There is an ongoing discussion among newcomers to the crypto and blockchain industry about how cryptocurrencies are created, and it’s a discussion that carries many parallels to how regular currencies are created. Nonetheless, cryptocurrency mining is different from gold mining, and cryptocurrency minting is different than real-life coin minting.
What is cryptocurrency mining?
Cryptocurrency mining is the process of recording and verifying transactions on a public digital record of transactions, known as a blockchain. In order to do that, miners solve complex mathematical problems and in return, there is the possibility they will be rewarded with cryptocurrency. As a result of mining in the Proof-of-Work sense, a new block is mined. Mining new blocks allows for the blockchain’s continuation. Thus, mining serves two purposes: to create new coins and to maintain a log of all the existing token transactions.
Is crypto minting a part of mining?
Interestingly, minting is also a part of mining. For example, when a new block is hashed for the first time in the Bitcoin network, it triggers a minting of new coins. Therefore, minting here refers to new coins coming into existence, and through Proof-of-Work, this happens through mining.
What is cryptocurrency minting?
On the other hand, under the Proof-of-Stake mechanism, coins are not minted through mining, but rather through staking. Proof-of-Stake does not have miners, it has validators, and it does not let people mine new blocks, but instead lets people mint or forge new blocks.
Minting is the process of validating information, creating a new block, and recording that information into the blockchain. Thus, Proof-of-Stake is the minting process for how blocks are created and how data is added to a block.
This is the primary difference between crypto mining and minting, and it’s really a difference between Proof-of-Work and Proof-of-Stake.
The main difference in the way cryptocurrencies are minted is that one requires Proof-of-Work, which is done through mining, and the other through Proof-of-Stake, which is done through staking. The coins being minted is the end, but the means to the end are what differentiates PoW and PoS minting. Nonetheless, both processes have the same goal, which is to secure the blockchain and distribute the newly minted tokens in a decentralized way, just through different means.