Minting: features, advantages, and risks

What is minting and how does it work?

With the emergence of the first cryptocurrencies, such as Bitcoin and Litecoin, the issuance of digital assets became available to all users — it only requires having a home computer and installing special software.

This revolutionized the financial industry, since previously the issuance of any currencies was unavailable to ordinary people — such attempts were prosecuted by law.

What is minting?

Minting is the process of issuing new tokens without the participation of a centralized authority controlling the issuance. The creation of such tokens is enabled by smart contracts — software algorithms that automatically execute issuance conditions and record the creation of a new digital asset in a distributed ledger.

How does minting differ from mining?

Despite the fact that both terms refer to the process of issuing new cryptocurrency units, the mechanism of minting differs significantly from mining. The first difference lies in the consensus mechanisms used in decentralized networks.

Mining is based on a consensus mechanism called Proof-of-Work or PoW. To obtain new coins, miners must perform work — specifically, solve mathematical problems using computing devices.

Minting occurs in networks based on the Proof-of-Stake or PoS mechanism, where the generation of new tokens is carried out through staking, which operates similarly to bank deposits but in a decentralized environment.

Minting does not require large electricity costs, unlike cryptocurrency mining. In some cases, minting can even be free for users.

The procedure for minting depends on the rules of a specific network and the team that issued the token. Minting of the network's native cryptocurrency occurs only through staking or by delegating to validators.

However, the minting of other digital assets created on these blockchains can occur in different ways:

Purchase of digital assets through ICO (initial coin offering) or IDO (initial offering on decentralized exchanges);
Getting into the "whitelist" of users by participating in project activities;
Minting as part of an airdrop (free distribution of digital assets);
Through an auction;
By locking certain digital assets on the blockchain or adding them to liquidity pools.

Minting itself can be performed directly through a smart contract if the user has sufficient experience working with wallets and blockchain explorers, or through specialized platforms such as:

NFT marketplaces (platforms for buying and selling non-fungible tokens);
Decentralized exchanges (Uniswap, Sushi, Balancer, PancakeSwap, and others);
IDO platforms ;
Project websites themselves.

The formats of minting can also vary. For example, the number of digital assets available for minting may be pre-limited (closed issuance) or unlimited (open issuance). In the first case, minting stops once the maximum allowed number of tokens is reached, while in the second case, it ends when a timer expires.

Unlike mining, whose rules are strictly defined in the protocol, the minting process can have flexible settings due to the nature of smart contracts (automated agreements on the blockchain).

Advantages of minting

Minting of cryptocurrencies does not require expensive equipment, which means the user does not risk losses due to hardware breakdowns, electricity costs, or loss of income due to a drop in cryptocurrency prices.

Also, projects may appear on the cryptocurrency market that offer the opportunity to mint their digital assets with small investments or without any investment at all.

For example, the currently most popular NFT collection, CryptoPunks, could be minted (issued on the network) for free when it was launched in 2017. Users only needed to pay the Ethereum network fee.

Disadvantages of minting

One of the disadvantages of minting is investment risk. New digital assets issued and sold at early stages through ICOs or IDOs do not have guaranteed market value. After entering the market, their price may not only fail to increase but even decline, leaving the investor at risk of losing the funds initially invested.

Another risk of minting is the possibility of speculation by the project itself. This refers to a situation where a significant portion of the issued assets is controlled by the project team. Such concentration makes it possible to significantly influence the market. For example, after the completion of minting and the start of trading on exchanges, the project team or insiders may massively sell the tokens they own to lock in profits.

If a large number of assets enter the market at the same time, their supply sharply increases, which can cause a rapid price drop. As a result, ordinary investors who bought the cryptocurrency at early stages or shortly after its issuance may incur significant losses. For example, in April 2025, the price of Mantra (OM) collapsed due to insider manipulation, as insiders controlled about 90% of all project assets.