Explanation
Cheating costs part of your stake. It uses far less energy than mining but concentrates influence with whoever holds the most capital.
Security through capital
Instead of computing power, validators post coins as collateral. Whoever may propose a block is chosen semi-randomly based on that stake. Behave correctly and a reward follows; attempt to cheat and part of the collateral is destroyed. Attacking therefore becomes expensive in capital rather than in electricity.
The criticism
Two objections recur. First, concentration: large platforms and custodians control a substantial share of the stake, raising censorship questions. Second, the charge that those who already hold much earn more. Supporters point to energy use falling by more than 99 percent when Ethereum switched in 2022.
Key takeaways
- Collateral replaces computing power.
- Slashing punishes misbehaviour financially.
- Concentration at large providers is the real risk.