Mining validates the legitimacy of a transaction as well creates a flow of new crypto-currency as a reward to the miner.

In the Proof Of Work system, the puzzle that the miner must solve has a key feature: asymmetry. This idea is also called as a CPU cost function, client puzzle, computational puzzle or CPU pricing function, commonly.

The network miners essentially compete to be the first to arrive at the solution to claim its records. Proof Of Work usually utilizes brute force by the miner and thereby, a huge number of attempts. As soon as the miner has solved the problem, he/she announces it on the ledger and immediately receives a fixed amount of cryptocurrency as the reward.

Proof of Stake, however, isn’t about mining. It’s about validating. Effect blocks still need to be created by someone, and who gets to create the next block depends on the specific Proof of Stake algorithm, but the selection process must have some kind of randomness or at least distribute voting shares properly (otherwise we revert to a centralized system).

In PoS, each validator owns some stake in the network. For example, ether, in the case of Ethereum, they bond. Bonding stake means you deposit some money into the network, and in some sense use it as a collateral to vouch for a block.

So, in a Proof Of Work system, you know a chain is valid because lots of work is behind it, while in the Proof Of Stake you trust the chain with the highest collateral.

Another major difference is the efficiency from a resource standpoint.

Enstine Muki, author of BlogExpose believes “Any system based on Proof of Work relies on energy use. According to a bitcoin mining-farm operator, energy consumption totalled 240kWh per bitcoin in 2014 (the equivalent of 16 gallons of gasoline). In a recent research, experts argued that bitcoin transactions may consume as much electricity as Denmark by 2020. Moreover, these energy costs are almost always paid in non-cryptocurrency (fiat currency), introducing constant downward pressure on the price.”

What this implies is that Proof of Work is extremely inefficient in terms of energy, and therefore also very expensive – which is obviously not desirable for a network whose goal is to minimize the need to trust third parties.

Most existing PoW blockchains, such as Bitcoin, pay for these costs with the pre-agreed creation of coins; inflation.

With this in mind, Proof Of Stake stands out as well. It can be referred to as the greener alternative to a highly un-ecofriendly system upon which the basis of cryptocurrency lays.

Proof Of Stake works on an agreement within the blockchain measured not on the basis of how much computing power agrees with the current state, but instead on the basis of how much digital currency agrees with the current state. Hence, it requires negligible amounts of energy.

The Proof Of Stake algorithm thus provides us with a pathway for implementing a decentralized ledger whose security is not based on expensive computation.

Top 5 coins for Mining

Zcash

“Zcash is the first open and permission-less cryptocurrency.”

According to whattomine.com Zcash, is the most profitable cryptocurrency for mining right now.

Algorithm: Equihash

Block Time: 2 m 27 s

Block Reward: 10.00

Website: https://z.cash

Exchange Price: 0.091 BTC

Check more details at https://whattomine.com/coins/166-zec-equihash

ZClassic

“ZClassic is a fork of Zcash: decided to take another path by removing the 20% fee. Miners are simply earning their fair reward, and the coin development can be supported by the community.”

Algorithm: Equihash

Block Time: 2 m 26 s

Block Reward: 12.50

Website: http://zclassic.org/

Exchange Price: 0.00054 BTC

Check more details at https://whattomine.com/coins/167-zcl-equihash

Zencash

Zen is leveraging the best minds in technology, governance, and community building to create the world’s first private, distributed, and reliable platform for communications, transactions, and publishing.

Algorithm: Equihash

Block Time: 2 m 30 s

Block Reward: 11.00

Website: https://zensystem.io/

Exchange Price: 0.00217 btc

Check more details at https://whattomine.com/coins/185-zen-equihash

Monero

Algorithm: Cryptonight

Block Time: 2 m 2 s

Block Reward: 6.30

Website: https://getmonero.org/

Exchange Price: 0.023 btc

Check more details at: https://whattomine.com/coins/101-xmr-cryptonight

Ethereum Classic

Algorithm: Ethash

Block Time: 14.13 s

Block Reward: 4.85

Website: https://ethereumclassic.github.io/

Exchange Price: 0.0031 btc

Check more details at: https://whattomine.com/coins/162-etc-ethash

Top 5 coins for Staking

OKCASH

OKCash is a Proof of Stake (PoS) cryptocurrency that gives a fixed percentage of income per year.

Annual Return: 10%

Wallet Link: https://okcash.org/

Exchange Price: 0.32$

Tutorial:  https://okcash.news/okcash-your-own-future-bank-in-your-own-living-room-1e1a200dcd12

NEO

“NEO, formerly Antshares, is China’s first ever open source blockchain.”

Annual Return: 5.46%

Wallet Link: https://neo.org/en-us/Download

Exchange Price: NEO: 30.47$  GAS: 24.8$

Tutorial: https://steemit.com/crypto-news/@champagnecrypto/how-to-stake-neo-antshares-and-claim-gas

ROI Calculator: https://neotogas.com/

NAVCOIN

Nav Coin is a decentralized cryptocurrency based on the latest version of Bitcoin Core. On top of a solid foundation, Nav Coin supports SegWit functionality, and easy to use wallets which are packed with advanced privacy features.

Annual Return: 5%

Wallet Link: https://navcoin.org/downloads/

Exchange Price: 0.92$

Tutorial: https://medium.com/@bocyaj2012/nav-coin-proof-of-stake-informational-guide-71c9c3417212

ROI Calculator: https://navtechservers.com/navtech-tools/staking-calculator/

REDDCOIN

Reddcoin is the social currency that enriches people’s social lives and makes digital currency easy for the general public.

Annual Return: 5.1%

Wallet Link: https://www.reddcoin.com/#Wallets

Exchange Price: 0.0013$

Tutorial: https://steemit.com/reddcoin/@shaunmza/beginners-guide-to-staking-with-reddcoin

ROI Calculator: https://agroff.github.io/posv/

Ethereum

Ethereum will be switched from POW to POS in next month. Annual returns are not announced yet, But according to some coverage, we came to know it could be around 8%.

Link: https://steemit.com/ethereum/@dana-edwards/proof-of-stake-casper-ether-and-compound-interest-gains

Conclusion

All the new projects are now choosing to work on POS consensus, that will make staking more popular. As there is no need of expensive hardware in staking. It will soon be mainstream and likely to choose more over mining in future.

Hitesh Malviya

Hitesh Malviya is the Founder of ItsBlockchain. He is one of the most early adopters of blockchain & cryptocurrency enthusiast in India. After being into space for a few years, he started IBC in 2016 to help other early adopters learn about the technology.
Before IBC, Hitesh has founded 4 companies in the cyber security & IT space.