Proof-of-Stake is defined as a consensus mechanism where validators are chosen based on their cryptocurrency holdings. It differs from Proof-of-Work and is more energy-efficient. While cryptocurrencies can be a store of value and unit of account, their acceptance as a medium of exchange for everyday transactions is still limited.
The correct definition of Proof-of-Stake is option 1: A consensus mechanism to validate transactions and create new blocks that works by selecting validators in proportion to their quantity of holdings in the associated cryptocurrency. This method is distinct from Proof-of-Work, which is defined by option 3, wherein participants must solve complex mathematical puzzles to create new blocks. Proof-of-Stake is considered to be more energy-efficient compared to Proof-of-Work as it does not require extensive computational power.
For cryptocurrencies to be considered as money, they need to fulfil certain criteria including being a store of value, a unit of account, and a medium of exchange. Although cryptocurrencies can be exchanged for other currencies like the U.S. dollar and are securely owned, their use as a common medium of exchange for everyday purchases such as groceries or rent remains less common.