What Is Minting?
In the realm of cryptocurrency, minting represents a decentralized process allowing individuals to generate new tokens without the intervention of centralized authorities like governments or banks. This process can yield either non-fungible tokens or crypto coins.
Two Methods of Minting
Cryptocurrency minting can occur through two distinct methods, differing mainly in their procedures while achieving the common goal of creating new coins. One method involves mining, known as the proof-of-work approach, while the other entails staking, known as the proof-of-stake mechanism.
Proof-of-Work: Mining
Proof-of-work entails the mining of coins, which involves validating and storing transactions on a blockchain, a digital public ledger. Miners employ high-powered processors to solve complex mathematical problems, earning cryptocurrency as rewards for their efforts.
Proof-of-Stake: Staking
Proof-of-stake, generally regarded as a more favorable minting method, relies on staking existing cryptocurrency holdings. Users stake a significant amount of cryptocurrency to validate transactions and are chosen randomly to perform this task. The higher the stake, the greater the likelihood of selection.
Stakeholders cannot access the staked amount during the process and risk losing it if they violate rules or provide inaccurate data. Despite the associated risks, stakeholders are motivated by the potential for profit.
Comparison: Mining vs. Staking
Both proof-of-work and proof-of-stake methods result in the creation of new coins, although the term "minting" is commonly associated with staking to differentiate between the two methods. Both minting and mining involve adding new blocks to an existing blockchain.
Minting Non-Fungible Tokens
While mining and staking are used for minting cryptocurrency, minting non-fungible tokens (NFTs) follows a distinct process. NFTs are added to the Ethereum blockchain and serve as digital assets for creators to sell their media files or digital artworks.