Nimiq is Migrating from Proof of Work to Proof of Stake - Here’s What You Need to Know…

Overview

Nimiq is about to undergo a big upgrade!

It is migrating from a Proof of Work to a Proof of Stake consensus mechanism, and this blog post will walk you through what that means, in simple terms.

If you hold NIM (Nimiq’s native cryptocurrency), you’re probably wondering how this affects you.

Let’s dive in!

First, What Do NIM Holders Have To Do?

The good news? You don’t need to take any action—NIM will continue to function seamlessly, but with enhanced speed, efficiency, and lower costs thanks to the migration—no complex steps or technical know-how needed.

Same wallet. Same address. There is no new coin being introduced. 

It all happens automatically.

But here’s the exciting part: You can receive amazing rewards and have the chance to win prizes by choosing to stake early!

There’s an exclusive pre-staking campaign which will allow you to actively participate in the migration, support the network, and receive rewards—all while growing your holdings—essentially free NIM just for staking what you already hold. It’s a simple and easy way to grow your holdings while supporting the future of Nimiq. Why miss out on this opportunity?

For a more technical overview of the Nimiq migration click here!

What Does the Switch from Proof of Work to Proof of Stake Mean?

You’ve likely heard terms like Proof of Work (PoW) and Proof of Stake (PoS) before, but what do they actually mean?

Let’s break it down:

Proof of Work (PoW)

Nimiq started as a Proof of Work blockchain. Such blockchain operates by having digital “miners” solve complex puzzles using powerful computers to validate transactions, ensuring their authenticity and securing the network. However, this process requires a significant amount of electricity, and as more miners compete to solve these puzzles, energy consumption increases. While Bitcoin has proven to be a very secure system, transaction processing is relatively slow, and the network can lead to very high electricity demand and costs.

Proof of Stake (PoS)

Proof of Stake is a more modern and efficient system. Instead of relying on miners, PoS allows “validators” that put up or pool a certain amount of the network token as “stake” to validate transactions. The higher the amount of NIM a validator represents with the stake, the higher is his relative contribution to securing the network. PoS is faster, uses far less energy, and allows Nimiq to scale up much more easily.

Plain language: Think of Proof of Stake as a system where participants "prove" they have a stake in the network by holding NIM.

This “skin in the game” incentivizes honesty and efficiency, making it a win-win for everyone involved.

What are the Benefits of Proof of Stake?

Better Performance

Currently, with Proof of Work, Nimiq can handle a maximum average of 10 transactions per second. This number is not sufficient for supporting large-scale usage and is a well-known limitation of Bitcoin. With Nimiq's new Proof of Stake approach, this capacity will skyrocket to 1'000+ transactions per second! This means more users can transact simultaneously without slowing down the network and without increasing network fees per transaction under heavy usage. This opens the doors for mass adoption of Nimiq in true peer-to-peer on-chain format.

Better Energy Efficiency

Proof of Work relies on a process called "mining," which consumes a lot of energy. In contrast, Proof of Stake eliminates the need for such high energy-consuming computations, making Nimiq much more environmentally friendly.

Faster Transactions

Right now under Proof of Work, transactions can take over a minute to be received, which might not seem like much. But if you're paying for something quick, like a coffee, that wait can be frustrating. With Proof of Stake, transactions will be confirmed in just a few seconds, making everyday payments faster and smoother for everyone.

Staking NIM

One of the most exciting changes with this migration is the ability to easily stake your NIM. Staking is the process of locking up your NIM to help secure the network, and in return, you get staking rewards. This creates a great incentive to acquire and hold NIM, as holders can receive passive rewards simply by participating in the staking process.

In short: Nimiq’s transition to Proof of Stake will make the network faster, more environmentally friendly, and let every user stake NIM to receive NIM rewards—creating a better overall experience for users, all the while not compromising decentralization.

Staking Explained: How You Can Receive NIM Rewards

Staking is one of the most exciting features that Nimiq’s transition to Proof of Stake brings. Building on what we discussed earlier, staking allows you to “lock up” your NIM to help secure the network. In return for contributing to the network’s security, you receive rewards in the form of additional NIM issued by the protocol itself.

How Does Staking Work?

When you stake your NIM, you’re locking your coins on the network for a certain period of time. These staked coins help a validator verify transactions and keep the blockchain secure. The more NIM you stake, the more rewards you can potentially receive—making it an easy way to grow your holdings while supporting the network.

To make things easier, Nimiq created a staking calculator that can help you estimate how much you could get by staking your NIM.

Click here to check out the Nimiq Staking Calculator!

Simply enter the amount of NIM you plan to stake and see the potential rewards.

Who’s Involved in the Migration; Who Does What?

Different groups will play specific roles during the migration:

NIM Holders

As we’ve mentioned, while you don’t need to take action to keep using your NIM, NIM holders play a crucial role in the migration by pre-staking their NIM. By pre-staking, you lock up your NIM with a Validator until the migration is complete, helping secure the migration process. In return, you receive pre-staking rewards, along with the chance to win an additional bonus giveaway.

Validators

Validators are responsible for creating blocks and validating transactions. To become a validator, you need to hold a significant amount of NIM and run software that processes transactions and validates blocks. Validators play a key role in maintaining the network’s security and efficiency.

Validator Staking Pools

Becoming a Validator requires technical expertise and having a machine running 24/7. That’s where validators that operate staking pools come in. NIM holders can delegate their coins to a staking pool, and the pool handles all the technical work in exchange for a reward fee. This makes it easy for anyone, even without technical skills, to participate in the staking process and receive rewards.

How Will the Migration Take Place? Phases of the Migration

The migration will occur in three key phases:

1. Validator Registration Phase (Currently underway)
   Begins: September 12
   Ends: October 6
   During this phase, users interested in becoming validators can register. This is essential for setting up the network’s security infrastructure under the new PoS system.
2. Pre-staking Phase
   Begins: October 7
   Ends: November 10
   In this phase, users can begin staking their NIM before the full migration is complete. This allows users to start receiving rewards early by locking their NIM in staking contracts.
3. Activation Phase
   Begins: November 19, ~7 AM UTC
   Ends: When 80% of the pre-staked NIM is ready.
   
   This phase triggers the full activation of the Proof of Stake system. Validators will start operating, and NIM holders will begin enjoying the new system’s benefits.

Final Thoughts

Nimiq’s transition to Proof of Stake marks a huge leap forward, making the network faster, more eco-friendly, and ready for mass adoption. This is the upgrade we’ve all been waiting for—designed to ensure Nimiq is primed for the future.

As a NIM holder, the best part is that you don’t need to do anything—your NIM will seamlessly migrate to the new system, no button-pushing required. But, pre-staking offers an exciting opportunity to receive rewards and actively support the network’s growth.

Stay tuned for more updates as the migration progresses, and feel free to reach out with any questions.

This is just the beginning of a brighter, faster, and more efficient Nimiq!

Pura Vida
Team Nimiq