Is Staking overtaking the Mining for Cryptocurrency consensus mechanism?
Do you know you can directly participate to any public blockchain network either through mining or through staking? While most people mostly engage in cryptocurrency with price speculation only by doing trading but not aware that besides trading, there is better way to get profit or benefit in long term just by participating in the network either by mining or staking. Proof of work (POW) related to mining and proof of stake (POS) related to staking are the 2 different mechanism to participate in the network as part of consensus mechanism.
In this article I will highlight some of the key features of staking and compare mining vs staking and explained why staking is taking over mining.
Proof-of-Work, or PoW, is the original consensus algorithm in a Blockchain network. In Blockchain, this algorithm is used to confirm transactions and produce new blocks to the chain. With PoW, miners compete against each other to complete transactions on the network and get rewarded. For POW mechanism, there is a need to have the hardware equipment capable of mining the coins. This is expensive, consumes large amounts of electricity (energy-consuming), and generates a low of heat (requires cooling equipment).
Proof-of-stake or POS on the other hand is a consensus algorithm that decides on who validate the next block, according to how many coins you hold, instead of miners cracking cryptographic puzzles using computing power to verify transactions like they do with traditional Proof-of-Work. Cryptocurrency Staking is evolving from being a semi-passive reward, to becoming a powerful incentive for participating in governance.
An individual can only validate transactions based on their staked number of coins. Typically, users that stake larger amounts of coins have a higher chance of being chosen as the next block validator. While ASICs mining requires a significant investment in hardware, staking requires a direct investment (and commitment) in the cryptocurrency. This allows for blocks to be produced without relying on mining hardware (ASICs). So, instead of competing for the next block with heavy computation work, PoS validators are selected based on the number of coins they are committing to stake. The production of blocks via staking enables a higher degree of scalability. Each PoS blockchain has its particular staking currency.
In a simple term, Crypto staking can be described as holding interest over some amount of money fixed in your bank account. In this case, the coins are locked in a wallet for a period of time and as a reward, more coins are added to the wallet due to network participation reward. The more a person stakes their coins, the additional coins they get.
Is Proof of stake more secure than Proof of Work?
One of the most common risks with blockchain is the 51% attack. This refers to an event where miners with more than 50% of the computational power of a Proof of Work blockchain would essentially control the blockchain. With the 51% attack on a Proof of Work system, the miners need to have more than 50% of the computational power. I.e. the hardware, which for Bitcoin is near impossible. And on a Proof of Stake system, you need to control more than 50% of all the coins available. Which for Ethereum or other bigger blockchains are near impossible. However,, POW base consensus or mining is expensive, consumes large amounts of electricity (energy-consuming), and generates a low of heat (requires cooling equipment).
In summary, yes, proof of stake going to overtake the mining due to more secure, faster, scalable and more computational efficiency benefits seen from staking consensus mechanism. Currently most of the Top Public blockchain platform moving to POS including Cardano, Avalanche, COSMOS, Algorand, EOS, DASH, Tezos, NEO, Wanchain, Vechain, Ontology, ICON, Ethereum (Pending) and many more to come in future.
