What is cryptocurrency staking and mining? ⛏

You have surely heard of cryptocurrency mining and staking. Both processes allow us to earn more cryptocurrencies and interest, but we will see why and what difference there is between these two systems.

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Both mining and staking are processes where people help to validate the transactions and operations that are made in a blockchain, that is, we help to confirm that they are correct and truthful transactions, and we cooperate so that they are really registered in the chain of blocks and in return we receive rewards for that collaboration or the work done. And as you can see, when validating economic operations, these systems ultimately guarantee the security of the network and prevent hacks that could incorporate a double expense of the same cryptocurrency or an operation that directly never existed.

So we mainly have two great methods to secure the system. The proof of work system, of bitcoin, litecoin and currently also of Ethereum, and the proof of stake system, for example, of cardano, or of Cosmos, Polkadot and in the future Ethereum will also migrate towards this system. But let's quickly see the differences between the two systems and how you can use it to your advantage.

As you know, the number one cryptocurrency is bitcoin, and as one of its objectives when it was created was to become an asset comparable to, or even replace, investment in gold, they began to talk about mining bitcoins, to assimilate it to the extraction of the gold. Hence, the name of cryptocurrency mining. And as I told you, all the transactions that are made on your blockchain must be registered. To do this, using powerful processors and specialized computers, miners seek to solve a series of mathematical problems or equations, and the one who solves the problem faster is the one who records new operations and transactions on the block chain and for that. The reason is who gets the reward for the new bitcoins created. We in our houses have no opportunity to compete against large mining pools. That is why today what is offered is to contribute our small mining capacity, that is, our speed of processors and computers, precisely to one of those pools, and according to the contribution of processing speed that we do in the pool, we we carry a percentage of the reward. In fact, one of the platforms that is having the most growth with its mining pool is Binance, but there are several that offer this cooperation system.

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In favor of the bitcoin proof of work system, we must say that it has never been hacked so far, which is not a small thing, although in order to participate in this system, on the one hand, we need a large initial investment to buy specialized computers and, on the other hand, the system is criticized because the miners compete with each other and only one wins, which causes a large amount of electrical energy to be “wasted”.

The proof of stake system.

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Here the participants of that blockchain can generate validation nodes. For that, investors are simply required to contribute their cryptocurrencies or tokens, and do Staking, precisely in one of these validation nodes. And then, in most blockchains, one of these nodes is randomly selected, which will then be the one who verifies and guarantees that the transactions are correct, and for those verifications the node receives a percentage of new cryptocurrencies. Meanwhile, the other nodes usually function as witnesses, trying to guarantee that there have been no manipulations in the system and promoting the correct functioning of that chain of blocks.

If the system manages to be sufficiently decentralized, with a sufficient number of validators and cryptocurrencies in Staking, its security is also very high, and it is estimated that it is 99% more energy efficient than the proof of work system; added to the fact that in the future this system is more scalable and simple so that it continues to grow. And for small investors, the great advantage is that we can delegate our tokens or cryptocurrencies in validation nodes in a very simple way and in this way we begin to earn more cryptocurrencies, or interests, simply helping the system to work correctly and without needing for our share of technical or specific knowledge.

What percentage of interest can we earn?

That actually varies in each project, but in general it tends to be around 4% per year to values that can reach over 30% per year.

And where can they participate in the Staking?

The ideal is to find out how to join directly to a specific node of a certain blockchain, now if they are just starting in this, the easiest thing really is to do it through the large exchanges, such as Huobi, Kraken or Binance to mention some of main.

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