Staking vs mining, it’s a conversation that has been going on since the dawn of Bitcoin. They are the two most common methods of validating transactions and securing the blockchain. But what differentiates the two? Here we take a look at what they mean and the key differences between them.
Staking
Cryptocurrency staking includes purchasing and holding crypto coins/assets within your wallet and earning a profit from it. Staking uses the proof-of-stake (PoS) consensus mechanism implemented by blockchain networks. This allows you the ability to verify transactions and support the blockchain network.
Mining
Cryptocurrency mining involves purchasing and holding crypto coins/assets within your wallet and earning a profit from it. However, crypto mining uses a proof-of-work (PoW) consensus mechanism.
This requires technical knowledge as well as computational power for miners to solve algorithmic puzzles in the blockchain network. Mining can be done solo or by joining a pool, making it easier and more effective.
For more information about crypto mining see here.
Staking vs Mining – How do they differ?
For starters, when using staking no money is spent on buying equipment like high-end GPUs or ASICs necessary for mining.
Staking uses significantly fewer resources and less-energy intensive equipment compared to mining. This means low consumption of electricity and is overall environmentally friendly.
In staking, once users ‘stake’ or lock their coins, it becomes virtually impossible to use or withdraw these coins/assets if necessary. Thus, making them illiquid.
Mining remains a highly reputed method for cryptocurrencies with higher rewards compared to staking due to its high volatility causing rewards to quickly become irrelevant and cryptocurrency prices to rise and fall.
Staking makes it marginally easier for holders to earn a return on their holdings as it’s more predictable than mining.
Unlike in mining, staking doesn’t require the participant to have knowledge or the technical know-how in order to participate in staking coins.
Instead of purchasing hardware and paying for electricity, the money finds itself spent on buying and locking more assets which will increase balance and value growth.
