The Capital
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The Capital

Staking Is Gradually Replacing Mining and Opens up New Ways of Making Money

Blockchain is considered a democratic technology that underlies cryptocurrencies and implies their wide distribution, which, in turn, is aimed at freeing people from the financial yoke of banks and governments. However, in the crypto industry, there is also an opinion that many public cryptocurrencies are quite centralized and “concentrated”.

A recent study showed that approximately 66% of the world’s Bitcoin mining is concentrated in China, while 54% of all mining is concentrated in southwestern Sichuan. Three Chinese mining pools account for almost half the Bitcoin hashrate. The days when Bitcoin enthusiasts could use their home computers to mine the main cryptocurrency have long passed.

The problem of the “concentration” of Bitcoin infrastructure exists, and not only because it is under the control of an authoritarian government. Sichuan is a very attractive place for miners and a kind of centralization factor for Bitcoin.

Bitcoin mining is a great way to control the issue of coins and protect their infrastructure. But it is also a huge waste of electricity, while the world is trying to become more energy efficient.

Thus, the world of cryptocurrencies is looking for new solutions, experimenting with new ways to build blocks and reward people who are willing to allocate resources to support the cryptocurrency infrastructure.

Solution — Staking

Mining rewards people who want to transfer computing power to the blockchain. The more processing power the miners have, the more likely they are to solve problems within the framework of the proof-of-work protocol, add blocks to the blockchain and demand rewards for such work.

Staking is built on the reward of people who want to use their own cryptocurrencies to confirm transactions on the blockchain, without relying on computer power. By agreeing to block a certain number of their own digital coins, users create master nodes for transaction management. The more coins they block as part of the proof-of-stake protocol, the more likely they are to receive a transaction fee. Thus, there is no solution to problems using computing devices, and there is no huge consumption of electricity by miner devices.

For example, staking is embedded in the Dash cryptocurrency, which has long been using master nodes. For a deposit, you need to enter 1000 dash coins, which can give 6.55% of the annual interest. Simply put, your $46,000 used to maintain master nodes can give you around $3,000 a year.

Another cryptocurrency for staking, PIVX, is less demanding and offers users two ways to earn money. To start a master node, you need 10,000 PIV coins, which currently cost you $2,055. In addition, users can store any number of PIV coins in the active wallet, and they will be used for staking. PIVX claims that each master node can receive a reward once every two days, and active wallets with 1000 PIV will receive money every month. PIXV master nodes currently generate around $218 in revenue per year.

Some major cryptocurrency players are now also interested in proof-of-stake. For example, Binance offers the option of staking and offers an appropriate list of coins with which you can earn on this new method, which gradually replaces mining.

The world’s largest altcoin, Ethereum (ETH), also plans to completely switch from proof-of-work to proof-of-stake in 2020, although this transition is conceived as a complex, long and multi-stage process due to the characteristics of the cryptocurrency.

Thus, the crypto industry opens up new ways for investors to earn and increase their funds using the relatively new proof-of-stake protocol, which makes it easy to bypass banks and the traditional monetary system.

Author: Marko Vidrih

Featured image credit: Pixabay

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Marko Vidrih

Marko Vidrih

1.3K Followers

Most writers waste tremendous words to say nothing. I’m not one of them.