What is mining and staking? What do miners do?

Started by AmarInfotech, Jul 24, 2022, 05:37 AM

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AmarInfotechTopic starter

Let's look at the most famous consensus algorithm - Proof-of-Work, as the name implies, is a mechanism for getting to an agreement between network users with public proof of the effort done. The procedure of reaching consensus on this algorithm is closely related to mining.

Mining is the procedure of mining bitcoin and other cryptocurrencies, as a result of which a new block of transactions is added to the blockchain and coins are issued.

Emission, or the issuance of new coins, is a miner's reward for the job done and the electricity spent in the mining procedure.

How does the transaction take place?
You make a transaction, all transactions are automatically sent to pools and distributed among validators through smart contracts. Nodes called validators stake cryptocurrencies. The amount of coins in staking is called the stake.

Differences between staking and mining.
To date, the procedure of mining in the Bitcoin network is a complex procedure that requires large computing power to obtain new blocks. People who want to make money by mining blocks have to buy expensive equipment designed specifically for mining.


I don't see the safety and fairness scores.
In PoS, instead of the block with the most assets spent on mining, the block with the most votes wins.

If the behavior of the nodes turns out to be malicious, in place of losing the reward for the work they have done, they will literally lose their entire blocked share - as if their entire mining farm, configured to work with the PoW algorithm, burned down in a fire.


In simple words, mining is the extraction of digital currency using certain equipment, to put it even more simply, these are attached blocks that store transaction data. And staking is a way to validate transactions and create blocks.
Blocks can only be attached if a certain cryptocurrency algorithm is decrypted. This is done by the miner, or rather his special device.

nikola Kras

I'll try to explain. For processing information, the owner of a computer resource receives a reward in the form of a commission assigned by the owner of virtual money, or a reward in the form of a part of the cryptocurrency issued during the mining process. It is on this that one of the main principles of the operation of payment systems is based, involving the use of bitcoins and some other virtual money. First of all, those transactions are processed and carried out, where the highest commission is set. Therefore, transactions with zero commission can be carried out for a very long time.


Mining is a process that ensures the operability of blockchains running on the Proof of Work (PoW) algorithm.
The first cryptocurrency, bitcoin, works on this algorithm. With the help of computing power, miners support the operation of the network and the execution of transactions in it, and for this they receive a reward. If mining can be called a competition of computing power, then stacking is a competition of coin owners of a certain blockchain.

The main difference between stacking and mining is that stacking does not require large computing power, the purchase of video cards or ASIC miners. Accordingly, stacking is a more environmentally friendly and energy—efficient way to create a new block chain in the blockchain. There is another advantage of stacking to be the fact that the owner of a cryptocurrency does not necessarily have the technical skills necessary to start and maintain the performance of a computer.

"Mining requires more involvement in the process, you need to constantly keep your finger on the pulse. In the case of stacking, the process is simplified and open to more members of the blockchain community, the threshold for entering stacking is lower than the threshold for entering mining,".

Risks in stacking
In general, stacking looks like a less risky way of investing, since there is no need to buy physical equipment, but so far there is no adequate information on stacking — how it works, what risks and what income it brings. No one plans to "rush headlong" into stacking until it brings super profits. As in mining there is a risk of investing in equipment that can become illiquid, so in stacking there is a risk of changing the value of the coin being held.

How to start and choose a coin for stacking
To start stacking, you need to have free funds to buy coins and the ability to freeze them for a long time on a special deposit smart contract. It should be understood that investments may require quite substantial. 1000 coins are needed for DASH stacking ($225.3 thousand). Therefore, choosing cryptocurrencies for stacking based on the budget.