How does staking compare?
Staking means the locking of some certain amount of cryptocurrencies by participants to contribute to the blockchain network for some reward. Sometimes mentioned alongside mining in a PoW design, this is a very different process in regard to energy consumption and accessibility. Probably the most important difference refers to-
Energy efficiency:
Unlike in PoW, where miners use big computational power and energy to confirm transactions, the economic incentives in staking depend rather on hardware. That makes it way more energy-efficient and reduces the environmental impact related to blockchain confirmation.
Accessibility:
While this is the case, staking is much more open in comparison to PoW mining, because participants don't need access to large, specialized hardware. Instead, they only have to hold and stake a minimum amount of the underlying cryptocurrency, after which they can participate as a validator. This greatly opens up the possibility for participation to a wide number of users, furthering decentralization.
Security:
Both staking and mining rely on economic disincentives to deter malicious behavior. Validators in PoS risk losing their staked tokens because mechanisms like slashings are involved should they try to cheat the system, while PoW miners lose the energy and resources spent mining.
Rewards:
Rewards are divided in proportion to the stake staked by a party, and therefore it is far more predictable and much less resource-intensive way to earn cryptocurrency than PoW, where profitability is much dependent on computing power and market conditions.
In general, staking is less energy-intensive and more inclusive, and more secure compared to PoW, given the predictability of rewards.
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VEIGO (Community Mod)
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