Cryptocurrency trading and investment are gaining a lot of popularity and adoption as people are embracing technological change quite rapidly. The hype behind such novel technological products created a media explosion leading to swelling demand, which triggered a spike in the price of some new coins and particular tokens.
Consequently, crypto followers and enthusiasts started entertaining the idea of minting their cryptocurrency. For example, the price of Bitcoin increased by 8,362% from $13 to $1,100 in 2013 alone, even rising above $60,000 in 2021. NFTs caught the world’s attention when Christie’s Auctions sold the very first NFT artwork, a collage of images by the digital artist, Beeple, in 2021. The NFT artwork sold for a whopping $69.3 million.
Now What Is Minting?
Minting crypto is the process of generating new coins by authenticating data, creating new blocks, and recording the information onto the blockchain through a “proof of stake” protocol. Both cryptocurrency and Non-Fungible Tokens (NFTs) can be minted this way
Newly minted crypto is then added to the circulation to be traded. Proof of stake is a minting method of how blocks are formed through staking as opposed to “mining” under the “proof of work” protocol. Users are called validators (rather than miners) who mint crypto.
What is Proof OfWork And Proof Of Stake?
Proof of Work vs. Proof of Stake
Proof of work is a process of mining cryptocurrency coins. Mining refers to the practice of generating cryptocurrency by solving cryptographic equations using high-powered computer processors.
The solving mechanism involves verifying and validating data blocks and storing transaction records on a public ledger known as a blockchain. The transactions are secured through complex encryption techniques. Miners are rewarded in cryptocurrency coins, which are added to the circulation.
Proof of stake is a method associated with minting cryptocurrency coins. It is a blockchain consensus mechanism used to validate cryptocurrency transactions. It is done through staking, which refers to owners pledging pre-existing coins to validate transactions.
The coins are locked up while the owners stake them and can be unstaked for trading. A random selection of stakeholders is made to verify transactions on the blockchain such that the more coins an individual stakes, the better their odds of being selected.