Cryptocurrencies have revolutionized the way money is created and controlled. The main factor that sets cryptocurrencies apart from traditional fiat currency is decentralization, which means that digital currencies are not controlled by a single entity. Since no central authority governs or validates transactions on a blockchain, miners play a vital role in the network’s ecosystem. Let’s take a deeper look at how?
Miners not only keep the blockchain secure and operational, but their activities also ensure that new coins are minted. Most cryptocurrencies are generated through the process of Mining, particularly Bitcoin. As miners around the world gather to solve bitcoin’s complicated Proof-of-work algorithm and verify transactions on the blockchain, they are rewarded with newly minted coins. Coins like Ethereum, Bitcoin, Dogecoin, Monero, Litecoin, Bitcoin Cash, and ZCash are a few popular Mineable cryptocurrencies.
Furthermore, there are also non-mineable cryptocurrencies. The major difference is that they can only be bought, not mined. Based on CoinMarketCap’s ranking of the top 10 cryptocurrencies, Five out of the top ten cryptocurrencies are not mineable. Coins like Binance Coin, Ripple, Cardano, Solana, and Uniswap are non-mineable. Non-mineable coins can either be; 1) Created and issued through the Initial coin offering (ICO) or 2) Built on a Proof-of-Stake algorithm and do not need miners to verify transactions on their blockchain. Instead, verification is done through Staking. So why are some coins mineable and some coins not mineable, and how do they both work?
Mineable Cryptocurrencies
Mineable Crypto are coins that are earned and created through Mining. These coins are created by the network and are rewarded to miners in the form of blocks for successfully verifying transactions on the blockchain. The newly minted cryptocurrencies are then injected into the circulating supply. For example, Bitcoin has a maximum supply of 21,000,000. Where different people already own over 18,000,000 coins. For the rest of the circulating supply to be available in the market. Miners need to keep the blockchain secure and running by verifying transactions. As a reward for this activity, new blocks are created and issued into the system.
Non-Mineable Cryptocurrencies
Again, not all coins are mineable. Non-mineable cryptocurrencies usually use a different algorithm compared to mineable coins. Many non-mineable coins are built on a Proof-of-stake (PoS) algorithm. In this case, users cannot mine or create new coins using their computer power. There is also no need for a collective computer rig to keep the blockchain secure. In essence, non-mineable coins are already in circulation, and users can only acquire these coins either by purchasing from an exchange or broker. For new coins to be issued into circulation, some non-mineable coins use the staking method. The (PoS) consensus allows users to buy coins and stake their coins to earn more Crypto. This process helps with the verification and minting of new tokens on the blockchain. It doesn’t operate like Mining. Still, users can earn Crypto through Mining or Staking.
In Summary
To have a deeper understanding, picture Cryptocurrencies as regular money and the blockchain network as a decentralized bank. Traditionally with fiat currency, the government decides and prints new money whenever they want to increase money in circulation. But with cryptocurrencies, no one authority states when new currencies should be issued. Instead, a network of computers (miners) using a P2P system validates different transactions on the blockchain, which lets the network know when to issue new coins.
Many individuals these days are actively deciding to partake in the crypto space in other forms asides from trading. Staking and Mining are two ways to earn Crypto and make a difference in the blockchains’ network.
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