Proof of Work (PoW): Bitcoin’s Security Model Proof of Work is how Bitcoin solves the double-spending problem without trusted authorities. It’s energy-intensive by design – that’s a feature, not a bug. Proof of Work is a consensus mechanism where miners compete to solve computationally difficult puzzles to validate transactions and create new blocks. The winning…
Proof of Stake (PoS): Energy-Efficient Consensus Proof of Stake secures blockchain networks through economic staking rather than energy-intensive mining. It’s like replacing a gold rush with a security deposit system. Proof of Stake (PoS) is a consensus mechanism where validators are chosen to create new blocks based on their stake in the network rather than…
Mining: How New Bitcoins Are Created Bitcoin mining is the process that creates new bitcoins and secures the network. It’s like a global lottery where miners compete to solve mathematical puzzles for rewards. Mining is the computational process of validating transactions and adding new blocks to a blockchain while earning newly created cryptocurrency as rewards….
Mining Pool: Collaborative Block Mining Mining pools combine computational power from multiple miners to increase chances of finding blocks and earning rewards. It’s like joining a lottery syndicate to improve your odds. A mining pool is a collaborative group of cryptocurrency miners who combine their computational resources to increase their chances of successfully mining blocks…
Block Reward: Miner and Validator Compensation Block rewards are the cryptocurrency payments that miners and validators receive for successfully adding new blocks to the blockchain. It’s how networks incentivize security without charging transaction fees. Block reward is the amount of cryptocurrency awarded to miners or validators for successfully creating and validating a new block on…
MEV (Maximal Extractable Value): The Hidden Tax on DeFi MEV is the extra profit that miners and validators can extract by reordering, including, or excluding transactions within blocks. It’s like cutting in line at the blockchain cafeteria. Maximal Extractable Value (MEV) is the additional profit that block producers can capture by strategically ordering transactions, beyond…
Liquidity Mining: Earning Rewards for Providing Liquidity Liquidity mining rewards users who provide capital to DeFi protocols with governance tokens. It’s like getting paid to be the house money at a casino. Liquidity mining is a DeFi incentive mechanism where protocols distribute governance tokens to users who provide liquidity to their platforms. Users earn both…
Delegated Proof of Stake (DPoS): Democratic Validation DPoS lets token holders vote for validators who secure the network on their behalf. It’s like electing representatives to Congress, but for blockchain consensus. Delegated Proof of Stake (DPoS) is a consensus mechanism where token holders vote for a limited number of delegates who validate transactions and secure…
Staking Rewards: Earning from Network Security Staking rewards compensate users for locking up cryptocurrency to help secure proof-of-stake networks. It’s like earning interest for helping guard the bank vault. Staking rewards are cryptocurrency payments earned by users who lock up tokens to participate in proof-of-stake network consensus and security. These rewards incentivize honest participation while…
Halving: Cutting Block Rewards in Half Halving events reduce block rewards by 50%, creating artificial scarcity that historically triggers major bull markets. It’s like cutting gold mining output in half overnight. Halving is a pre-programmed event that reduces block rewards by half, typically occurring every four years or after a specific number of blocks. This…