block Production: This pertains to the methodology for generating new blocks within the blockchain.

  2. Block Finality: This concerns the selection and inclusion of a specific block from multiple candidate blocks into the canonical chain.

Proof-of-Work (PoW) and Proof-of-Stake (PoS) are well-known mechanisms for reaching consensus in a secure and trustless way on public blockchains. In PoW, network security relies on the fact that for adding blocks to the chain the miners must compete to solve difficult mathematic puzzles - a solution that has been criticized for the wastage of energy. For doing this work, miners are typically rewarded with tokens.

In PoS networks like DENTNet the security of the network depends on the amount of capital locked on the chain: the more the capital locked, the lower the chance of an attack on the network, as the attacker needs to incur a heavy loss to orchestrate a successful attack. The process of locking tokens on the chain is called Staking.

Similar to the miners in PoW networks, PoS networks have validators, but they do not have to compete with each other to solve mathematical puzzles. They are instead pre-selected to produce the blocks based on the stake backing them.

DENTX holders can lock funds on DENTNet and for doing so, they are getting staking rewards. There is thus an economic incentive for DENTX holders to become active participants who contribute to the economic security and stability of the network.

In case of misbehavior, participants in the staking process can be punished or slashed, and depending on the gravity of the situation, their stake can be partly or fully confiscated by the network. It is not in a staker's economic interest to orchestrate an attack and risk losing tokens. Any rational actor staking on the network would want to get rewarded, and the PoS network rewards good behavior and punishes bad behavior.

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