Proof of Stake (PoS) – So this is the easiest way to “dig” crypto-currencies!
Hi! Today’s entry will be dedicated to “Digging” crypto-currency is the simplest possible method of what is called consensus Proof of Participation (POP).
In the following, I will describe how, in practice, you commit your own resources to this method of mining crypto-currencies.
I will try to describe it in the simplest language without going into the technical details of this algorithm
introduction
But let’s start with a brief introduction and some of the basics needed to fully understand and utilize the earning potential of this method.
The purpose of the consensus algorithm in the public blockchain* network is to allow many users to agree on the current state of the blockchain, even if they don’t trust each other or a central authority. This is a difficult problem that was not solved until the launch of the Bitcoin network.
Blockchain * – Simply explained Blockchain is a common accounting book in which transactions are permanently recorded in blocks. Blockchain serves as a historical record of all transactions that have ever taken place, from the genesis block to the last block, hence the name blockchain – block.
Proof of participation (Pos)
Proof of Participation is the most popular alternative to the expensive and energy consuming Proof of Work (PoW) consensus algorithm.
Proof of participation, or Dowód Stawki is a consensus algorithm that chooses the owner of a new block based on its own offer / wealth.
“Miners” they are paid with crypto-currencies depending on their rate. The rate is used to calculate how much currency you can mine. The more coins you have, the more you earn by mining them using this protocol.
In the points of sale, the coins are generated for their own possession. Therefore, to start mining, we must have the crypto-currency on the wallet. The more crypto-currency you have, the more chance you have to “Dig” again.
However, it would not happen that someone has a monopoly of the given PoS crypto-currency (The person with the most coins would generate block after block, then the monopoly would come from the machine) there are different ways to avoid it, I will describe two, which I consider the most popular:
- Random HashesFor example, NXT and Blackcoin draw hashes, and the number of random hashes depends on the amount of money in your wallet.
- “Age” of MonetWe also have the hash lottery, but the coins are older than 30. Each time a coin digs a block, we count its new 30 days.
The main advantages of Proof of Stake
- Energy EfficiencyPoS algorithms are energy efficient – especially when compared to PoT. The elimination of the energy-consuming extraction process makes PoS a greener option and less expensive to maintain.
- BezpieczeństwoThe attackers should put their assets (your fare) on the line to try Attack 51. This is a great deterrent. For comparison, attackers do not lose their equipment when they try to attack PoW systems.
- Decentralized mining pools (groups of miners connecting their resources) they can control 51% of networks with PoW systems, which creates a very real threat of centralization. This is due to the exponential growth of the investment price in PoW systems, as opposed to the linear increase in the number of PoS systems.
How to start digging with the Proof of Stake method?
The great advantage of this method of mining crypto-currencies lies in the fact that it is not necessary to have / invest in expensive and power-hungry graphics cards or specialized ASIC scoops. However, in return, we expect the purchase of the minimum amount of a given coin to start the so-called Staking (common name for digging with the PoS method).
Below, I will describe the three known methods of point-of-sale extraction and, in the remainder of this entry, calculate the exemplary cost of purchasing parts and their return on investment.
- Rent a virtual server type VPS
- Digging in the Cloud with other users
- own Server – “Shovel
Rent a virtual server type VPS
Virtual Private Server (VPS) is a virtual private server that we can rent from a company offering such services. VPS hosting is one of the most popular hosting services that you can choose for your own needs. (for example, website, server for gamers or as a “crypto” excavator). It uses virtualization technology to provide you with dedicated (private) resources on a server with multiple users.
PROS➕ Relatively low server maintenance costs➕ Easy server supportRemote server access capability➕ Ability to use server to place Master Node
CONS➖ Lack of full control over the server➖ Manual portfolio updates, etc.
Digging in the Cloud with other users
Digging in “Cloud” is different Cloud Mining. It is a process of mining crypto-currencies using a remote data center with shared computing power or rate.
This type of cloud mining allows users to mine cryptocurrency without having to manage the hardware or virtual server. Since cloud mining is provided as a service, it usually results in some cost, which can result in lower profits for the miner.
PROEasy operation (just send our parts to Cloud Mining)No problems with portfolio updates, etc.
CONS➖ Lack of total control over the server and our resources➖ Ability to remain stolen by the creators of the given “Cloud”
own Server – “Shovel
The last way to dig into the PDS is to have your own server. Our server can be our current computer, where we will keep our parts on Portfolio 24 / 7 included. It is important that the computer has an SSD drive and more RAM memory.
Depending on the number of portfolios you want to use on the station, the settings need to be larger. Therefore, if you don’t have a computer that I could use in this way, you can submit another one just for this purpose.
Personally, I have already submitted 5 such stations that I called PoS Miner – their gross cost was ~ 1,600 PLN with the original windows ~ 2070 PLN. Unfortunately, since then, the prices of equipment have increased several times and the cost of such a station is even higher than PLN 2,000. To save on the operating system, you can consider installing some of the free distributions. Linux ex. mint lub debian.
Below, I present the parameters of the stations I performed:
- Power supply 450 / 500W
- SSD 128 / 500gb
- 4 / 8gb ram ddr4
- the processor is quite i3 last generation
- a motherboard compatible with the processor
- case
The fixed costs are ~ 30 / 40 PLN per month for electricity.
Graphics on individual stations “PoS Miner” they are hand painted by me and he took the photos Sławomir Gątkowski z FotogRafia Gątkowscy. I also reserve the right to use the name “PoS Miner” for stations of this type.
PROS➕ Full control of equipment and portfolios (more security)➕ Relatively low start-up costs (compared to PoW)➕ Low electricity costs➕ Equipment malfunction➕ Ability to use server to place Master NodeRemote server access capability.
CONS➖ Service (upgrades, repairs possible, etc.)A higher starting cost compared to a VPS or Cloud Mining server
Parts costs and potential return on investment
“How much will I make on this?” This is one of the most common questions I hear about crypto mining and what is the difficult answer to this question with regards to Proof of Work is with Proof of Participation it is much easier.
Explaining in the simplest way possible for the outlets, we earn as a bank deposit. When we keep a given amount of coins on our wallet (which must be running, preferably 24/7) in return, we receive a certain annual return, which is paid in installments. The great advantage of this method is (and crypto-currency in general) there is constant access to our resources (24 / 7). So at any time we can take our funds in the wallet and exchange them for another crypto-currency or money in traditional currencies.
An example is a crypto-currency Nav Coin (NAV)The annual NAV payback rate is currently % 5.
The minimum rate I suggest to people when choosing a PoS method is 1000 Parts. Therefore, for this example, I will give calculations.
Having the NAV wallet running all year round, we can profit 5% of the total number of coins you have. The dug coins are then multiplied by the current run and we calculate how much we have earned, for example in zlotys or dollars. It is easy to calculate more or less the annual production and speculate on individual scenarios.
Let’s assume that the price Net Value at $0.251000 pieces at $0.25 per pc $250. We expect to have dug all year with breaks 4% = 40 pcs x $0.25 = $10
However, let’s assume an optimistic scenario, where the price Net Worth it returns to its ATH neighborhood. Let’s assume they are $4. At this time, dug PC 40 x $4 = additional profit of $160.
It is also worth remembering that the value of our 1000 NAV product purchased for $250 also increases when the price rises. This increases our overall annual return on investment.
Other examples of crypto-currencies that can be upgraded in this way include:
Annual extraction = 1-3%.
Annual extraction = 5%.
Annual extraction = 18% (annual reduction)
Annual mining = 7.5% (each year is reduced.) The next mining change will be 11.04.2020r and will fall to 5%)
At the end of the word
In my opinion, the Proof of Participation method is still very underestimated.
I think that as time goes by, it will be noticed more and more by small miners “Who can no longer compete alone with the big POW mines and by ordinary people looking for a way to multiply their capital.
Man, I hope that at least a little I came up with the method of digging outlets and how much you can potentially earn on them. So I encourage you to comment, ask questions and share this post.