Betting on cryptocurrencies is a popular way to multiply digital assets. It is similar to depositing money in a bank, where the bank uses customer deposits to create loans for others and incentivizes them with interest payments.
More specifically, #cryptocurrency staking is the transfer of a portion of coins to the #blockchain to keep the network functioning and secure.
For this contribution, the owner of the coins is rewarded with a percentage of the deposited funds. This process is quite convenient, as it is a way to get passive income.
Before betting was not discussed and used as often as it is now. In order to understand why it has become so widespread, it's worth examining its history.
To better understand this topic, we need to look at proof-of-work (PoW) and proof-of-stake (PoS) mechanisms.
Stake was born out of the PoW problem.
In PoW, transactions are verified and new blocks are created on the blockchain. Verifiers are called "miners" and compete to solve mathematical problems.
This concept worked well until #cryptocurrencies began to grow in popularity and the network became overloaded.
PoWs could no longer handle large numbers of TPS (transactions per second), and network bandwidth became limited.
PoWs are also energy-intensive and require large amounts of computing power. This became especially evident when the network activity increased and the need for changes only intensified.
the answer to the problem of PoW mechanisms became a new mechanism - PoS. The idea was proposed on the BitcoinTalk forum in 2011 by a user named QuantumMechanic. He stated that the PoS mechanism would select network validators who would add new blocks to the blockchain based on the number of coins they have and are willing to provide.
For the same reason, they will not need powerful computing machines and will consume less energy.
The PoS mechanism was first introduced by the cryptocurrency Peercoin in 2012.
The idea of the PoS mechanism seemed very attractive to the cryptocommunity.
Many cryptoprojects started using PoS or hybrid PoW-PoS mechanisms. The first examples were #Blackcoin and Nxt.
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