What do “mining” and “staking” mean?

In general, there are two ways in which cryptocurrency networks confirm transactions and produce new coins: Proof of Work (PoW) and Proof of Stake (PoS).

The Bitcoin network, which has BTC as its coin, is PoW. Special nodes called miners compete to solve mathematical problems and the miner who succeeds in meeting specific conditions gets to create the next block. The more powerful and efficient the hardware (known as a “mining rig”) that you mine with, the higher your chance of successfully mining the next block. This computational efficacy is measured in hashes per second, or hashrate. The higher the hashrate of a miner the more likely it is to mine successfully. This mining is the work in Proof of Work. The successful miner is rewarded with a number of BTC (currently 12.5 BTC) plus the transaction fees for the transactions contained in the block. Mining is competitive. This is because someone mining with a higher hashrate has a better chance of mining a block than someone with a lower one. The more powerful the rig, the more it costs. Want a better shot at earning some BTC? You’ll have to spend money on a better rig.

For PoS networks, like the Stratis network, a staking node is a wallet which downloads the full blockchain and contains a number of coins which are then used by the node operator to stake. When you stake, every coin you are staking with has a chance of forging (the staking equivalent of mining) the next block of the blockchain. The more coins you have staking, the higher the chance that your node will be successful. When a node stakes successfully, it will receive the transaction fees for the transactions contained in the block and in some cases newly created coins as a reward. Stratis, for example, creates a new block every 64 seconds. The staking node which succeeds in forging this block will receive the newly minted 1 STRAT + the transaction fees associated with that block.

Where miners’ principal consideration is the hashrate of their mining rig, stakers’ main concern is the number of coins they are staking with compared to the total number of coins staking on the network. Every staking coin competes with every other staking coin for the chance to forge the next block. Not every coin in the overall supply of coins will be staking at any one time. This is because some people may be keeping their coins in cold storage, others may not choose to stake 24/7, etc. The number of coins you are staking with constitutes your staking weight. The ratio of this against the total network weight (every other coin being staked) determines how likely you are on average to successfully forge a new block. For example, if 1m coins in total are currently staking, and you are staking 10,000 coins, you will be forging 1 in every 100 new blocks on average.