What is Minting?
Let's find out Minting meaning, definition in crypto, what is Minting, and all other detailed facts.
Minting is the decentralized method of generating new cryptocurrency coins or tokens without the interference of a central authority such as the bank. Users can mint a range of tokens, including stablecoins and non-fungible tokens.
New cryptocurrency coins are generated using consensus algorithms. The two main consensus algorithms used to create new cryptocurrency coins are Proof-of-Work (PoW), which requires users to mine the coins, and Proof-of-Stake (PoS), which involves staking assets.
Both consensus algorithms exist with the purpose of creating new crypto coins. For clarity’s sake, it is more common to use the term “minting” when referring to staking and “mining” when talking about the PoW consensus mechanism. However, both minting and mining are methods of creating new blocks and adding them to the blockchain.
The Proof-of-Work (PoW) consensus mechanism is used to mine cryptocurrency. The process of mining involves network nodes finding, storing, and validating crypto transaction data on the public distributed ledger known as the blockchain.
Bitcoin (BTC), the biggest cryptocurrency in the world, is mined using the Proof-of-Work consensus mechanism.
Miners use special equipment, including high-powered processors to solve hashes – mathematical problems that unlock new blocks. For each solved block, miners are rewarded in cryptocurrency and add new coins to circulation.
The Proof-of-Stake consensus algorithm involves staking. Users put a certain amount of their funds to stake the pre-existing cryptocurrency. These assets are known as their stake.
Stakeholders can be randomly chosen to verify the blockchain transactions and receive rewards in transaction fees. The more coins stakeholders put forward, the more likely they are to be chosen as validators.
Any coins that have been put forward as a stake are not spendable. If a stakeholder breaks the rules of the blockchain or deliberately records inaccurate transaction data to receive rewards, they may lose their wager. Stakeholders follow a high-risk-high-reward strategy by staking large amounts of coins to increase their odds of making a profit.
Although minting can refer to different processes of creating coins or tokens, it is most commonly used to refer to new cryptocurrency created via the Proof-of-Stake mechanism.
Non-fungible tokens are ERC-721 standard tokens built on the Ethereum blockchain. The process of minting an NFT differs from minting cryptocurrency. All new NFTs are added to the Ethereum blockchain and often contain visual files, such as photos or videos, attached to them.
Users who want to mint NFTs must have a cryptocurrency wallet with Ethereum (ETH). They can then register their wallet on an NFT marketplace like OpenSea or Rarible. To create the NFT, they can upload the file they want to be attached to the token and pay for the creation using ETH. The NFT is minted when the transaction data is verified.