The 9 Best Proof of Stake (POS) Tokens in 2024

Proof of stake chains’ first appearance in the blockchain industry was in 2012 when Sunny King and Scott Nadal introduced the concept on paper. Their major aim was to resolve Bitcoin’s high mining energy consumption. In 2013, Sunny King created Peercoin (PPC), the first token to adopt the proof of stake consensus mechanism while utilizing the proof of work mechanism.

Though Peercoin still functioned with mining, its existence kickstarted the era of proof of stake tokens. In time, other tokens, like Blackcoin (BLK), emerged and embraced pure proof of stake, a protocol that doesn’t require mining. Also, several iterations of the proof of stake protocol, such as the Delegated Proof of Stake (DPoS) and Byzantine fault tolerance (BFT-PoS), emerged.

How Proof of Stake (PoS) Works

To successfully reduce the high energy consumption associated with the Proof of Work (PoW) protocol, PoS uses validators instead of miners to verify transactions and secure the blockchain. Miners on proof of work require high computational energy to create new blocks of transactions. Validators, on the other hand, make their tokens available to the network through staking, with the chance to validate blocks and earn rewards.

Also, compared to proof of work, where miners earn rewards through fierce competition by solving complex puzzles, the proof of stake system selects validators randomly. Therefore, the reward structure ensures fairness among validators, allowing them to earn fees. However, to become a validator, an individual must hold a certain number of tokens, varying from network to network. The Ethereum network, for example, requires holding and staking 32 ETH to run a validator node.

On the other hand, Solana does not require any specific amount of staked tokens to become a validator on the network. Also, some proof of stake models, like delegated proof of stake, use delegators who stake their tokens to a validator or a staking pool to secure the network. Delegators earn rewards through this process, with no minimum token required for staking.

Pros of the Proof of Stake Consensus Mechanism

• The proof of stake consensus mechanism is energy efficient.
• It has less negative impact on the environment due to reduced energy consumption.
• It is highly scalable, processing transactions faster by establishing consensus before creating blocks. Thereby allowing it to execute thousands of transactions in split seconds.

Cons of the Proof of Stake Consensus Mechanism

• Proof of stake has yet to be proven as secure as the proof of work mechanism. Tokens that utilize the proof of stake algorithm are more susceptible to cyber-attacks.
• Validators with massive holdings can manipulate the validation system by having too much influence on the verification of transactions.
• Since forking is not discouraged, validators on proof of stake can sometimes get duplicate copies of their staked holdings on a newly forked chain. Therefore, they can double-spend their tokens and receive double rewards by signing off on both sides of the fork.

The Top 9 Proof of Stake Tokens in 2024

While there are lots of tokens at the moment that have adopted proof of stake protocols, some have managed to stand out, and they are Ethereum, Cardano, Solana, Polkadot, Polygon, Tezos, Cosmos, Algorand, and Avalanche.

Ethereum (Ether)

Source: Ethereum.Org

Ethereum is the second largest cryptocurrency and the brainchild of Vitalik Buterin, who introduced it in 2014 in a white paper. In 2015, Vitalik launched the platform with Joseph Lubin, Gavin Wood, Charles Hoskinson, and Anthony Di Lorio as co-founders.

Initially, at launch, Ethereum operated as a proof of work chain but transitioned to proof of stake in 2022 in an upgrade called the Merge. After transitioning from proof of work, Ethereum became the largest cryptocurrency using the proof of stake consensus protocol.

Transactions on the Ethereum network undergo two rounds of voting by validators before final execution. This is due to the casper consensus mechanism on the network, which provides a Byzantine Fault Tolerance (BFT) system to ensure network security. Also, this BFT system guarantees agreement between validators even when faulty or malicious nodes are present.

Ethereum Staking Data

Currently, the Ethereum network requires staking 32 ETH to run a validator node. Validators receive freshly minted ETH tokens and a fraction of network fees as a reward for securing the network. Ethereum has a staking market cap of $110 billion as of March 28th, 2024.

Cardano (ADA)

Source: IOHK.IO

ADA, the native token of Cardano, was launched alongside the platform in 2017 by Charles Hoskinson, one of the co-founders of Ethereum, and Jerry Wood. The Cardano network is developer-friendly and serves as home to several dapps.

Cardano uses its proof of stake model, Ouroboros, which was built to facilitate energy-efficient transactions. ADA holders on Cardano can earn rewards through validating or delegating. Validators run staking pools and are chosen based on the tokens they staked.

Meanwhile, delegators can stake their tokens in a staking pool run by other validators. Either way, both parties benefit from the high interest rate on stakes on the platform.

Cardano Staking Data

As of 28th March 2024, Cardano offers an average of 3% APR on staking. Cardano has a circulating supply of 35.5 billion ADA tokens, and about 63.8% of them represent staked ADA. Thus, Cardano has a staked market cap of $14.5 billion.

Solana (SOL)

Source: Solana.Com

Solana operates on a hybrid Delegated Proof of Stake (DPoS) and Proof of History (PoH) consensus mechanism. This makes it potentially more scalable, energy efficient, and faster than other proof of stake models. It hosts multiple projects and has recently concentrated more on blockchain gaming.

The Solana network requires no specific number of staked tokens to become a validator. Instead, as a delegated proof of stake model, users without the capacity to run validator nodes delegate their tokens to validators who use them to secure the network and validate the transactions on the Solana blockchain.

The validator with the most staked tokens has the larger share in consensus voting. However, the tokens staked by delegators are not locked. Therefore, they can withdraw or move their tokens to other validators.

Further validators on Solana can run voting/consensus nodes or RPC nodes. While both nodes help to secure the network, RPC nodes can not participate in voting; instead, they allow developers and other users to interact with the Solana blockchain. Also, Solana staking yield is determined by factors like the current inflation rate and the total amount of staked tokens.

Solana Staking Data

An average SOL staker on the Solana platform receives about 7.34% APR with a staking market cap of $70.66 billion as of March 28th, 2024. Validators also release rewards to delegators every two days.

Polkadot (DOT)

Source: Polkadot.Network

Polkadot is a blockchain network that champions interoperability between multiple chains, enabling the cross-chain transfer of tokens, assets, and data. The platform runs a Nominated Proof of Stake (NPoS) consensus model, allowing it to process several transactions on parachains.

DOT, the platform’s native token, serves the purpose of governance, enabling all who hold it to participate in decision-making and actively secure the network. Users can stake their tokens with as little as 1 DOT to earn rewards.

On Polkadot, nominators select a group of validators to secure the entire network. Both nominators and validators receive DOT tokens as a reward for helping the network function. However, token holders who act dishonestly could lose all their staked tokens.

Polkadot Staking Data

The estimated reward rate for DOT stakers on the network is about 11.93% per annum. Also, over 727 million DOT tokens are staked on the platform, with a staking market cap of $6.9 billion.

Polygon (Matic)

Source: Polygon.Technology

Polygon is a layer two blockchain built to solve the scaling problems of the Ethereum network by leveraging L2 scaling solutions like plasma and sidechains. The platform’s EVM (Ethereum virtual machine) compatibility and proof of stake consensus mechanism have helped it become the developers’ choice.

Polygon Staking Data

Currently, there are over 105 validators on the polygon network. Delegators stake their tokens with validators, who use them to verify blocks of transactions. Also, there are over 3 billion eligible staked tokens with 2.39% as APR (annual percentage rate).

Polygon is home to thousands of dApps, with over 3 million daily transactions. Also, it holds over $5 billion in secured assets. Users can help secure the network on Polygon by staking as a validator or delegator.

Tezos (XTZ)

Source: Tezos.Com

Tezos is an open-sourced blockchain network built to facilitate peer-to-peer transactions and smart contracts. Launched in 2014 by Arthur Breitman, it was one of the industry’s first DPoS (Delegated Proof of Stake) blockchains.

Validators on Tezos are known as “Bakers,” they are responsible for securing the network by validating new blocks of transactions. They are also heavily penalized if they validate an invalid transaction into the blocks.

Tezos Staking Data

Tezos has a staking market cap of over $87 million, and currently, stakers earn an average of 5.77% annual interest rate. Tezos delegators stake their token with the network validators, earning rewards distributed every three days.

Cosmos (ATOM)

Source: CometBFT.Com

Cosmos champions interoperability between numerous compatible chains through IBC (inter-blockchain communication) protocol, which enables data transfer between blockchains. IBC allows communications between heterogeneous chains, completely trusting each other to exchange data tokens and messages.

The platform operates on a Delegated Proof of Stake (DPoS) system, which enables enhanced scalability, speed, and efficiency of transactions. ATOM, the platform’s native token, functions as a governance token, allowing holders to stake their tokens for reward. Also, ATOM holders can secure the network as validators or delegators.

Delegators stake their token with validators on the network who, in turn, secure the network by validating new blocks of transactions. Both parties earn rewards in either ATOM tokens or other tokens added to the network.

Cosmos Staking Data

Currently, the staking reward on Cosmos is 14.36% per annum, provided the stakers hold the token for 365 days. As of March 28th, 2024, the total value of assets locked on Cosmos is $3.08 billion.

Algorand (ALGO)

Source: Algorand Technologies.Com

Algorand is one of the cryptocurrencies that uses a Pure Proof of stake (PPoS) algorithm to achieve consensus. Launched in 2017 by Silvio Micali, a computer scientist, Algorand is regarded as one of the greenest cryptocurrencies in the blockchain industry.

As a decentralized platform, Algorand facilitates borderless transactions with very low fees and swift executions. Currently, the platform can process 1000 transactions per second. PPoS, unlike other proof of stake models, doesn’t allow vote delegation to avoid malicious activities. Also, all nodes are equal, giving most participants the same voting rights.

Algorand staking Data

On Algorand, token holders can stake as low as 1 ALGO to participate in securing the network, earning up to 5.02% APR (annual percentage rate). Currently, Algorand has a total staking market cap of over $463 million as of March 28, 2024.

Avalanche (AVAX)

Source: Avax.Network

Avax is the native token of the Avalanche network, a decentralized platform that runs its proof of stake model known as the Avalanche consensus. The platform consists of three primary blockchains: the C-chain for running compatible Ethereum smart contracts, the X-chain for transfers and exchanges, and the P-chain for staking and validators.

Validators on Avalanche secure the network by staking a minimum of 2000 AVAX to run a validator node. Also, users who are not qualified to be validators can delegate their tokens to other validators on the network to earn rewards. Further validators on Avalanche can set the fees for delegators who stake their AVAX with them with a minimum of 2%.

Avalanche Staking Data

On Avalanche, validators earn a fraction of transaction fees on the platform and AVAX tokens to secure the network. Delegators also receive rewards in AVAX tokens, earning up to 8.49% APR. An over 58% ratio of eligible tokens is currently staked on the Avalanche platform with a staking market cap of over $224.75 million as of March 28, 2024.

Liquid Staking Tokens (LSTs)

Liquid staking tokens represent the direct amount of a staked token on a proof of stake network. LSTs enable individuals to participate in staking and simultaneously buy, sell, or trade the staked token, giving adequate room for flexibility. One thing that sets LSTs apart from other tokens is liquidity.

LSTs have an enhanced liquidity supply, making it possible to simultaneously use these tokens for other DeFi functionalities without needing to unstake them. LSTs are also inherently interoperable, working between multiple chains. Further, aside from benefiting from various DeFi strategies like yield farming, LSTs can be used as collateral for lending protocols.

While its pros look promising and investment-worthy, it is essential to note that it comes with risks. One of the foremost risks associated with LSTs is the complexity it adds to the already complex world of decentralized finance. Also, there is the risk of exposure due to surplus liquidity, as an individual can lose all their staked assets by entering a high-risk protocol.

Then, there is also the risk of over-collateralization, as some platforms require large amounts of collateral to participate in liquid staking. For example, WBETH is obtained after staking ETH.

Conclusion

Though not as old as its counterpart proof of work, the proof of stake consensus mechanism has radically changed the blockchain ecosystem by solving scaling issues. It is also energy efficient, replacing miners with validators who secure the blockchain network through staking.

This process, in turn, consumes less power to verify new blocks of transactions. Liquid staking tokens, one of the newer innovations in the blockchain industry, have also seen an increase in adoption due to their flexibility and high-yield opportunities.