The A-Z of Crypto Minting: Is it Different from Crypto Mining?
Crypto Minting is a high-risk, high-reward pursuit. Should you become a validator and stake your crypto? Learn everything about crypto minting.
There is a fundamental difference between cryptocurrency mining and cryptocurrency minting. Cryptocurrency mining is the result of a Poof-of-Work consensus mechanism used to validate transactions on-chain. Cryptocurrency minting on the other hand, is the byproduct of the Proof-of-Stake consensus mechanism. Proof-of-stake is an alternative method of verifying on-chain transactions where validators deposit the cryptocurrency in question, in other words, stake their crypto token, to verify transactions. In the case of Proof-of-Work consensus mechanism, which is what most blockchains ascribe to, nodes (computers) or validators solve a complex mathematical problem and the node that finds the solution (which is selected randomly) gets to mine the block. In both the cases the validator is selected randomly and is rewarded in cryptocurrency.
To learn more about how you can become a cryptocurrency miner, check out this guide.
Which is Better: Crypto Mining or Crypto Minting?
Both crypto mining and crypto minting require investment. If seen from the angle of profitability, both ventures are suitable for those who have a high-risk appetite. Still if we compare the two, crypto mining is riskier than crypto minting, the chances of getting rewards are less, but the amount of rewards are significantly higher.
Top cryptocurrencies like Bitcoin and Ethereum use a Proof-of-Work mechanism for validating transactions. Each time a node cracks the mathematical problem, the validator running the node is rewarded with fractions of the cryptocurrencies with the highest market capitalisation. But here’s the catch. You can’t be a Proof-of-Work validator without a high-end computer, constant electric supply, permission and the infrastructure – an investment that can run up to $15000 or more depending on your location. Plus, cryptocurrency mining may not be legal in your area. The Proof-of-Work system randomises the mathematical algorithm every time so that no single node can monopolise the validation process. Therefore, there’s no guarantee to when your node would be the one cracking the code and validating a transaction.
It might be six months before you break even or more. If lady luck is by your side you may even hit the scoreboard on the first go. If not, you may end up sitting idle for months on end. In short, it’s a luck game. This also makes the Proof-of-Work validation method more secure, according to many, as it would be infeasible for someone to try to authenticate a conflicting transaction as the cost of investment offsets the chances of rewards. However, one thing to note is that many condemn the Proof-of-Work mechanism for validating blockchains as it consumes a lot of electricity.
Crypto minting by staking or depositing crypto tokens is also risky because there’s no guarantee that the system will choose you as the validator, but again if it does, the rewards are high. However, one advantage is that there are blockchains where the staking amount is not that high So you can take a chance and spare only the amount that you can afford to lose. Some of the cryptocurrencies/blockchains that use the Proof-of-Stake validation method are Cardano, Avalanche, Polkadot and Solana. You can become a validator within the network by staking a certain amount of tokens. Every time, the system chooses a validator randomly to avoid centralisation within the network. Ironically, however, most systems tend to choose a validator who has the highest stake. So, you can either take a chance and spare the amount you are okay losing or you can increase your stake and improve your odds of minting a cryptocurrency. Many blockchains these days are adopting the Proof-of-Stake validation method because the electric consumption is far lesser.
Here’s a More Economic and Simpler Strategy
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Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. C-Trade, its affiliates, agents, directors, officers, or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability as to any loss arising from any investment based on the same.