Staking vs Mining — What’s the difference?
As the crypto market grows, more and more people are looking for opportunities to make money from it. Hashrate, consensus algorithms, DeFi. NFT — to understand what’s what in this world, you need to be well informed. However, for a beginner, the nuances begin even where you have to make a choice between mining and staking. This article is primarily intended for people who have just started to get acquainted with the cryptocurrency market, but old-timers too should think again about the advantages and disadvantages of mining and staking.
Mining
The word “mining” was acquired by the public around the same time that everyone was talking about blockchain and Bitcoin in the beginning. In order for a decentralized system to function, it needs the support of its infrastructure. In Bitcoin, this support is provided by the Proof-of-Work consensus algorithm. Mining here is about checking transactions on the blockchain and adding them to a distributed ledger. These complex operations are necessary to avoid the so-called double-spending problem in a decentralized system. To solve this problem, computing power is needed in the form of special computers, so the system implies rewarding miners for providing this computing power. Thus, miners are still interested in using their hardware to support the decentralized network.
However, the popularity of mining has led to a sharp rise in the price of video cards and ASICs. The threshold for entering mining in recent years has grown significantly — if during the first crypto-hype a mining farm could recoup its cost in a few months, now the situation is completely different. Now the minimum amount of costs for equipment and electricity for an adequate income may seem overwhelming to ordinary people.
Staking
Even if you’re new to the world of cryptocurrencies, you’ve probably heard that the world’s number two cryptocurrency, Ethereum, is moving from a Proof-of-Work consensus algorithm to a Proof-of-Stake consensus algorithm. This radical decision was made in response to the need to reduce computational load and speed up transactions.
In the Proof-of-Stake algorithm, the participants of the “miners” usually receive a reward proportional to the ownership of the tokens of this blockchain from the total stake of the staker’s reward. The owners of large shares of tokens often become the main servers (validators) serving the blockchain.
However, staking does not necessarily exist precisely as a technical mechanism to support the blockchain. “Staking” in its most general sense means storing user funds on the blockchain to support the ecosystem for subsequent reward with interest. Usually, the more coins have been placed for staking and the longer they participate in this process — the higher the reward — this is somewhat similar to a regular bank deposit, but it is not.
Sometimes staking is simply a mechanism to increase liquidity and increase interest in long-term participation in a project. The more tokens are stored in the ecosystem for a growing number of holders and the more traded in large batches of funds, the higher the value of the ecosystem (and the value of its tokens — the internal currency) becomes. What attracts stakers is the ability to quickly start making money by holding the tokens they bought in the market or took part in the presale.
If you look at it from a user perspective, staking is more affordable than mining to start making money quickly because you don’t need ASICs or graphics cards, you just need to have a proper application to do that. For example, try staking with Telegram Barter Wallet bot, which pays 0.05% of the stored amount of tokens every day. This is 22% per annum.
Website https://barter.company
Barter Wallet bot http://t.me/barterwalletbot
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