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Crypto Glossary

Minting, staking and farming — what are they and what’s the difference

The decentralized projects and services industry is attracting more and more attention from both novice and experienced crypto investors. New slang terms and expressions specific for the crypto industry are appearing around. And it often takes a lot of time to understand what a particular term means.

Right now, we invite you to dive into the world of cryptocurrencies and find out what all these terms that every crypto investor now uses in their vocabulary mean.

Minting is a coinage. New coins are minted using a smart contract that contains basic information: name, total amount of coins for minting, etc. Thus, minting is the creation of blockchain blocks. The user chooses how many blocks he wants to create on the network. Then the user’s assets are frozen for a certain period. And after a specified period of time, the cryptosystem pays the user the reward specified in the smart contract. The size of the reward directly depends on the amount of the “frozen” coins.

Staking is storing funds in a cryptocurrency wallet to keep the network activity and security. In other words, staking means blocking cryptocurrencies to receive rewards. Unlike bitcoin and its Proof-of-Work, Proof-of-Stake (proof of ownership) allows new blocks to be verified through staking. Staking involves validators who lock their coins in order to be selected to create a block. Participants who stake large amounts are usually more likely to be selected as validators for the next block. Most chains that run on Proof-of-Stake have their own staking currency.

Farming is a process of accruing tokens as a reward for providing liquidity to a project by placing a specific pair of tokens in a pool. A liquidity pool is a cryptocurrency repository where a trader can quickly exchange one currency for another. To enter the pool, an investor must deposit two coins for the same amount of money there.

When coins are debited from your wallet, you get a special token. It shows how many of your coins are in the liquidity pool. If you join a pool that already has other members, your share will be a certain percentage of the total amount of coins. When users buy (or sell) coins in the pool you hold your coins in, they pay a fee for it. You receive a certain percentage of this amount depending on your share in the pool. So farming is like taking interest from a bank account, as technically you’re lending to a bank.

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