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This vs That - December 13

Proof of Work vs Proof of Stake

  • Proof of Work and Proof of Stake are the two main consensus mechanisms that the blockchain uses to validate transactions

  • Proof-of-Stake requires node operators, known as validators, to stake their crypto asset as collateral to operate a validator node. Validators are randomly selected to secure the block to the chain, and are rewarded for correct validation of data

  • Proof-of-Work requires computational power, derived from crypto specific machines running “nodes,” to solve complex mathematical algorithms repeatedly until the correct outcome is reached and the block is “hashed” to the chain

Coins vs Tokens

  • Both coins and tokens are a cryptocurrency asset based on blockchain technology, but have key differences that make them unique

  • A coin is a crypto asset that is native to the blockchain it runs on, such as Bitcoin. Launching a coin is time consuming and complex because it also requires building a blockchain for it to run on

  • A token is a crypto asset that is built on top of pre-existing blockchains. Many tokens can be built on top of a single blockchain and often offer more utility than a coin

Diamond Hands vs Paper Hands

  • These two sayings both represent a narrative in crypto trading

  • “Diamond Hands” means that the user will hold their crypto position no matter what, they are in it for the long haul

  • “Paper Hands” means that the user sells their position, usually due to fear, uncertainty or doubt

Collateralized vs Algorithmic Stablecoins

  • Stablecoins are a crypto asset that is pegged to the value of another asset, to keep the value of the crypto asset stable

  • Algorithmic stablecoins are pegged to the values of other assets using smart contracts that increase or decrease their supply based on their current market values

  • A collateralized stablecoin is entirely or almost entirely backed by collateral held in a reserve, either fiat or crypto

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