Cryptocurrencies usually seem like a difficult concept because they have a lot of complicated words associated with them, and people might not know exactly what they mean. Especially for beginners, it might be hard to grasp all these concepts, but in some cases there are also terms experienced investors don’t understand.
Cryptocurrencies first entered the world in 2009, when Bitcoin was created to offer an alternative to fiat money. It truly managed to do that and captured the attention of people worldwide who wanted to discover the best way to buy Bitcoin and what is the significance of the challenging terms they initially didn’t understand. In this article, we will explore the concepts of crypto mining and minting and what sets them apart.
What exactly is crypto mining?
Crypto mining is a process used by some cryptocurrencies, such as Bitcoin, to add new blocks to the network. Miners verify all transactions and are rewarded with BTC for their time and effort. They are the ones who keep the network going, and they need to receive rewards for their work. Miners must solve complicated mathematical problems, and the first one who does that will add new blocks to the network.
Crypto mining is a process that uses a lot of energy, as it requires specialized and high-performance hardware devices to perform all the necessary operations in mining. Crypto miners provide the processing power needed for mining, which in many cases comes with a high energy bill. This is why mining isn’t a very profitable solution for individual miners, as the rewards might not sustain all the costs of this operation. Now, miners receive 3.125 BTC per mined block, and the amount was cut in April 2024, when the rewards were 6.25 BTC per new block added. This event happens every four years, and it is called Bitcoin halving, which maintains the scarcity feature of Bitcoin. Bitcoin has a limited supply of 21 million coins, and after this amount is finally issued to the platform, miners will no longer receive rewards for the mining operations.
As mining individually is not profitable anymore, now the ones who validate new transactions are usually mining farms that have invested in highly effective and expensive mining equipment. They also have all the resources to pay for the huge electricity they need for mining, as some are located in regions where electricity is cheaper. However, mining farms are sometimes unable to generate enough mining power, so in the end, more farms have joined their forces and energy, forming mining pools. Then, these mining pools share their rewards in accordance with the power that every mining farm generates.
What exactly is crypto minting?
If mining is a process used to create cryptocurrencies on a blockchain using the Proof-of-Work consensus mechanism, minting is a procedure that follows the Proof-of-Stake (PoS) blockchain protocol. Simply put, minting is the creation of new coins, and it is used in staking. Staking function with the help of validators, who validate new transactions and verify the authenticity of data. Anyone wanting to be a validator must stake a set amount of digital coins to become eligible. Many cryptocurrencies function on a PoS consensus mechanism, as this process doesn’t consume the same amount of electricity as mining. Instead, in the PoS, the consensus mechanism randomly chooses validators to automate a process. Additionally, the ones that have staked larger amounts of digital coins might be able to be selected more often than the others.
A validator’s responsibility is to confirm and record transactions on the blockchain. The staking process is secured by the fact that validators will lose their staked crypto if they don’t act according to the set norms and violate the protocol needed to add new blocks. Validators receive rewards in the minting process from transaction fees that individuals pay on the blockchain.
Minting also creates other tokens, including non-fungible tokens (NFTs). However, these processes are different and minting coins is not the same as minting tokens. NFTs can be described as art pieces that offer better ownership in the digital world, giving creators a way to monetize their work. If minting digital coins is done only by validators, this process doesn’t really occur with minting tokens, which anyone can do.
What are the main similarities and differences between crypto mining and minting?
The similarities between the two concepts are offered by the fact that both have the same purpose, and only the approaches are different. Mining is used for the PoW consensus mechanisms while minting in the PoS models. Additionally, how these operations function is different. For example, miners need to solve mathematical problems in mining, while in minting, validators will only need to stake a set amount from a particular digital currency. This is why staking can be seen as a great way to generate passive income, and the market will also benefit from this process, as it improves liquidity.
Last words
So, crypto mining differs from crypto minting, and the two of these words mean something else. The crypto world is a space full of complex notions that might be hard to grasp, especially at first. However, they will be present in the life of anyone who wants to invest in cryptocurrencies, so people must know exactly what they mean.
Research is always needed before entering the digital currencies space, as this will maximize the chances of a successful investment. Whether it is searching for the significance of terms or the use cases of cryptocurrencies, good research is always needed before entering the crypto space.
Lynn Martelli is an editor at Readability. She received her MFA in Creative Writing from Antioch University and has worked as an editor for over 10 years. Lynn has edited a wide variety of books, including fiction, non-fiction, memoirs, and more. In her free time, Lynn enjoys reading, writing, and spending time with her family and friends.
