Staking Vs Mining | The Differences And How You Can Earn From Both

Wondering what the difference between staking and mining is? Both can be used to help networks perform and both can be used to generate passive income.

Passive income is a buzz word going around the crypto space at the moment and possibly everyone's favorite way to make money. In this article we go over two great ways you can earn passive income in the cryptocurrency space, through staking and mining.

But what do those terms mean? How does it work? And can I really make extra passive income through them? Read on below to find the answers…

Staking Vs Mining

Key Takeaways

  • Both staking and mining can earn you passive income
  • You need cryptocurrencies to start staking
  • You need hardware such as a computer or video cards to start mining
  • Mining is very energy intensive

What is Mining?

Mining is a process used by several different cryptocurrencies such as Bitcoin that generates new coins, helps to process transactions and helps secure the network. Mining is done by using your computer's processing power to complete complex equations and contribute processing power to the network, computers used for mining are then rewarded with coins.

Crypto mining is a big reason why there was a large graphic/video card shortage during 2020 as the amount of miners ramped up and people realized the money there was to be made doing it, especially with the popular cryptocurrency Ethereum.

Mining can also be done via a mobile phone however with a lot less processing power than a high end computer would have so the rewards are a lot smaller.

The benefits of mining

Apart from the passive income you can earn you are also helping a network stay secure and running. Without miners, networks that run on a proof of work (POW) consensus mechanism would not be able to process transactions or stay secure.

As the crypto space evolves we are seeing more and more networks make the transition from Proof of Work over to Proof of Stake such as what Ethereum has done with its recent “merge”.

You might be wondering what I’m talking about, proof of work this, proof of stake that.

Proof of Work is a consensus mechanism which relies on miners to process transactions and secure the network while Proof of Stake relies on validators made up of staked tokens to process transactions and secure the network. We will cover more on Proof of Stake and staking tokens later on in this article.

What do you need to start mining?

As mentioned before you need either a computer or even a mobile phone for you to start mining today and earning passive income.

Since mining is very hardware intensive the higher end equipment with the more processing power the more your mining rewards are going to be. If you are wanting to really get into mining I would recommend looking into “mining rigs” which are made up of multiple high end video cards to maximize the amount of processing power you can use.

You will also need the software needed for the specific tokens you would like to mine. You can easily find this by Googling “Software for mining Bitcoin”. 

What is staking?

Unlike Mining, Staking does not require any hardware to start earning passive income.

Staking is a great way to earn passive income from cryptocurrencies that you plan to hold for a while. Staking is available for a large range of cryptocurrencies through varying DeFi protocols. Staking is where you lock away or deposit your tokens in a contract and in return you earn rewards.

Staking is often used to help networks process transactions, this is called Proof of Stake. We touched on this briefly earlier in the article. Let's use the popular layer 1 network Solana as an example.

Solana is a layer 1 network that runs off a proof of stake consensus mechanism, this means that the network relies on nodes or validators that have a large amount of SOL staked in them to process transactions and keep the network healthy.

To participate in this you can select a validator that you like to contribute to by staking your SOL and in return you will earn rewards, aka passive income.

Helping networks run is not the only way that staking helps, some DeFi protocols will offer a fixed percentage per annum in return for you to stake your tokens with them and they will then use these staked tokens for lending and other income generating activities.

Best places to stake your tokens?

There are dozens of places for you to stake your tokens depending on your goals and the cryptocurrencies in which you want to stake.

The most common place for users to stake their crypto is on exchanges such as Binance. This is often thought of as the safest place to stake your crypto while still getting decent rewards. Exchanges often offer staking on hundreds of different assets and offer a simple user friendly way to start staking.

Staking can often seem like a daunting task or a highly technical process however with exchanges offering such a user friendly UI and wallets and DeFi protocols marketing themselves towards beginners staking has never been an easier way to start earning passive income.

Conclusion

To wrap things up both Mining and Staking can be used to generate passive income, both in different ways.

Mining you will need hardware such as video cards or a computer that can generate a lot of processing power to mine while staking you just need a wallet and the desired cryptocurrency that you would like to stake.

Wondering what the difference between staking and mining is? Both can be used to help networks perform and both can be used to generate passive income.

Passive income is a buzz word going around the crypto space at the moment and possibly everyone's favorite way to make money. In this article we go over two great ways you can earn passive income in the cryptocurrency space, through staking and mining.

But what do those terms mean? How does it work? And can I really make extra passive income through them? Read on below to find the answers…

Staking Vs Mining

Key Takeaways

  • Both staking and mining can earn you passive income
  • You need cryptocurrencies to start staking
  • You need hardware such as a computer or video cards to start mining
  • Mining is very energy intensive

What is Mining?

Mining is a process used by several different cryptocurrencies such as Bitcoin that generates new coins, helps to process transactions and helps secure the network. Mining is done by using your computer's processing power to complete complex equations and contribute processing power to the network, computers used for mining are then rewarded with coins.

Crypto mining is a big reason why there was a large graphic/video card shortage during 2020 as the amount of miners ramped up and people realized the money there was to be made doing it, especially with the popular cryptocurrency Ethereum.

Mining can also be done via a mobile phone however with a lot less processing power than a high end computer would have so the rewards are a lot smaller.

The benefits of mining

Apart from the passive income you can earn you are also helping a network stay secure and running. Without miners, networks that run on a proof of work (POW) consensus mechanism would not be able to process transactions or stay secure.

As the crypto space evolves we are seeing more and more networks make the transition from Proof of Work over to Proof of Stake such as what Ethereum has done with its recent “merge”.

You might be wondering what I’m talking about, proof of work this, proof of stake that.

Proof of Work is a consensus mechanism which relies on miners to process transactions and secure the network while Proof of Stake relies on validators made up of staked tokens to process transactions and secure the network. We will cover more on Proof of Stake and staking tokens later on in this article.

What do you need to start mining?

As mentioned before you need either a computer or even a mobile phone for you to start mining today and earning passive income.

Since mining is very hardware intensive the higher end equipment with the more processing power the more your mining rewards are going to be. If you are wanting to really get into mining I would recommend looking into “mining rigs” which are made up of multiple high end video cards to maximize the amount of processing power you can use.

You will also need the software needed for the specific tokens you would like to mine. You can easily find this by Googling “Software for mining Bitcoin”. 

What is staking?

Unlike Mining, Staking does not require any hardware to start earning passive income.

Staking is a great way to earn passive income from cryptocurrencies that you plan to hold for a while. Staking is available for a large range of cryptocurrencies through varying DeFi protocols. Staking is where you lock away or deposit your tokens in a contract and in return you earn rewards.

Staking is often used to help networks process transactions, this is called Proof of Stake. We touched on this briefly earlier in the article. Let's use the popular layer 1 network Solana as an example.

Solana is a layer 1 network that runs off a proof of stake consensus mechanism, this means that the network relies on nodes or validators that have a large amount of SOL staked in them to process transactions and keep the network healthy.

To participate in this you can select a validator that you like to contribute to by staking your SOL and in return you will earn rewards, aka passive income.

Helping networks run is not the only way that staking helps, some DeFi protocols will offer a fixed percentage per annum in return for you to stake your tokens with them and they will then use these staked tokens for lending and other income generating activities.

Best places to stake your tokens?

There are dozens of places for you to stake your tokens depending on your goals and the cryptocurrencies in which you want to stake.

The most common place for users to stake their crypto is on exchanges such as Binance. This is often thought of as the safest place to stake your crypto while still getting decent rewards. Exchanges often offer staking on hundreds of different assets and offer a simple user friendly way to start staking.

Staking can often seem like a daunting task or a highly technical process however with exchanges offering such a user friendly UI and wallets and DeFi protocols marketing themselves towards beginners staking has never been an easier way to start earning passive income.

Conclusion

To wrap things up both Mining and Staking can be used to generate passive income, both in different ways.

Mining you will need hardware such as video cards or a computer that can generate a lot of processing power to mine while staking you just need a wallet and the desired cryptocurrency that you would like to stake.

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