Two major events have created quite a stir in the crypto world in the last couple of years. One is China’s complete ban on crypto mining- and the other is – Ethereum’s ongoing Ethereum 2.0 upgrade. Both the incidents have one thing in common. Both of them are taking proactive steps to come out of the dangerous effects of crypto mining. While there are other reasons too behind the two phenomenal events yet a major focus has been on eliminating environmental concerns created by crypto mining. Read more about crypto mining at Multibank.io.
However, while China has taken a pessimistic stance towards crypto, Ethereum has opted for a more progressive attitude, offering a functional alternative to mining in the form of crypto staking.
According to a large group of crypto evangelists, crypto staking is probably the best answer to crypto mining. Mining is a crucial process that is utilized by blockchain platforms like Bitcoin to validate transactions and generate new coins. Despite the problems created by mining, we cannot just stop the process abruptly as otherwise Bitcoin and other PoW coins won’t function. Bitcoin is the king of crypto and any problem in its blockchain could bring the whole crypto industry to a standstill. Thus, experts are constantly stressing on finding a suitably alternative solution that will be able to shoulder the task of mining yet without creating the unwanted side-effects of the process. And crypto staking has come up as the most viable option here.
Environmental concerns created by crypto mining
How does mining work?
In mining, miners have to solve complicated mathematical problems to validate new blocks. The first miner to solve the problem will get rewarded with new coins. The contemporary crypto mining scene consumes a huge volume of computer power. Crypto mining is prevalent with Proof-of-Work blockchains.
The problem
The process of crypto mining consumes an “enormous” volume of energy. A rough estimate of annual energy consumption by Bitcoin mining activities amounts to around 120TW hours a year. The volume is equivalent to yearly electric consumption (domestic) of an entire country like Sweden! And the number mentioned above is just the estimate of one PoW coin. There are other PoW coins as well, such as Litecoin.
The world is already suffering from an energy crisis. Energy shortage is becoming predominant even in first world countries. Standing in such a grim scenario, we do not need another energy-draining avenue that would only accelerate the fast rising problem.
Another issue is that, high level of energy consumption also leads to further rise of carbon emission- another pressing problem at the moment.
It must be noted here that the early days of crypto mining were rather simple. Miners could mine with their regular PC CPUs only. Over the years, an increasing level of completion has brought to the fore rising use of GPUs and ASICs. Both GPUs and ASICs are highly energy consuming and crypto mining is immensely harmful for the environment today.
How does crypto staking offer a solution?
As mentioned previously, crypto staking offers a viable eco-friendly alternative to crypto mining.
What is crypto staking?
Crypto staking is a process of validating new blocks and generating new coins through staking.
In staking, a staker has to pledge a certain volume of coins to a blockchain network to help the network in validating new blocks. When you will pledge coins for staking, the coins will be kept locked in for a specified period of time, officially known as
“staking period”. In return, the blockchain rewards the staker with staking rewards (in the form of new coins). Crypto staking is prevalent with Proof-of-Stake blockchains.
How does staking solve the problem?
Crypto staking resolves the environmental concerns created by mining through its unique validation process.
In staking, unlike mining, you don’t need a high level of computational power and computing resources. In other words, staking does not need the enormous amount of energy needed for validating as you find with crypto mining. Rather, the process needs cryptocurrencies that will be locked up for a specific time period.
Although Bitcoin is not likely to switch from PoW blockchain and mining yet Ethereum is already shifting to PoS blockchain and crypto staking. The ETH 2.0 upgrade is designed to bring Ethereum blockchain to a full-fledged PoS blockchain in the coming months. The network has already introduced the Beacon Chain that has introduced crypto staking for ETH holders. As of now, the network is waiting for the Merge upgrade which is scheduled for August 2022. The Merge upgrade will “merge” the traditional Ethereum mainnet with Beacon Chain to create an end-to-end PoS blockchain that will utilize staking for block validation.
99% less energy consumption
Ethereum’s switch to PoS and staking has been estimated to reduce energy consumption by 99%. It’s self-explanatory why crypto enthusiasts are increasingly inclined to crypto staking and PoS coins.
Additional advantage of passive income
While crypto staking proactively offers a greener alternative to the mining process, its benefits don’t stop here. Another major benefit of crypto staking is its opportunity for passive income for PoS coin holders.
When you stake the coins for staking, you actually give your idle coins that you have kept for HODL. In return, you get staking rewards. Thus, thanks to staking, you are able to enjoy another additional income stream, apart from your HODL investments that will bring you high returns once you sell off the holdings.
Final words
Majority of crypto coins today offer crypto staking opportunities. However, the range of staking rewards will vary from one coin to another. On an average, the APY on staking rewards is around 10-12%. The staking reward will also vary from one staking platform to another. If you are planning for staking, there are various kinds of platforms to choose from- crypto exchanges, staking pools, crypto wallets, DeFi lending platforms, and so on.
Most of the staking coins have a specific entry point. Ethereum needs you to deposit at least 32 ETH to take part in Ethereum staking. However, if the entry point for staking seems too high for you, you can always join a staking pool.
