Proof-of-Work, Proof-of-Stake, Cold and Hot Staking - In a Nutshell
Cover photo: Coins.   Photo by Syed Hussaini on Unsplash.

Proof-of-Work, Proof-of-Stake, Cold and Hot Staking - In a Nutshell

By L0S3rC0D3r | L0S3rC0D3r | 18 Jan 2020

Proof-of-Work (PoW)

Back in the early stages of Bitcoin. The term "mining" where refereed to the process of validation of transactions between nodes of terminals. The record of validation of transaction is something known as Blockchain. All this records called blocks, are securely linked using a cryptographic hash function. This makes them resistant to modification or the need of a third party verification. A reward is awarded by presenting a valid partial proof of work, and this reward creates a new coin.  

The increase use of the digital currency with its price, made the currency the new gold among the pioneers and as the need of more nodes of machines generating this consensus faster, made it an excessive labor to the machines and use of resources such as electricity, this is why there's a possible origin to the term "mining". The increase of prices by the halving; process specified for preventing inflation of the coin, in which rewards for the validation of Blockchains are decreased in half, led to the need of more powerful machines capable of generating encryption hashes more efficiently by using ASICs (application-specific integrated circuits) that could do the job of previous multiple nodes in the network.

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Proof-of-Stake (PoS)

Staking, as the name suggest, is the action of making heaps of coins staked each other in an ordered way. The method of securing a cryptocurrency network and achieving a dynamical consensus is considered proof-of-stake. Sunny King y Scott Nadal probably where the first ones introducing the ideas of PoS as a way of dealing with the issues of PoW, they introduced this concepts in the "Peercoin" in 2012.

Rather than using Blockchains to validate blocks. A PoS chain generate new block without using hardware or an incremental computational work, rather they are selected by the weight of a node proof-based on staked coins. The other side of the coin, is that this method encourages centralization by this Pooling-Nodes, but in the other side promotes scale application. Another type of application is called Delegated Proof of Stake, that allows users to simply make their staked coins reinforce part of the whole network.

Photo by Daria Shevtsova on Unsplash

Hot Staking / Cold Staking

Hot staking reefers to the process in which a certain PoS coin, stakes. Weather you need your device or wallet to be "ON" or "OFF", Online or offline to be able to earn rewards for the staking coins. Rather with an access of a synchronized wallet (Hot Stake), which the user needs to have their staked coins with their running machine or delegated to a network or pooling node (Cold stake), that can receive rewards without the need of a synced wallet. Usually "running a node" means cold staking for the hodlers as for the user running a node might be considered hot staking.


Examples of coins with cold and hot staking


Hot Staking Coins

  • REDD coin
  • BitBean
  • Condensate

Cold Staking Coins

  • AION
  • NEO
  • ONT

Probably I will make another post detailing all Proof of Stake coins and their characteristics. In the meantime I recommend you to watch the next video by Alpha Crypto, and  see if you can spot more cold and hot staking coins, and which are not considered staking coins, but can be lend for an interest.



Feel free to share your thoughts and comments. I appreciate feedback. Have a good day.

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