Mining to Minting: How Staking Got Started (Clone)

In the early days of cryptocurrency mining tokens or coins was the only way to acquire them. Miners raced to solve complex equations. Doing so meant burning through enormous amounts of electricity to keep specialized hardware running 24/7. But in 2011, when the largest cryptocurrency was just two years old, a simple forum post proposed a radical alternative.[1] What if instead of competing with computing power, networks could be secured by participants with the highest economic exposure to the network?

Energy and Exclusivity

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The original consensus mechanism required extensive computational work to validate transactions and create new blocks.[2] Energy consumption skyrocketed as networks grew. Specialized mining equipment became so expensive that ordinary users could no longer participate. The very decentralization that cryptocurrencies promised was being eroded by mining pools and industrial operations.

Mining also created waste. Miners competed to solve identical puzzles. This meant a huge majority of the computational work served no purpose beyond the competition itself. The first blockchain network alone was consuming more electricity than entire countries by the time alternatives emerged.

Stake Instead of Work

The staking concept was elegantly simple in design. Instead of proving computational work, users could prove their commitment by putting their own cryptocurrency at risk, staking it.

In 2012, Sunny King and Scott Nadal published "PPCoin: Peer-to-Peer Crypto-Currency with Proof-of-Stake" as a solution to mining's energy consumption problem.[3] The first functioning use of this mechanism for cryptocurrency appeared the same year, although its scheme, on the surface, still resembled traditional mining. The breakthrough came in 2013 when the first cryptocurrency to fully employ staking as a means of validating transactions launched.

How Does Staking Work?

Staking involves locking up cryptocurrency tokens to become a validator for a network. Validators are randomly selected to verify transactions and create new blocks. The chances of selection being directly proportional to the amount of tokens they've staked.

In proof-of-stake (PoS) systems, miners are scored based on the number of tokens they have in their digital wallets and the length of time they have had them. As mentioned above, the validator with the highest number of tokens at stake has a greater chance to be chosen to validate a transaction and may be eligible for protocol-defined rewards.

Networks use sophisticated algorithms to choose validators fairly. The exact definition of "stake" varies from implementation to implementation. Some networks use simple token counts. Others incorporate "coin age" which is the product of the number of tokens multiplied by the amount of time that a single user has held them.

There are also mechanisms in place to impose penalties on validators trying to scam or obfuscate their block creation. The most common is slashing. When a validator gets caught slashing a portion of their token stash is confiscated. This is a simple but effective way of disincentivizing poor validation behaviors.

Lower Network Risks and Better Behaviors

Good validator behaviors are incentivized. While staking outputs fluctuate based on the number of participants staking, transaction volume and other factors, the aggregate benefit for long-term participants is interesting but ultimately not guaranteed.

The security model used in staking is materially different from mining. When 50% or more of a token's supply is staked, it becomes more and more difficult for malicious actors to gain control of the network. While the threat of a 51% attack still exists as it does with mining-based networks it is much more difficult to pull off. Attackers must acquire and stake enormous amounts of the network's currency before their attack is detected.

The Great Migration

The real turning point came in September 2022 when the second largest cryptocurrency network completed its transition from energy-intensive mining to staking.[4] This migration, affecting hundreds of billions in market value, demonstrated that major networks could successfully transition to more sustainable consensus mechanisms.

The result was a remarkable 99.84% reduction in energy consumption. Some networks have demonstrated improved security through aligned economic incentives.[5]

Maturation and Momentum

As the staking technology has matured there have been new innovations. Liquid staking allows users to exchange tokens to represent their staked assets. This allows users to retain some asset flexibility, depending on the protocol.[6] Delegated systems let smaller validators pool their resources with larger validators. Some networks have implemented governance features, allowing stakers to vote on network upgrades and policy changes.[7]

Today's staking landscape spans multiple iterations of implementations. There is basic staking where users lock tokens directly, delegated systems where users stake through validators, liquid staking where users maintain tradeable tokens and restaking where staked assets secure multiple networks simultaneously.[8]

Bottom Line

Staking represents a shift from the traditional mining model to a more energy efficient and accessible system. Unlike the resource intensive mining process, staking allows cryptocurrency holders to potentially receive tokens by participating in transaction validation through economic commitment rather than computational competition.

The journey from 2011 forum posts to today's sophisticated staking systems shows how quickly blockchain technology evolves to solve real problems.[9] Energy consumption dropped by over 99%, participation barriers fell dramatically.

A concept that seemed radical a decade ago is now a widely implemented mechanism among certain blockchain networks.[10]

[1] “Proof of Stake instead of Proof of Work.” n.d. Bitcointalk.org. https://bitcointalk.org/index.php?topic=27787.0.

[2] "What is proof of work or proof of stake?" Coinbase. Accessed June 4, 2025. https://www.coinbase.com/learn/crypto-basics/what-is-proof-of-work-or-proof-of-stake

[3] “PPCoin: Peer-To-Peer Crypto-Currency with Proof-of-Stake : Sunny King, Scott Nadal : Free Download, Borrow, and Streaming : Internet Archive.” Internet Archive, 19 Aug. 2012, archive.org/details/PPCoinPaper. Accessed 4 June 2025.

[4] "Proof of Stake: A Brief History." Stake Fish. September 2, 2022. https://blog.stake.fish/proof-of-stake-a-brief-history/

[5] "Understanding Staking in Crypto: A Guide to PoS Block Validation." BlockApps. December 5, 2024. https://blockapps.net/blog/understanding-staking-in-crypto-a-guide-to-pos-block-validation/

[6] "Everything You Need to Know About Crypto Staking: From Principles to Practice." OSL. Accessed June 4, 2025. https://www.osl.com/hk-en/academy/article/everything-you-need-to-know-about-crypto-staking-from-principles-to-practice

[7] "What is Crypto Staking?: Overview, How it Works, & Future." Chainalysis. November 15, 2024. https://www.chainalysis.com/blog/crypto-staking/

[8] "What Does Proof-of-Stake (PoS) Mean in Crypto?" Investopedia. Accessed June 4, 2025. https://www.investopedia.com/terms/p/proof-stake-pos.asp

[9] "What is Staking? The crypto process explained simply." Bitpanda Academy. May 3, 2022. https://www.bitpanda.com/academy/en/lessons/what-is-staking/

[10] "What is proof of stake (PoS)?" McKinsey. January 3, 2023.https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-proof-of-stake

The information provided on this page and its associated documents is intended to provide a broad overview for discussion purposes. It is subject to change and should not be taken as financial or investment advice. Teucrium Trading LLC and Teucrium Investment Advisors, LLC make no offers to sell, solicitations to buy, or recommendations for any security, nor do they offer advisory services.

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