Staking vs mining crypto is a very important knowledge to have.
This will help you make better decisions when you want to invest in crypto for passive income.
When trying to earn passive income with the use of cryptocurrency staking or mining, it might be confusing which one to go for.
Carefully checking the differences that exist when staking or mining crypto will go a long way in helping you to finally choose.
There so many factors that may lead to the final conclusion on which to choose.
In this tutorial, you will learn about the differences between staking and mining crypto.
1) Cost Of Starting Mining Or Staking Crypto
When it comes to the cost of starting cryptocurrency mining, the cost is really high when the whole cost is added up.
Apart from the cost that is incurred from buying the crypto mining equipments, the cost of electricity usage and cost of other components add up to a high figure.
This is because other components that will make the mining active like cables, cooling system and other accessories will come into consideration.
When you compare the cost that is incurred in staking any cryptocurrency, you realize that you spend little to nothing in starting cost apart from cost of buying the crypto.
This is because cryptocurrency staking does not require much physical equipments like crypto mining to be functional.
You just need to join a staking pool you desire like the binance staking pool for ADA.
After joining the staking pool and staking the quantity of Cardano you desire, you can even be offline till the staking period finished without missing even a period of stake reward.
This is not so when you are mining a cryptocurrency as you have to check regularly if any of the mining machines are down.
Periodic fluctuations of crypto mining equipment is common as the machines like ASIC miners produce a lot of heat and shut down when they over heat.
This is common when the mining environment is not properly ventilated.
This becomes a huge concern as they may as you will lose a lot of stake rewards if you are offline without knowing.
To curb downtime due to overheating, you have to spend a lot on ventilators which drastically increases the starting cost of crypto mining.
2) Risk Of Mining Or Staking Crypto
The level of risk that you face when you mine cryptocurrencies for passive income is very high as compared to staking crypto.
This brings a huge differences between staking and mining crypto.
Some of these risk include;
- Malfunctioning of Mining Machine Parts
Malfunctioning of the parts of a mining equipment is a very common thing in crypto mining.
This is due to the high level of work that the machines performs
Another reason why the parts of crypto mining equipments malfunction is due to the long duration of days in which the machines are active.
When they are active for a long period of time without some hours of rest. They start developing fault.
This fault in turn reduces the revenue of the miner as well as the revenue of the mining pool.
When staking for passive income, you have no business with thinking about faulty parts.
- Repairs are not Readily Available.
Due to the high level of technology that is used to produce crypto mining equipments, the technicians for repairs are not common.
When the machine develops any fault, you have to ship the machine to the manufacturer with high shipping and repair fees.
This makes crypto mining very risky and expensive.
3) Energy Consumption When Mining or Staking Crypto
One of the striking differences between crypto staking and mining has to do with the level of energy consumption.
This high level of energy consumption from crypto mining machines is really on the high side.
Due to the high level of energy usage for crypto mining activities, mining farm operators spend a lot on light bills to keep the mining farm running.
Some resort to the use of combustion engines in order to produce electricity at a much cheaper cost.
This leads to technological backwardness and pollution of the environment with toxic gases.
This is one of the reasons why ethereum is moving from the proof of work consensus method to the proof of stake.
With crypto staking, the cost of running the staking pool is little to nothing in terms of energy consumption.
This level of energy usage has really drawn more developers to move from the proof of work to the proof of stake.
4) Cost Of Running a Crypto Mining Farm or Staking
A burdensome crypto mining vs staking difference has to do with cost of operation.
With cryptocurrency staking, the cost of running a staking pool is really low because you don’t pay for the following;
- House to keep your mining equipment
- Electricity bills
- Cost of repairing parts
- Cost of other mining accessories
- Cost of relocating mining equipments when you relocate
- penalty fee incase the government fines you
- Cost of workers in the crypto mining farm
The above mentioned cost is just a few among the numerous cost that comes in when operating a cryptocurrency mining farm.
When you are using cryptocurrency staking, you are free from all these cost.
When you are travelling to any place in the world, you don’t need to think of how to move your equipments with you or if the equipments are all functioning.
Crypto staking is just a whole new world of earning passive income from crypto with less operational cost.
5) Environmental Effects Of Mining or Staking Crypto
If you operate a cryptocurrency mining farm in your home or in a residential area, chances of getting into trouble with the government is really high.
This is because the whole process of mining cryptocurrency is totally against the sanity of an environment.
Cryptocurrency mining machines develop a very high level of noice which is consistent.
The hotter the mining farm, the higher the speed of the mining machine in order to cool the machine.
When this occurs with a lot of the mining machines confined in one place, it disturbs the environment which is against the regulations of the government.
6) Ease in Setting Up Crypto Mining or Staking
There is a huge difference between staking and mining crypto when it comes to ease of setting up for use.
With crypto stalking, you can easily setup or join a mining pool of your choice in less than a minute.
This level of speed is not achieveable when setting up a crypto mining farm irrespective of how small it may be.
Setting up a crypto mining farm entails the following;
- first buying the mining equipments
- renting a space to keep the mining equipments
- Connecting mining equipments to routers
- Connecting to a mining pool like Slush pool
When you add all the time it takes from purchasing your crypto mining equipments to connecting them to a mining pool, it takes days at some point.
7) Continuous Relevance of Mining Equipments
Another differences between staking and mining crypto has to do with the optimum performance of a cryptocurrency mining machine over time.
I can remember when the S7 ASIC miner came out.
It was a great asset in the mining farm of many cryptocurrency miners.
Today, that same S7 is useless as it cannot even pay for the electricity it consumes talk less of making profit while using it.
This is due to the increase in the difficulty rate of mining cryptocurrencies like bitcoin.
When this difficulty increases, it demands the production of mining machines with higher hash rates which makes the older machines useless.
This is because they cannot perform optimally when the amount of passive income they produce is compared to the power they consume.
This is very evident when using GPU to mine cryptocurrencies like bitcoin.
In the early days of bitcoin mining, CPU’s were mining a lot of bitcoin daily but as the difficulty rate of mining bitcoin increased, they became useless as far as bitcoin mining with CPU is concerned.
But when it comes to crypto staking, you can use even a small phone to stake cryptocurrency.
This is because you just need to have an account with the exchange or mining pool you want to stake your coin in their staking pool.
Creating an account with an exchange does not demand the use of a super power devce as compared to crypto mining.
After you stake your crypto with the staking pool, you can still use the same phone in the next years to come and earn the stake rewards the pool allocates to you.
This makes the phone useful and not obsolete as the staking difficulty increases as compared to what happens with crypto mining machines.
8) Effects of Government Policies on Crypto Mining and Staking
Another striking difference between cryptocurrency staking and mining is how they are affected by government regulations.
With the use of cryptocurrency staking as a concensus mechanism, majority of the work is done online and this reduces the chances of getting into trouble with the government.
Apart this, crypto staking uses less resources and is not harmful to the environment with respect to energy usage or noise.
When comparing this to crypto mining, the case is totally dufferent.
Cryptocurrency mining uses a lot of energy and is accompanied with a high level of noise and heat from the mining machines.
This has led to a lot of environmental violations in some countries.
In 2021, due to the violation of some laws, the Chinese government in some province have ordered crypto mining activities to be stopped.
This has affected a lot of crypto mining companies being that majority of cryptocurrency miners operate in china.
9) Flexibility of Mining or Staking Crypto
Moving out or relocating from a place where crypto mining equipments are domiciled is the worst thought some crypto miners can have.
This is due to a lot of factors like;
- Cost Of Transporting Mining Equipments
The cost of transporting cryptocurrency mining equipments is on the high side.
This is due to the fact that crypto mining equipments are usually heavy and are also need extra care when transporting them.
If you run into a scenario like what some crypto miners face in china where crypto mining has been stopped in some province.
It becomes a very difficult task to ship your mining machines to another country.
Any who knows if the next country you move to will also ban crypto mining too.
- Safety Of Equipments While Transporting Them
Cryptocurrency mining equipments need extra care when transporting them.
This is because the parts are delicate and should be handled with extra care.
Any mistake in the transporting process, you can lose the optimal performance of the machines.
- Cost Of Reinstalling Mining Equipments
In the case of moving from one place to another due, the mining equipments have to be uninstalled and then reinstalled.
When this takes place, the cost of making it possible is usually high.
When staking your cryptocurrency, you do not have to bother about this as your work is online and you can move to any place or country without bothering yourself.
This is because with just a click from your phone, you can see how the staking pool is.
- Nature Of Government Policies
The nature of government policies towards crypto mining is not favourable in all places.
This is due to how the crypto mining process is.
From consuming a lot of power to producing a lot of heat and unbearable noise.
This makes the government policies in some countries unfavourable for the operation of crypto mining farms.
10) Ease of Use to Beginners
Another difference between staking and mining crypto is how easy it is for a beginner to use.
In order to be able to run a crypto mining farm, you have to have a vivid knowledge of how it is done.
If you are just a beginner and want to run a crypto mining farm without training, you will end up damaging your crypto mining equipments.
This is due to how technical and attention demanding the process of mining cryptocurrency is.
With the use of crypto staking, a total beginner can be up and running in a matter of few minutes.
This is due to how simple it is to operate a crypto staking pool.
You can learn how to stake Cardano easily in one of our tutorials. https://obongcrypto.com/stake-cardano-on-binance/
11) Type of People Involved in Crypto Mining and Staking
For a crypto staking or mining to be successful, there must be people who are actively involved in the process.
In the Staking of cryptocurrency, people stake their crypto assets to validate transactions on the blockchain.
The people that are involved in the staking process are called Validators.
In the Mining of cryptocurrency, people use their crypto mining machines to verify transactions on the blockchain.
The people who are involved in the mining process are called Miners.
Conclusion On Differences Between Staking And Mining Crypto
During the course of this tutorial on differences between staking and mining crypto, a lot of points have been deeply explained in order to point out the differences that exist.
Is It Better To Stake Crypto?
Staking cryptocurrency rather than mining is an individual choice when you weigh the cost that will be incurred in each of them.
Crypto mining hasa lot of chances of violating the environmental policies when compared to staking.
This is due to the fact that the future is going more into noiseless and more environmental friendly activities.
With crypto mining, these factors are not easily achievable.
This is why big cryptocurrencies like ethereum are gradually moving from cryptocurrency mining to crypto staking.
Is Crypto Staking The Same As Mining?
Crypto staking and crypto mining are not the same.
They have different methods of consensus mechanism and this brings some sort of difference on how each works
While the crypto mining uses the proof of work consensus mechanism, it is different for staking.
With staking, the consensus mechanism used is the proof of stake.
This proof of stake is more friendly in energy consumption.
This is why large and reputable cryptocurrencies like ethereum are migrating from the proof of work to the proof of stake consensus mechanism.
This is due to the difference between staking and mining crypto that exist.