What importance does it have, security-wise, that cardano uses proof-of-stake instead of proof-of-work?
Cardano uses the validation method proof-of-stake instead of proof-of-work. If you’re not sure what these terms mean, you can read all about them in our blog-post “What is cardano? ”.
In relation to security, cardano is technically a secure cryptocurrency on line with ethereum and bitcoin. The security that ethereum, for example, works with is also incorporated into cardano. That’s evident since the creator behind cardano, Charles Hoskinson, also was a co-founder of the ethereum project back in the day.
Hoskinson introduced proof-of-stake for blockchains with his new cryptocurrency, cardano, where ethereum uses proof-of-work.
In order for a blockchain to work properly, a network of people who validate activity on the blockchain needs to exist – activities could be buying and selling cryptocurrency.
The person who ends up validating the activities is called a validator. With proof-of-stake the validator is selected based on how many cardano coins they stake.
Example: Imagine that there are 1,000 cardano coins. A validator, let’s call him Henry, has 200 coins, which he puts into the validator-draw. Henry now has a 200/1,000 chance - or 20% - to get selected to validate the next block of activities in the blockchain.
If Henry tries to trick the blockchain by inputting faulty information, it’s up to the rest of the network to check whether Henry’s validation is true. However, it’s relatively easy for the rest of the network to check. Read more about how blockchain validation works here .
If Henry gets caught in the act, all of the 200 coins he staked will be confiscated. That’s why there’s also a big incentive to not cheat the system - and that also strengthens cardano’s security.