With many speculating staking to be the future to mining cryptocurrency, it is crucial to understand the process of staking. Apart from that, what is the difference between the two? But also, what makes people call staking the future mining?
Here, we shall briefly understand and explore the wide-open world of cryptocurrencies. More specifically, the process of mining and staking cryptocurrencies.
Table of Contents
What is Crypto Staking?
In comparison to a fixed deposit, staking is the process of placing an amount of cryptocurrency coins in lock in a virtual wallet for a period of time. Just as the receival of an interest, the receival of additional coins to the virtual wallet takes place as it remains in the wallet for a long time. These additional coins are merely a token of appreciation for supporting the system.
In 2012, Scott Nadal and Sunny King introduced crypto staking as a form of reward for Proof of stake while introducing Peercoin. Some of the most popular virtual wallets for staking include Atomic wallet, Coinbase and Binance.
There are a few vital conditions for crypto staking, apart from the blockchain using Proof of stake mechanism. These include;
- A minimum amount
- Maturation time before receiving reward
- The wallet must be online at all time and has to support staking
Pros of Crypto Staking;
- Absence of any cost
- Absence of the requirement for machinery
- Growth of wallet value
- Less consumption of resources such as electricity
- Absence of all the risks faced by crypto miners
- The process of crypto currency follows decentralization
Cons of Crypto Staking;
The only cons of this process is that once the coins have been locked in the virtual wallet, there is no going back. The coins shall remain there for the set amount of time and are inaccessible
Another con for this would be that once the coins are under lock and key, there can be no accurate prediction of the volatility of the market.
What is Crypto Mining?
Mining is the process of using a machine to perform certain mathematical tasks in order to create new cryptocurrency coins. Miners are paid either through the coins they mine or through the transaction that take place while trading cryptocurrencies.
Pros of Crypto Mining;
- Independent chances of making money
- Mining is getting cheaper by the day as cloud mining gains momentum
- The hardware retains price
Cons of Crypto Mining;
- Chances of fraud are high
- Resources such as electricity, equipment and provider subscriptions are costly
- Takes time to start making money in some cases
- The process is complex and requires extended knowledge
- The process of mining is follows centralization as some methods require joining mining pools
Also See: The Crypto Code Software
Staking vs. Mining
Crypto Mining requires detailed knowledge on computer algorithms and mathematical tasks which are of utmost importance as they are a part of blockchain networks.
On the other hand, Crypto Staking is merely a form of investment and all it needs is a good judgement and a profit strategy.
Staking, apart from being completely beginner-friendly, is completely accessible, free of cost and does not require any machinery or subscriptions. Mining is done on the basis of the proof of work and requires endless resources and software, subscription and more.
When it comes down to profit, researchers approximate that the profits of both these processes are equally the same. The only difference being, the profit in crypto staking depends on the amount of coins under lock in the virtual wallet and the profit in crypto mining depends on the amount of work put into the process.