A Guide to Understand Leased proof-of-stake  – All You Need to Know 

Regular cryptocurrency users have perhaps encountered the term proof-of-stake (PoS) when handling crypto. However, they might not know the leased proof of stake (LPoS) and the link between them.

The two are related since LPoS is merely a variant of the PoS system. PoS is a critical aspect of the blockchain consensus mechanism, while validators take part in staking to create and authenticate transaction blocks.

Validators on PoS platforms must stake more cryptocurrency to enhance their chances of block generation, and LPoS is essential in this situation. Tokenholders lacking the technical skills or financial ability can consider leasing the tokens to the validator node operators and acquire a share of the transaction fee paid to the validator. 

In an LPoS environment, tokenholders have capacity of leasing the stake and run the full mode relative to one’s preferences. The more the tokens staked, the higher their chances of being picked to generate a new block.

How Leased Proof-of-Stake (PoS) Functions?

Creating a lease transaction

Tokenholders can leverage the node by leasing the coins held by stipulating the amount and recipient address. Leases can be canceled at any time.

Block generation

It boosts the possibility of securing the subsequent block lottery when the leased funds are joining the node’s pool. 

Consensus participation

LPoS allows leasers to join the consensus process. Bigger nodes have higher chances of generating a new block.

Share rewards

Node operators facilitate in distributing rewards to leasers relative to their investment. Higher stakes result in greater rewards.

The leased tokens never move from the leaser’s hardware wallet and stay in the tokenholder’s control.

What are the Critical Features of Leased Proof-of-Stake?

Balanced leasing

Leased tokens cannot be traded and cannot be transferred to validators. Users can lease out their money or tokens from wallets or cold storage.

Decentralized

LPos splits rewards based on the staked amount, eliminating the need for a mining pool. It is also excellent for blockchain governance given that it utilizes the peer-to-peer protocol to avert third-party intervention.

Fixed tokens

Mining does not add additional tokens to LPoS since the system only permits token leasing.

Volatile block generation

It is difficult to forecast who will win the right to generate the next block. The important thing to note is that the larger a node’s economic stake, the higher the possibility of winning the right to generate the next block. 

Scalability 

LPoS developers prioritize high-on-chain scalability over second-tier applications.

Rewards 

LPoS issues transaction fees to reward successful node operators.

What is LPoS’ Role in Blockchain Validation?

LPoS uses network devices or nodes to authenticate and validate blockchain transactions. Node-founded authentication utilizes computational randomness to assign rights to authorize blockchain transactions.

A PoS consensus algorithm depends on two major factors to establish the best node to confirm transactions at any given time, including the age of tokens and stake size. The blockchains currently using LPoS are Nix and Waves blockchains.

Benefits of Leased PoS

Passive investment

Users can be involved in block generation and acquire some rewards without actively participating in the process.

Hard to manipulate 

The LPoS generating balance regulation evaluates the lowest balance after factoring the leasing in the most recent 1000 blocks, preventing manipulation by shifting funds between accounts.

Permits smaller investors to get involved

LPoS protocols have a minimum investment requirement for network involvement. For example, Waves only permits a node to be part of block generation if it possesses a minimum of 1000 Waves (WAVES), meaning investors whose ownership is below the cap can lease cryptocurrency tokens to the more prominent notes.

Reduced barrier to entry

Mining hardware is not needed to participate.

LPoS crypto mining alternatives

Delegated proof-of-stake (DPoS)

The production of new blocks can be delegated to witnesses or delegates via a democratic voting process. Votes can be weighted by the number of tokens held onto the platform.

Proof-of-validation

This seeks to attain consensus via staked validator notes. The number of staked tokens with every validator determines the validator’s voting numbers.

Pure proof-of-stake (PPoS)

The Algorand blockchain primarily utilizes it to create decentralized applications (DApps).