The popularity and increasing market cap of the crypto market is one of the most prominent trends of recent times. However, many people willing to make a start in the crypto industry are still doubtful about the process through which they can create more cryptocurrency. For example, token minting is a process through which new cryptocurrency is generated. But without proper know-how of the process, you can get confused and lost in the process without proper or any results.
People with little to no knowledge of the field might think that cryptocurrency needs to be minted just like regular coins. However, the crypto minting process is very different from the real minting process used in coins.
In this guide, we’ll explore the method through which new crypto tokens are minted. You can also learn how crypto minting can benefit you and what the best crypto minting practices actually are.
As beginners, many people ask questions about the creation process of new cryptocurrency tokens. Crypto tokens are one of the most valuable things in these times, and understanding how these tokens are created can help you in lots of different ways.
As far as the different methods to create cryptocurrency tokens are concerned, the two processes in use are minting and mining. The exact steps you need to follow in both of these cryptocurrency creation methods are different. Keep in mind that minting and mining are completely different processes, and you must understand the difference between both of them in order to learn how minting actually works.
Crypto Mining
Cryptocurrency mining is very different from minting crypto tokens. Mining includes keeping a public record of every transaction done on the public Blockchain in order to create blocks of cryptocurrency. It is just like using your powerful processor to process and solve lots of mathematical equations in order to win cryptocurrency as the reward. In this process, groups of many miners are made, and they compete with one another to get complete blocks of cryptocurrency for processing. This is the only way to get cryptocurrency through mining.
Whenever a group of miners solves the mathematical equation of a transaction, they have to do it faster than everyone else on the Blockchain. When it is proved that a miner has solved the problem faster than everyone else, he is rewarded with the same cryptocurrency. This type of system is called the proof of work algorithm. This helps every cryptocurrency in creating new blocks and continue growing in the long run.
On the other hand, crypto minting is a different process. It requires you to keep a record of every transaction on a Blockchain and helps you create a new cryptocurrency as well. Crypto minting is also used in the crypto mining process to keep a record of all the newly created cryptocurrencies. So, we can say that crypto minting is used by the mining process as well.
Introduction to Cryptocurrency Minting
If you want to start earning cryptocurrency as a source of passive income, you must also understand what crypto minting actually is. The crypto minting process uses the proof of stake consensus algorithm to create new blocks of cryptocurrency on the Blockchain and to safeguard all the data related to transactions. This process is used to create new crypto and NFTs as well.
Crypto tokens created in the minting process are added to the market to facilitate more trade. Crypto investors stake their cryptocurrency tokens in order to be able to mint new cryptocurrency. This is carried out due to the proof of stake mechanism used by some cryptocurrencies. On the other hand, the proof of work mechanism facilitates the crypto mining process.
People included in the crypto mentoring process are called nodes, and they validate every transaction. The process of minting cryptocurrency is completely decentralized. Therefore, if you want to start crypto minting, there is no authority that can keep you from doing so. You can easily create crypto tokens and add them to the Blockchain without any restrictions.
Why Is Crypto Minting So Important?
Since crypto minting is the only way through which certain cryptocurrencies and NFTs can be generated, it can be regarded as a very important process. Since the process does not require lots of computing power, it has become very popular in the cryptocurrency field. Moreover, most of the cryptocurrencies created these days support the proof of stake mechanism. This means they can be generated with the help of minting. Moreover, the popularity of non-fungible tokens or NFTs has also increased the significance of crypto minting.
Since the crypto market has become very popular lately, the number of people trying to step into crypto minting to take advantage of the growing market has also increased considerably. Moreover, since more people are stepping into the crypto field, the demand for new tokens, and thus for minting, also increased. Lots of experts now support the minting process just because it consumes way less energy and is the future of crypto token generation as well.
NFTs are another reason why this process is becoming more popular by the day. The NFT market has recently grown significantly in size and now amounts to billions of dollars in market capitalization. There are lots of new NFT projects under creation, which will change lots of markets forever.
Crypto Mining Vs Crypto Minting
The difference between cryptocurrency minting and mining is another important thing you should understand to complete your knowledge of the cryptocurrency field. To know the difference, you should learn the difference between proof of stake and proof of work. Let’s see how these two differ.
Proof of work is an algorithm that is used to mine new crypto tokens. Computers with lots of computing power are used in this process to solve equations, process transactions, and create new blocks of crypto tokens. This system works by creating new blocks of crypto by compiling lots of transactions together. The processed data is uploaded to the public ledger for transparency purposes.
Every transaction on a blockchain needs to go through a process of encryption to make it safe and permanent. Miners are rewarded for their contribution to the network, which they make by processing and validating all the transactions. The tokens miners create during this process are added to the circulation.
Proof of stake is used in this process to create new tokens. The staking process is used by crypto investors to validate transactions and to get the same cryptocurrency as their reward. The assets of crypto investors interested in staking are locked by the system to get help in the staking process.
Once you have your crypto assets locked away, you can’t trade them for other assets unless you unstake them. The staking algorithm selects a few validators through a decentralized process. As a rule of thumb, stakers with more crypto tokens staked away have better chances of being selected as the validators for transactions.
How Does Crypto Minting Work?
You should also understand the working of crypto minting. Learning about the PoS consensus can help you learn how crypto minting works as well. Staking is one of the most important things in the crypto minting process.
In the minting process, crypto investors have to stake a specific amount of cryptocurrency in the hopes that they’ll be selected to validate transactions on the Blockchain and earn crypto while doing so. Once your account is registered for staking, you’ll have a better chance of being selected as the validator from the pool of stakers. Validators are always chosen randomly through a decentralized process. The whole purpose of a validator is to validate transactions on the Blockchain.
Once you’ve staked your cryptocurrency, it can’t be used for trading or any other thing. However, you can always unstake your cryptocurrency in order to start using it normally once again. You can also be penalized and punished by the network if you try to mess with a transaction as a validator.
Uploading the wrong information on the Blockchain can cause a validator to face fines and penalties. You can even lose all of your staked cryptocurrency. However, the crypto staking process is still very interesting for large-scale investors who have a good chance of getting selected as validators most of the time. Whenever you’re selected as a validator, and you validate a transaction, you will receive a reward for that. The reward is actually a percentage of the fee a user pays to make a transaction on a Blockchain network.
Crypto Coin Minting Vs Token Minting
Every crypto asset is either a coin or a token. You can easily buy crypto coins with fiat money as they are available on the main Blockchain. You can use them like regular currency to make financial transactions or to transfer value.
Token minting is carried out on the Blockchains that already exist. Minting crypto tokens is much easier as compared to minting coins as they can be minted from a newly created Blockchain as well.
If you want to mint crypto coins, you’ll have to join a Blockchain or develop one from the very beginning. Moreover, you’ll need lots of technical knowledge in the case of coins. However, minting crypto tokens is a relatively easy process as almost no technical knowledge is needed in it. Blockchains that already exist can be used to mint crypto tokens easily.
Things To Consider When Minting Crypto Tokens
If you want to mint crypto tokens, you should follow all the necessary token minting techniques to stay safe and profitable. You must be aware of the tokenomics of a Blockchain before you attempt to mint tokens on it. You should also understand the key purpose of the crypto token you’re creating and how it’ll contribute to the future of the Blockchain you’re using. Moreover, depending on how you need your token to operate and respond, you should create a specific node structure for the token as well.
Pros and Cons Of Token Minting
As a potential token developer and seller, you should also learn more about the pros and cons of token minting in the crypto market. Decentralization allows for the fast creation of crypto tokens in the minting process without any hurdles. Since the PoS algorithm is used in minting, almost no power is consumed in creating a token. Moreover, you don’t have to use a computer with high computing power, and this can help lower the barrier to entry for many artists and developers. You can easily create NFTs with crypto minting and list them for sale as well.
Along with its benefits, there are certain drawbacks of crypto token minting as well. For example, an investor needs to have a considerable amount of cryptocurrency in order to apply in the consensus process and start crypto minting. Since the people with the most shared are selected as nodes for validation, there’s a chance that large investors can easily become the central authority by staking a considerable amount of crypto assets they own.
What is Lazy Minting?
In regular minting, you create a token/ NFT first and only then put it on sale. However, in the case of lazy minting, the NFT is listed on the Blockchain but is minted only when it is purchased by someone. This is a great method to help artists and NFT creators who don’t want to pay too much money without making any sales first. With the help of lazy minting, they can now pay the gas fee when they make their sale.
Here are the steps taken by token creators when they mint tokens.
The creation of a smart contract is the key point in minting a crypto token. This process is usually easy, and little to no technical expertise is required. You can get pre-made contracts, specifically in the case of NFTs.
In order to create a new token on the chain, a gas fee is to be paid by the creator. This is just like paying a fee for a transaction and can cost the token creator lots of money.
Once the tokens are created, you can take them to marketplaces like OpenSea to list them for sale. There are lots of different minting options available depending on the market you’re willing to use to create and sell the token.
Every platform which allows token minting tries to make the process as simple and straightforward as it can. However, there’s still a specific degree of complication involved in this process, and you’ll need some technical knowledge to go through the whole process.
Benefits of Lazy Minting
Let’s take a look at the benefits of lazy minting.
For new artists, paying the gas fees upfront while waiting for their tokens to sell can be very difficult. That’s why the lazy minting process delays the gas fee payment by minting the NFT only when it is sold. This can help the artists include the fee in the price of their tokens and can help them create more tokens with no money as well.
High fees in Blockchains like Ethereum keep new artists from trying their luck on the platform. However, lazy minting helps remove the difficulty they face by delaying the gas fees. This helps lower the entry barrier for new artists.
Lazy minting helps every Blockchain in maintaining its liquidity as well. For example, since all of the NFTs are minted at the time of sale, no artist has a huge sum of unsold NFTs, which decreases the liquidity and accumulates most of the funds in one place. Moreover, the transfer of NFTs can be made much faster with this method.
Drawbacks of Lazy Minting
Here are a few potential drawbacks of lazy minting.
Although lazy minting allows an artist to avoid the upfront gas fees, it also takes away much of the control from the artist. Once lazy minting is used to list a token, the developer can decide whom they want to sell their NFT and when they can transfer over the token after the sale.
There are heavy chances of fraud in lazy minting as well. That’s because, in traditional minting, the developer gets to keep the token even if it isn’t sold. However, in lazy minting, the developer might never mind and send the token even after getting paid by the buyer.
Takeaway
As you might’ve guessed by now, crypto token mining is very different from crypto coin mining. However, both of them are equally important when it comes to generating new crypto. Since there are lots of people joining the crypto market these days, the need for new crypto coins and tokens is also increasing faster than ever before. Therefore, it is important that you understand how crypto minting works and how it uses the proof of stake algorithm.
Minting is way more energy efficient, reliable, and easier as compared to the traditional proof of work or mining process. However, that doesn’t necessarily mean that the technique is flawless, as it definitely has some drawbacks which need addressing.