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The Proof-of-Staked-Authority (PoSA) consensus algorithm is a hybrid between the Proof-of-Staking and Proof-of-Authority consensus mechanism. The Binance Smart Chain (BSC) is a blockchain that uses this Proof-of-Staked-Authority consensus algorithm. The PoSA consensus model supports a shorter block time and lower costs than, for example, the PoW consensus model that Ethereum (ETH) uses (with the arrival of Ethereum 2.0 this will become PoS).
BSC validators are participants who “stake” a certain number of BNB. When they propose a valid block, they receive transaction fees as a reward for the transactions contained in that block. This means that no new BNB is minted as rewards for the validators, but that the reward comes from already existing BNB tokens.
The number of active validators is limited to 21 and only active validators are eligible to validate transactions. Active validators are determined by ranking all validators according to the number of BNB tokens they have. The top 21 validators with the highest number of BNB become active and take turns validating blocks. This is determined once a day and the set of all validators is stored separately on Binance Chain. Note that Ethereum has more than 70,000 validators, which is a big difference with the 21 validators of the Binance Smart Chain.
While the PoSA consensus model allows for short block times and lower costs, it comes at the cost of network decentralization and security. Due to this PoSA consensus model, a user cannot simply start validating transactions of the Binance Smart Chain themselves in the same way that they can with Bitcoin or Ethereum.
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