As Bitcoin recorded another ATH success some months ago, interest in cryptocurrencies has gained a lot of interest among people. However, how some of the new coins and tokens are created has resulted in a subject of discussion called crypto minting. The process of creating new coins is known as minting. If you have been around for a while in the cryptoverse, it is unusual not to have come across the word minting, especially when you have attempted to trade or flip NFT in the past.
Minting is a decentralized process of creating new coins and tokens such as ASIMI Token using the proof-of-stake consensus algorithm mechanism, disintermediating the involvement of centralized authorities such as the government or a bank. This newly created coin may be a crypto coin or a non-fungible token.
TYPE OF MINTING
If you observe clearly, minting is homophonic to mining. Both are the two ways crypto is created; while they are similar in meaning, the consensus algorithm employed is different. The former uses the Proof-of-Stake while the latter uses the Proof-of-Work consensus mechanism.
What is a consensus mechanism? According to Investopedia, A consensus mechanism is a fault-tolerant mechanism that is used in computer and blockchain systems to achieve the necessary agreement on a single data value or a single state of the network among distributed processes or multi-agent systems, such as with cryptocurrencies. It is useful in record-keeping, among other things.
Proof of work
Mining coins used the proof-of-work consensus mechanism. Mining is the process of creating a crypto token or coin through the storage and validation of transactions on a blockchain, which is a digital public record. This is accomplished by solving complex mathematical problems with high-powered CPUs, and as a result of this, miners are compensated with crypto for taking up the challenge of solving these complex mathematical equations, resulting in the creation of new currencies. Examples of coins mined are Bitcoin and Ethereum.
Proof of Stake
Staking is used in the Proof-of-Stake consensus algorithm mechanism, which is generally regarded as a better alternative method of minting as it is environmentally friendly. Staking refers to putting existing crypto to validate crypto transactions, i.e., users who want to validate transactions must put down some crypto. Stakeholders are then chosen at random to verify blockchain transactions which are dependent on the quantity of staked crypto. The more coins a person stakes, the probability and the high score of a chance they will be chosen. And it should be noted that during staking, stakeholders are unable to use the money they already put in staking.
In contrast to mining, Coins are minted through staking. Proof-of-Stake has validators and not miners as in the case of mining (that employs proof of work), and it doesn’t allow individuals to mine new blocks as in the case of mining; instead, they can mint or forge existing coins.
Crypto Mintng Vs. Staking
While both proof-of-work and proof-of-stake consensus mechanisms eventually result in new coins being minted, the term “minting” is typically used to refer to staking to differentiate between the two mechanisms mentioned above. Minting and mining are two different ways of adding new blocks to a blockchain.
BENEFITS OF CRYPTO MINTING
- Extra source of income for stakeholders chosen to record and validate transactions.
- Minting NFTs have availed the opportunity for creators and art enthusiasts to mint their works for flipping on marketplaces.
- Minting is zero risk.
Minting cryptocurrency adds value to the evolution of cryptocurrencies as a viable alternative to the inflated-risk fiat. Crypto may probably come to define the future monetary era, which will be characterized by a decentralized monetary system that is not regulated by a central bank.