It seems that one can mine bitcoin to obtain more bitcoins, whereas coins like reddcoin allow staking to have more reddcoins. What is the difference between these two processes ?
Mining requires doing work (i.e. using electricity to power machines that perform the proof of work) to produce blocks and earn coins. Staking generally requires those that are staking to lock up their coins for some period of time (i.e. can't spend the coins) for a staker to have a chance of being selected to produce a block and collect the block reward.
Here are some core differences.
- Entrance of new voters can't be forbidden. All that's needed is energy and machines that are capable of calculating hashes. Therefore, a miner who once owned 1% of the hash rate, can't make sure he'll maintain his percentage forever.
- You can't try to cheat without being punished, because you're spending energy. For example, if a malicious miner, who owns 10% of the hash rate, tries to reverse a transaction 6 blocks deep, and fails, his real cost is equal with the income he could have had if he had chosen to mine bitcoin; he spent energy for nothing.
- It's very difficult to steal the units that contribute to the security of the network (e.g., ASICs, GPUs etc.)
- Entrance of new voters is down to the stakers' permission. A staker who owns 1% of the total coins in circulation (presuming the total supply is fixed) can retain the same voting power overtime, if he just chooses to hold them.
- You can cheat without being punished. That's known as Nothing-at-stake problem.
- It's much easier, compared to Proof-of-Work, to steal the units that contribute to the security of the network. For instance, say an attacker hacked an exchange. He'd instantly gain a lot of voting power.
One more core difference is that Proof-of-Stake doesn't give a solution to the Byzantine Generals' problem. That's why it suffers from producing consensus, and that's why it's commonly referred to as "subjective mechanism"; not objective as Proof-of-Work.