HomeOPINIONMining and Burning in Crypto : Key Differences

Mining and Burning in Crypto : Key Differences


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Cryptocurrency is a vast realm with robust parlance with which every crypto enthusiast must familiarize themselves, this article aims to shed light on the key differences between Burning and Mining in Crypto. It’s very important to note that the two are vital to the distinctiveness of cryptocurrency.

Often, systems in Burning and Mining such as Proof-of-Work, Proof-of-Stake, and Proof-of-Burn are consensus mechanisms algorithms. These three usually instigate confusion among novices in the crypto realm, yet they come into play in different instances.

Both Mining and Burning in Crypto play a prominent role in preserving the value of the industry and protecting the blockchain. Despite having many differences, Yet, the two serve as a major source of income for crypto enthusiasts. This further emphasizes supplementary ways in which investors can earn from cryptocurrency aside from trading and hoarding coins.

Explaining Mining in Cryptocurrency

Firstly, Mining in cryptocurrency is a technical engagement by individuals and firms in other to mint fresh coins. It requires the deployment of supercomputers to solve mathematical calculations in other to protect the blockchain. These calculations are numerous transactions that took place on the blockchain, miners then validate and store these transactions on the blockchain.

In return, Miners (Firms and Individuals) are rewarded with new tokens due to the cost attached to the process. Mining requires supercomputers to carry out its operations, mainly because it’s a competitive task. The long league of miners working to keep the blockchain makes it a “winner-take-all” situation. The first to verify a transaction gets the reward.

Also, the energy-consuming nature of these supercomputers and other costs attached to mining sometimes make it unprofitable for individuals. Nevertheless, the aforementioned system only matters to tokens that use the Proof-of-Work system to mint more tokens.

Furthermore, another method of minting new tokens (Mining) is through the Proof-of-Stake. The PoS is a substitute for PoW, though not as protective as the PoW in terms of protecting the blockchain. Nonetheless, it eliminates the competitive nature of mining and as well its heavy power consumption.

Instead of engaging supercomputers, the PoS allows miners to stand a chance of becoming a validator through stakes. Coin holders offer their possession as collateral to become a validator. Thus, the system randomly selects those who staked their coins to mine fresh tokens.

Tokens that employ PoW and PoS

Irrespective of their differences, the two methods offer miners new tokens as a reward for their efforts towards securing the blockchain. Notably, various blockchain uses these two methods. The Polkadot, Avalanche, Cardano, and Ethereum 2.0 are blockchains that use the Proof-of-Stake.

Therefore tokens like Solana, Cardano, Tezos, Algorand, Celo, Mina, Bitshares, Etc. use the PoS to verify the blockchain and reward miners with tokens. While Bitcoin, Litecoin, Dogecoin, Ethereum, Monero, Bitcoin Cash, etc use the Proof-of-Work.

Key Differences between Burning and Mining in Crypto

Burning in cryptocurrency implies an intentional act of sending tokens into wallets that cannot send out but receives tokens. These wallets are known as “eater” or “burner” The deliberate act eliminates tokens from circulation in other to soar its value.

Additionally, a notable system in Burning is known as Proof-of-Burn which is distinctively different from Proof-of-Stake or Proof-of-Work in mining. It’s one of the diverse consensus mechanism algorithms deploy by a blockchain to confirm that every participating nodes acknowledge the validity of the blockchain.

Though, both PoW and PoS are consensus mechanism algorithms, while the two functions in Mining, PoB operates in Burning. PoB employs a system that allows miners to burn cryptocurrency, it permits them to mine coins in percentage to the coins burnt.

Meanwhile, Mining and Burning in crypto can have some parallels and work hand-in-hand for miners. Still, Mining tends to create more tokens as rewards for miners, due to their efforts. Burning on the other hand helps to get rid of some tokens in other to increase their value.

Nevertheless, both activities are rewarded with tokens yet, one tends to birth while the other tends to eliminate. Also, Burning in Crypto helps miners to maintaining the blockchain while creating new tokens. Simply, it helps to preserve the value of a token despite the minting of new ones by miners. Lastly, the distinctive differences between the two might not be wide, but technically they are unrelated and they serve different purposes.

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Olaleye Komolafe
Olaleye Komolafe
Olaleye is a professional reporter with vast experience in web3, cryptocurrencies, and NFT journalism. He enjoys writing about the evolving metaverse sphere and the prevalence in the crypto sphere. Notably, some of his contents have been published in numerous international publications. Away from the crypto world, Olaleye is a political scientist and a lover of football

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