Proof-of-Stake (POS) is a consensus algorithm used to add “blocks” to the “blockchain”. More specifically, POS is the method used in Tezos whereby a particular “Baker” is selected to add or “bake” a block containing new transactions to the blockchain. This process allows node validators or “Bakers” in the network to reach consensus on one true state of the ledger. This is similar to Proof-of-Work (POW) used by most cryptocurrencies which involve solving arbitrary “hash” problems to determine which node or “miner” is selected to add the next “block” to the “blockchain.”
While both POS and POW are consensus protocols that allow for Byzantine fault tolerance in a permissionless, hostile open network, POS has several advantages over POW. POS is unique in that it doesn’t require nearly as much electrical energy and, therefore, is significantly better for the environment and more sustainable from an energy resource allocation perspective. POS consensus algorithms are based on the concept of a “stake” or a bond containing Tezos funds whereby the Baker is selected based on their proportional amount of “staked” Tezos coins. While delegating to a Baker will increase the Baker’s odds of being selected to bake a block, the Baker’s delegations are never at “stake” meaning the delegator (i.e., you) cannot lose their Tezos funds due to Baker misbehavior (e.g., double baking).