In what ways can miners earn rewards from the mining process? In this section, Pandacoin’s Crypto Crash Course will explore the proof-of-work and proof-of-stake mining methods.
Proof of Work mining is a system of producing new coins such that coins are produced by people using mining programs and their processing power (via video cards, CPU’s, or specific hardware (ASICs)), to attempt to find blocks within the block chain to release coins. Proof of Work coins do not accrue interest but instead are subject to annual inflationary pressures because new coins are being mined, adding more coins to circulation. However this would no longer be the case once all the coins have been mined, if the coin has a “hard cap” such that only X amount of coins may be mined.
Proof of Stake mining is a system of producing new coins that is identical to an interest bearing account. That is, if you have 100 coins, and the Proof of Stake is meant to produce 2.5% interest per year as a reward for securing the network, you will earn 2.5 coins per year . Proof of Stake coins cannot be directly mined like Proof of Work coins, and thus the total number of coins in the market increases at a constant rate depending on the interest rate.
Proof of Stake coins are generally more secure than Proof of Work coins, and usually result in a safer investment.