CFA Level I · CFA Level I Exam · Introduction to Digital Assets
A blockchain network requires participants to lock up units of its native token as collateral in order to be selected to validate new blocks and earn rewards. The consensus mechanism being described is best identified as:
The mechanism is proof of stake. Validators lock up native tokens as collateral, are selected to validate blocks in relation to their stake, and earn rewards, while risking penalties for dishonest behavior. Proof of work instead depends on computational power expended in mining.
- Aproof of stakeCorrect
- Bproof of work
- Ca permissioned ledger without consensus
Explanation
In proof of stake, validators are chosen based on tokens they commit as stake and can lose them for misbehavior. Proof of work relies on computing power instead. Permissioned ledgers still need a consensus method.
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