FOUNDATIONAL TECHNOLOGY

Proof of Stake (PoS)

A blockchain consensus mechanism where validators are selected to propose blocks based on the amount of cryptocurrency they stake as collateral, rather than computational power. Ethereum transitioned to PoS in 2022, dramatically reducing energy consumption.

EXAMPLE

Ethereum's shift to Proof of Stake enabled institutional staking services, allowing asset managers to offer 3-5% yields to clients who delegate ETH to validated nodes.

Relevant Roles and Functions

On-chain Role
Chief Blockchain Infrastructure Officer
Head of Blockchain Infrastructure
Function
Blockchain Network Integrations
Node Operations
Smart Contract Infrastructure
Validator Participation
TradFi Equivalent
Core Banking Architecture
Distributed Systems
Payments Infrastructure
Technology

Related Terms

Ethereum

Generally considered the largest public blockchain holding the highest Total Value Locked (TVL) of $55.7 billion. Designed as a programmable platform that enables smart contracts and decentralized applications. Ethereum’s transition to Proof of Stake and Layer 2 scaling solutions have made it the primary infrastructure for institutional tokenization.

Example

BlackRock's BUIDL fund was launched on Ethereum due to its established ecosystem of institutional custody, settlement rails, and regulatory clarity compared to alternative chains.

Staking

The act of locking cryptocurrency or digital assets in a blockchain protocol to support network security, validate transactions, or provide liquidity, in exchange for periodic rewards. Institutional staking products allow clients to earn on-chain yield.

Example

Fidelity Digital Assets offers institutional clients access to Ethereum staking yield without requiring them to manage validator node infrastructure directly.

Validator

A node in a Proof of Stake blockchain network that is responsible for proposing and attesting to new blocks in exchange for staking rewards. Operating validators is one means by which financial institutions can earn yield and participate in network governance.

Example

A regulated bank operating Ethereum validators must implement hardware security module-protected key management to meet the OCC's guidance on digital asset safeguarding.

Blockchain

A distributed, immutable ledger that records transactions across a network of computers in cryptographically linked blocks, providing a shared and tamper-resistant source of truth across multiple parties.

Example

By settling trades on blockchain, two counterparties share an identical, real-time record without requiring a central reconciliation agent.