In PoS, instead of investing in heavy CapEx/OpEx in terms of mining hardware, electricity, servers etc, you basically ‘stake’ your coins in a bound wallet or some such mechanism. There are startups that specifically focus on providing staking-as-a-service to HODLers (folks with large crypto holdings). The idea here is that individual holders by and large cannot move the needle in terms of having a say in PoS governance systems, so aggregation and clustering into pools gives everyone a better chance. Miners in PoS protocols are (at least theoretically, although EOS is facing some criticism) chosen randomly from a pool. Miners offer themselves up for selection by staking a certain number of coins, and will, if they get selected, be eligible to ‘mine’ a proportional amount of the PoS currency.
Other benefits of PoS - it is arguably more environmentally friendly, and the risk of a 51% attack is minimized here. Of course, while the benefits of staking coins in terms of zero upfront expenditure etc are clear, it is also important to note that the staked coins are always vulnerable to bear cycles. A crash in prices can quickly wipe out any interest earned from staking. It is a bit like your checking account in a bank. It the economy goes into a tail spin and if the bank crashes, you lose your shirt to the ‘black swan’ event, but until then you get some interest, which hopefully beats inflation.
We took a look at PoS cryptocurrencies which have varying yields and compared them against their current inflation rates to calculate the real yields (nominal yield - inflation) on an annualized basis. Once we reach the equilibrium, yields offered should ideally reflect the inherent riskiness of the particular currency’s ecosystem.