Cryptocurrency trading and investment are gaining a lot of popularity. People are embracing the technological change in traditional finance. The hype behind such novel technological products created a media explosion which led to swelling demand. This triggered a spike in the price of some new coins and tokens.
Consequently, crypto followers and enthusiasts started entertaining the idea of minting their cryptocurrency. For example, the price of Bitcoin increased from $13 to $1100 in 2013 alone, even hitting the $60,000 mark in 2021. NFTs caught the attention of the world when Christie’s Auctions sold the very first NFT artwork. A collage of images made by the digital artist, Beeple sold for a whopping $69 million in 2021.
Minting is how crypto coins and NFTs are created, basically. Minting is the process of creating or producing something. In a blockchain, minting means validating information, creating a new block and recording that information into the blockchain. For example, someone can mint Non-Fungible Tokens (NFTs) or a new cryptocurrency through a proof of stake protocol. The newly minted crypto or NFT is then added to the circulation for trade.
The minting process is decentralized, allowing anyone to create crypto without the need or interference from a central authority. The crypto ecosystem provides a variety of coins and tokens to users at an ever-growing number. Tokens are typically in the form of non-fungible tokens (NFTs) created on various blockchain networks.
In the crypto world, the process of minting is equivalent to the issuance of fiat currency by a central bank, which thus puts it into circulation in the real world. Such a token is a legitimate cryptocurrency, the supply of which is not fixed. This allows the user to mint many other tokens of the same kind whenever they want. For this, a minting method is included in the token contract, which will later enable the token minting. Similarly, a method of disabling the minting process can also be added in order to stop it irreversibly. Minting is thus an invaluable element of the crypto ecosystem and traditional finance.
How is crypto minted?
To keep the blockchain network running smoothly, only one block can be created at a time. Proof of stake is the minting process of controlling how blocks are created and how data is added to a block.
Here’s how proof of stake happens:
- To be eligible to participate, users are required to deposit and risk a large number of cryptocurrencies, this is known as a “stake”.
- People who provide a stake (known as “forgers”) are randomly selected to record and verify information on the blockchain.
- Forgers participating in proof of stake cannot spend or move their stake. If they are caught recording false information or doing something against the rules, they risk forfeiting their entire stake.
- In most proof of stake systems, the larger your stake the greater your chances of being selected to record and verify the blockchain.
- Forgers are willing to endure the cost and risks of staking for the chance to earn transaction fees paid by users of the system.
What is crypto mining?
Proof of Stake is a minting method of how blocks are formed through staking as opposed to “mining” under the “proof of work” protocol. Users who mint crypto are called validators, rather than miners.
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