Leased Proof-of-Stake (LPoS)
Operates on the principle that literally everyone can win the chance to add a block to the blockchain, by using a system not much unlike a lottery which can be participated in using leased coins. Used by: Waves
- In classic Proof of Stake, holders with low amounts of coins are unlikely to ever get the chance to add a block — just as small miners with low hashrate are unlikely to mine a block in bitcoin. It may be many years before a small holder is lucky enough to win.
- This means that many holders with low amounts of coins will never actively partake in the network, so maintaining it is left to a limited number of larger players. This inadvertently creates unwanted centralization.
- Leased Proof of Stake works exactly like PoS, but uses leasing to provide small holders with an incentive to take part.
- The low holding nodes (D, E, F, G, H) lease their balance to a staking node (B). The leased funds remain in full control of the holder.
- The leased coins increase the staking node’s stake, in turn increasing its chance of winning the ‘lottery’.
- Upon winning, the staking node collects waiting transactions into a block and collects the transaction fees, which are shared – proportionally – between the staking node and its leasing nodes.
- Operation resumes as in regular Proof of Stake.