Often Heard Crypto Staking? The Following Is The Definition, How It Works, And The Inventor

Understanding Proof of Stake and staking in crypto (Cryptonewz)

JAKARTA – So far, many people have been mining cryptocurrencies using high-power computing devices such as the Nvidia GeForce RTX 3060 Ti VGA. It turns out that there are other ways to get crypto besides mining, namely by staking. To find out what staking is, here is an explanation of the term.

For information, staking is another alternative to mining that does not require sophisticated computing devices. In contrast to mining, staking does not drain a lot of energy because it does not use high computing tools to generate crypto.

In order to stake crypto both on Binance and on other crypto exchanges, users only need to deposit funds in certain cryptocurrencies to support the security and operation of the blockchain network. In simple terms, staking is the act of locking cryptocurrencies in order to get rewards.

Users can stake directly from digital wallets such as Trust Wallet, MetaMask, and so on. However, some crypto exchanges also provide staking services for their users such as Binance and Crypto.com, as well as other crypto exchanges.

In order to recognize the term staking more deeply, users should first understand the Proof of Stake (PoS) mechanism. PoS is a consensus mechanism that allows blockchain to work with less energy consumption.

Definition of Proof of Stake (PoS)

Understanding PoS, helps us recognize how the first crypto works, namely Bitcoin which works with Proof of Work (PoW) consensus. This PoW mechanism allows transactions to be aggregated in a number of blocks, each block connected to other blocks to create a blockchain. Through PoW, mining or mining can be done.

Miners are required to solve complex mathematical puzzles with high computing devices to keep the network safe. Therefore, miners get coins as a reward. The more sophisticated the computer equipment used for mining, the greater the opportunity to get the crypto that is mined. Because it uses high computing and consumes a lot of power, PoW consensus is considered energy-intensive.

At this stage, Proof of Stake (PoS) appears as an alternative. PoS does not require high-power computing devices and is more energy-efficient, crypto owners only need to lock the coin (stake) within the specified time limit. Then the protocol will give the right to one of the users to validate the next block. The possibility to be selected depends on the number of coins locked. The more coins staked, the bigger the reward.

Now, with this Proof of Stake method, the determination of which participants will make blocks is no longer chosen based on high computations as in Proof of Work. In PoS, participants will get the right to create blocks based on the number of coins staked.

With the advent of this Proof of Stake consensus, Ethereum will migrate from PoW to PoS in a collective upgrade called ETH 2.0. A number of other cryptocurrencies that have already used PoS consensus include Algorand, Cardano, Solana, and a number of other cryptocurrencies.

The presence of Proof of Stake cannot be separated from two names, namely Sunny King and Scott Nadal. In 2012, the two published a paper on the subject for the Peercoin network that utilizes a hybrid PoW/PoS mechanism as reported by the Binance Academy.