Stacking is locking your coins/tokens temporarily to support the network’s security and consensus. As a reward, you’ll earn stacking rewards. This may be achieved by depositing token in a software or committing by temporarily locking it while the ownership remains with you in your wallet. Ethereum 2.0 works on PoS and Stacks work on PoX, both are energy efficient and mining can be done through even a laptop, but there are fundamental differences to consider. PoX is a superior consensus mechanism compared to PoS.
ETH : PoS (Proof of Stake)
This consensus mechanism is based on the node’s coin stake. The nodes hold or lock up coins to validate the authenticity of transactions. Mining nodes having a higher percentage stake of total coin supply will get to mine more percentage of blocks. Mining rights are in proportion to staked tokens in cryptocurrency. As the nodes get randomly selected for validation, they keep on attesting the transactions and when a required number of transactions are completed a block is formed.
STX : PoX (Proof of Transfer)
PoX combines the merits of PoW, PoS, and PoB in one protocol. It has two types of participants:
- Validating nodes: they transfer BTC to the network & earn STX token as a reward for mining
- Stackers, or STX token holders: they receive BTC from validating nodes, an incentive to keep HODLing STX and receive more BTC in future
In this post, we will understand the difference between ETH & STX stacking, both chains run on different proof of consensus but both enable smart contract functionality to developers for creating DeFi dapps and increase adoption in metaverse.
The table above summarises the differences, Stacking STX has more flexibility and higher returns v/s Staking ETH.
