Minting is the process of generating new coins using the proof-of-stake mechanism and adding them to the circulation to be traded.
What Is Minting?
In cryptocurrency, minting is a decentralized method that enables a person to generate a new token without the involvement of a central authority, such as the government or the bank. It can either be a non-fungible token or a crypto coin.
Types of Minting
Cryptocurrency can be minted in two ways, the main difference between which is the procedure, while the final outcome, that is the creation of new coins, remains the same. One requires mining, which is called the proof-of-work method, and the other requires staking, which is called the proof-of-stake mechanism.
What Is Proof-of-Work?
The proof-of-work method involves mining coins. Mining refers to the practice of generating cryptocurrency by storing and validating transactions on a blockchain, which is a digital public ledger. This is done by using high-powered processors to solve mathematical problems. In exchange, miners get paid in cryptocurrency for solving difficult cryptographic equations, adding new coins to circulation.
What Is Proof-of-Stake?
Generally, more accepted as the better form of minting, the Proof-of-Stake method is done through staking. Staking refers to putting pre-existing cryptocurrency at stake, which means that users who wish to validate transactions in exchange for cryptocurrency must first wager a significant amount. This amount is referred to as their stake. Stakeholders are then randomly selected to verify transactions on a blockchain. The more coins an individual stakes, the more likely they are to be selected.
Stakeholders cannot spend the amount that they have put forth as their wager. If they breach the rules or are caught recording inaccurate data, they risk losing their entire wager. In this process, stakeholders are willing to bear the risks of staking huge amounts in return for the chance to make a profit.
Mining vs Staking
While both proof-of-work and proof-of-stake methods lead to new coins being minted, the term minting is often primarily used to refer to staking in order to distinguish between the PoW and PoS methods. Minting and mining are both methods of adding new blocks to a pre-existing blockchain.
Minting a Non-Fungible Token
The processes of mining and staking are used to mint cryptocurrency, but minting an NFT is a different procedure. NFTs are added to the Ethereum blockchain and are utilized by creators to sell their photos, videos, and digital 3D objects.
To mint an NFT, users need a cryptocurrency wallet with Ethereum in it. Then, they sign up using their cryptocurrency wallet on an NFT marketplace, such as OpenSea, and create their NFT by uploading their desired file and paying for the creation in terms of ETH. Once the transaction is verified, a new NFT is minted.
Minting can refer to different methods for creating different tokens. The most widespread use of the word minting means creating new cryptocurrency coins using the Proof-of-Stake method.
