From proof of work to proof of stake: Aligning your crypto portfolio
We have seen many investment waves in the cryptocurrency space since its inception in 2009. At the time, the Bitcoin network was established and the first network participants entered the game. The still unknown inventor of Bitcoin, which used the pseudonym Satoshi Nakamoto, came up with Bitcoin using a combination of game theory and cryptography to create a new type of currency.
Bitcoin and the foundation of Proof of Work
The currency has a fixed number of coins that will be supplied over its lifespan. At the inception, an amount of coins has been provided to the network. What about the other coins? These are rewarded to participants in the network to maintain it. Maintaining the network required to fulfill transactions, was done by using the Proof of Work algorithm.
Participants need to complete difficult cryptographic problems (requiring lots of computation power). The participant who finds the solution first is allowed to validate a batch of transactions and add them to the historical records. This batch is known as a ‘block’ and the historical records are referred to as the ‘blockchain’.
Move to Proof of Stake by many networks
With the rising popularity of cryptocurrency comes more competition to get such rewards. This has resulted in more difficult computations and has massively increased the energy required to maintain the network. This is the typical problem that is being referred to by skeptics, including Elon Musk.
Another type of algorithm known as Proof of Stake can be a good substitute. In this type of network, people who own coins (i.e., have a stake in the network) are allowed to validate transactions. Based on random selection, participants are requested to validate transactions. The more coins you have, the higher the probability that you are selected as a validator. When you are selected, you will receive coins in return for your activities. This is significantly better for the environment as little energy consumption is needed. The algorithm has already been adopted by Ethereum and many other blockchain-based networks.
Why should this matter to your crypto portfolio?
When investing in cryptocurrencies that use Proof of Stake, you do not only grow your wealth through a rising price. You can easily participate in ‘staking’ and using your coins to validate transactions in the network. The more coins you have, the higher the probability that you can validate the transactions and receive coins in return. This helps you grow your portfolio of cryptocurrencies to new heights with limited to no additional risks.
Advantage of the Delta cryptocurrency tracker
When you decide to move forward with the cryptocurrency tracker of Delta, you will enjoy the best of both worlds. You can connect your private wallets to the tracker, without any security risks involved. Next to that, you can still participate in the Proof of Stake validation and earn new coins, as they reside inside your wallet and not on an exchange.
Want to learn more about the Delta tracker? You can visit their website to see which coins are supported and how to connect to their system: https://delta.app/en.