How to mine Decred?
Everyone can do it. Let’s start with the basics. Mining is focused on three things:
1) Provide bookkeeping services to the network. Mining is essentially 24/7 computer accounting to verify transactions, store them into blocks and integrate those into the blockchain.
2) Guarantee the safety and stability of the network. Mining ensures that the network complies with the minimum safety standards.
3) Introduce new coins into the system. Miners get paid for each valid block that they integrate into the blockchain.
The whole process of mining is determined by the consensus rules of the currency. These rules can be found in the the codebase. Each currency has its own design principles and therefore each digital currency is unique.
Two famous consensus strategies
The aim of consensus rules is to let many different users agree on the state of the blockchain, without depending on any central authority. There are two famous strategies to reach consensus within a decentralised network.
Proof of Work (PoW): get rewarded for the ‘work’ you invest. This consensus strategy requires computational power to solve cryptographic puzzles. For each solution, a new block is created.
The more work you invest, the higher your reward.
The problem with using pure PoW, is that groups of miners could become a majority within the network. This may allow them to influence the blocks that get mined or to censor transactions. Furthermore, the PoW strategy is very resource intensive and it is difficult for late adopters to join.
Proof of Stake (PoS): get rewarded for the ‘stake’ you invest. This consensus strategy requires you to store away your coins for a period of time, to prove that you are a stakeholder.
The more coins you invest, the higher your reward.
Although PoS is more energy efficient and allows late adopters to join, it is not a complete solution. The main problem with pure PoS is that early holders of the currency might end up owning everything because they gain a passive income with their coins (as we see in the banking industry today).
Decred has developed an innovative solution: a hybrid PoW/PoS system. Miners ‘mine’ to create blocks, and stakeholders ‘vote’ to verify the blocks created by miners. The process of creating consensus is thus balanced between miners and stakeholders. It’s the best of both worlds.
The hybrid consensus system has several advantages. Most importantly, it increases the decentralisation of the network. This means that Decred has a very safe and stable network.
> Read about hybrid consensus in the Decred network.