Do you still think that mining cryptocurrency occurs only with hardware? Thinking of buying video cards or even incomprehensible Asics? Then this is the post for you!😀
Proof-of-Work vs Proof-of-StakeThis post is a preparation for you to discover a new, promising and unique way to mine cryptocurrency at home, without investing in questionable investment funds, cloud mining, and even without investing in equipment. Do you want to earn cryptocurrency on your usual weak laptop? Then get ready, you need to read very carefully, and maybe several times.
Let's start with the fact that cryptocurrency mining methods can be divided into 2 types:
Proof-of-Work (PoW) and
Proof-of-Stake (PoS). PoW and PoS are cryptographic protocols that determine how this network will function and how exactly new coins will appear in the world. Both of these protocols perform a protective function, ensuring the security of transactions.
What is Proof of Work (PoW) mining?Pow miningYou can translate this protocol from English as “
Proof of Work”. Working with this protocol requires a large amount of computing power, which ensures the security of the network. The main objective of this protocol is to prevent DDoS attacks from bad people who want to harm the work of the financial system. The processing of this protocol requires the so-called “computer time”, and the network security is ensured by the sum of the computing power of all network participants. It is to work with this protocol that people constantly buy new and new equipment, seeking to increase their capacity in the network and receive remuneration for it. Thus, to attack a network, hackers need to have 51% of the power of the entire network, which is difficult, but in principle real.
Given that
Bitcoin works with this protocol, and the main computational power is concentrated in the hands of several large mining pools, it is theoretically possible that criminal collusion exists between them to discredit
Bitcoin when it is beneficial for them. We have already witnessed a similar attempt recently, when a group of people (I will not mention their names), controlling a large number of capacities and having a large supply of
Bitcoin in their hands, attacked with the aim of putting Bitcoin Cash on the throne. At that time, capacities were switched from
Bitcoin to Bitcoin Cash, tens of thousands of transfers in the
Bitcoin network were sent at the same time with minimal amounts to overload an already weakened network, and these speculators massively sold
Bitcoin and bought Bitcoin Cash, which together caused panic in the market and huge fluctuations in the rates of both currencies. But even then,
Bitcoin held out because many people around the world began to buy
Bitcoin, taking advantage of its low rate. But let's not get distracted and summarize:
PoW protocol provides network security at the expense of computing power. The reward is given to those who control more equipment (hash power).
What is Proof of Stake (PoS) mining?PoS-miningPoker players have probably already guessed that this protocol can be translated as “
Proof by the bank (capital, amount)”. This protocol was created in order to “plug holes” in the
PoW protocol, the main of which is the very attack of 51% when big miners can dictate their conditions to the rest.
Here your influence on the net is not determined by the amount of power, but by the number of coins you own. The technology is very simple: we install a cryptocurrency wallet on a computer (let's take
DASH, for example, as the most famous representative currently working with
PoS), throw coins on it (just buy as usual) and .... everything! When you install the wallet on your computer, it synchronizes with the network, you get data on all the transactions that were completed earlier and become, in fact, another decentralized database. The main condition is that the wallet should not be encrypted and must go through synchronization, which can take from a couple of hours to several days. After that, your wallet becomes a so-called masternode, and you get a reward from the network to your wallet.
It all depends on the specifics of the coin. But often coins use the percentage ratio of the number of your coins to the total number of coins in the network. Suppose you have 1,000 coins. Total created 10,000 coins. Your stock is 10% of the world’s currency, and you will receive 10% of all generated blocks once in a given period of time. Again, this usually happens once a day. Thus, you will receive every day a % of the cryptocurrency put into circulation simply for having them in your wallet. No video cards, sleepless nights and burnt motherboards. Beauty, as for me. But the wallet, of course, must be up and running. My wallets are on a separate laptop, which is 95% of the time with the screen off and does not give me any worries.
Why do I personally consider PoS protocol promising?First - it does not require people to make regular purchases of new equipment, depending on the producers, who make money on this and outbid buyers.
Secondly - an attack on such a network makes less sense than on
Proof of Work. The rule of 51% also works here, but now you need to have more than half of the coin reserves and not capacity (hash power).
Thirdly - in
PoW mining, the amount of transfer fees depends on the miners. If you want your transaction to be included in the block earlier, you pay more. Miners set the minimum amount of commission for which they are ready to make a transaction. The commission is taken as a percentage, the larger the amount, the greater the commission. In
PoS mining, the size of the transfer is irrelevant, as is the greed of individuals. The transfer fee is fixed and always the same.
But of course, this protocol is criticized. The basic wording is “
The rich get richer" even more. Who has more coins, earns more. Did those who have enormous computing power work as loaders in the market? Of course, the richer a person is, the greater is his ability to succeed compared to the less rich. So this criticism is also valid for
PoW mining. Lucky for us that not all rich people have invested in cryptocurrency, and we have excellent chances to outrun them at the start.
The fact that behind
PoS protocol is the future, I personally have no doubt. Now there are coins working at once on both protocols, some hybrids, where the receipt of coins is distributed equally between those who want to work with PoW and who want to be holders of a bank with
PoS. Yes, and the famous Aether has already announced the transition to
PoS mining, which led to today's price increase, and this growth will logically continue. Let's also summarize:
The
PoS protocol ensures the security of the network due to the control package of coins. The reward of the holder is proportional to his stock on the wallet.
I sincerely hope that this article has given you new amazing knowledge, and most importantly, you understood what I wrote.
If anyone is interested in POS and masternodes, I have just updated my other post about how to set up a masternode.
This is a complete set with screenshots and all steps one by one.
You do not need any special computer knowledge, Linux or Ubuntu or any other special programs.
(GUIDE) Node, full node, masternode. How to set up one and make money from it?
This is my text published here
https://medium.com/@wieslaw17/masternodecoin-projekt-co-to-jest-w%C4%99ze%C5%82-node-pe%C5%82ny-w%C4%99ze%C5%82-masternode-i-jak-na-tym-zarobi%C4%87-e23c3cd0bad6After 4 years of using Medium, they removed my account and that is why this link above shows a 404 error now. I wasn't aware of the ban on Medium and now all my articles are lost because I haven't moved them when there was still the time or at least published somewhere else. Lesson learned and from now I will publish only on blockchain services like Steem or PublshOx.
