Staking versus Mining: How are They Different?


It has been approximately 13 years since the first cryptocurrency was released, and everything appears to have changed. Bitcoin only opened the doors to a world full of opportunities. Now, every banking service you think of, from sending value to taking a loan, is likely to be available at a more affordable cost via decentralized finance (DeFi) platforms. 

DeFi platforms are run as layers embedded on top of blockchain networks. These blockchain networks are public ledgers that are operated by the computers spread in their system. This means that there is no need for centralized systems, such as banks or credit card companies, to review clients’ details. In their place, the users/computers/ nodes on the network validate transactions using either mining or staking. 

So, what is mining and staking? Which is better?  

Comparing Mining to Staking Protocols

The main difference between mining and staking is the protocol used for validating transactions and generating new blocks. So, let’s take a closer look: 

Crypto Mining

When Satoshi Nakamoto introduced the first blockchain and cryptocurrency, Bitcoin, its distinguishing attribute was the proof of work (POW) protocol. This means that the participating computers or users have to work (solve complex mathematical puzzles) in order to get a chance to confirm transactions on the system. This process of solving the puzzles to validate transactions is referred to as mining. 

We must say that the process is never easy because only users with advanced mining equipment are able to participate. To mine Bitcoin in 2022, you need to have advanced ASIC miners, which are pretty expensive. Here are the main pros and cons of mining.

Pros 

It is an excellent way of earning new proof of work coins. Make sure to compare crypto wallet vs exchange wallet to determine where to store your coins after mining them. 

The rewards from mining are slightly higher compared to what you get from staking.

You get an opportunity to participate in crypto governance.

Cons 

  • Mining is not eco-friendly because it requires a lot of power. 
  • Putting up a mining rig is complicated. 
  • A lot of maintenance is required for proof of work (POW) mining equipment. 
  • More crypto coins are shifting from proof of work (POW) to newer protocols. A good example is Ethereum.

Crypto Staking 

Crypto staking was developed with the aim of addressing the challenges noted with proof of work (POW) protocol and to offer better “banking” services. Although the focus is to validate transactions, just like mining, staking differs in that users do not need to solve complex puzzles. All that you need is a stake in the selected proof of stake crypto network. 

The process of staking involves locking your POS coins in the respective blockchain network so that they can help with the validation of transactions. Some good examples of proof of stake (POS) coins include ETH, SOL, DOT, and POL. Remember that you can stake the coins directly from your wallet or the exchange pool. So, ensure to comprehensively look at crypto wallet vs exchange before making the big decision. 

Here are the main pros and cons of using crypto staking.

Pros 

  • The process of crypto staking is easy and fast. You can get started within minutes of buying your coins. 
  • You earn passive income without selling your crypto coins. 
  • No special setup or advanced equipment are required. 
  • The process is eco-friendly. 

Cons

The risk of your staked coins losing value always looms because of high volatility in the crypto niche. 

This comparison has demonstrated that proof of work (POW) and mining were pioneers in the blockchain industry, but came with so many limitations. The process is complex and uses a lot of power. However, staking is pretty straightforward, cheap and eco-friendly. 

If you use decentralized finance (DeFi) platforms, the process is even simpler because they have all the equipment and the setup done by experts. Therefore, all that you need to do is send your coins to the selected DeFi platform’s staking pool. One of the best platforms is hi.com, the best platform for sending, receiving and converting cryptos. 

Visit hi now to talk with experts in cryptos, start staking, and making passive income.


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