Ethereum 2.0 is the next major upgrade on the Ethereum Blockchain, and it allows users to stake. This will undoubtedly change the way that transactions are validated on the Ethereum network. It means validation will move from a proof-of-work protocol to a proof-of-stake protocol. The question is, what is proof-of-work and proof-of-stake? What is staking, and how do you stake?
The answers to the above questions are all in this guide. We will explain everything you need to know about how to stake on Ethereum 2.0. First, you need to understand what Ethereum 2.0 is and the opportunities that lie within it.
What Is Ethereum 2.0?
Before we go on to explore how to stake on Ethereum 2.0, here is what Ethereum 2.0 is. It is also known as Serenity or Eth2, and it is an upgrade to the original Ethereum network. It is more scalable, secure, and sustainable than the original Ethreum network.
Ethereum 2.0 utilizes a technology that uses less power and energy to make applications faster and cheaper. The network also increases security against every form of attack. There are many ways that Ethereum 2.0 will be different from the already existing Ethereum. The new Ethereum 2.0 introduces an improved Ethereum Virtual Machine (eWASM), sharding, and proof-of-stake (PoS) consensus mechanism.
We will go into details regarding the aforementioned mentioned features later in this guide. For beginners, a consensus mechanism is a method of validating a transaction on a Blockchain without the need for a centralized authority. This mechanism helps the network to prevent fraudulent transactions and attacks. The popular consensus mechanisms used on the Blockchain are the proof-of-work (PoW) and proof-of-stake (PoW) consensus mechanisms.
Staking On Ethereum 2.0
Users can stake on Ethereum 2.0 by depositing a given amount of ETH to validate the blockchain's transactions. These users will be rewarded in the process. The most interesting thing is that any user can partake in the staking process. All you have to do is lock a minimum of 32 ETH to become a validator on the Ethereum 2.0 network.
Users are incentivized to validate blocks. The users are selected based on the value of their stake and the length of time that their stake has been locked. To prevent validators from acting maliciously, a special program called "slashing" will be implemented. The slashing will take away the portion of any user or validator that acts maliciously.
Visit Eth2 Launch Pad to stay up-to-date with Ethereum 2.0 phases.
Steps On How To Stake On Ethereum 2.0
To be eligible to stake on Ethereum 2.0, you need to meet the hardware and software requirements. Also, you need to be connected to the internet and must have a minimum of 32 ETH for a validator node. The recommended requirements include 8GB RAM, 100GB SSD, Metamask wallet, while the minimum requirements are 4GB RAM, 20GB SSD, and Metamask wallet.
Another consideration to stake on Ethereum 2.0 is to choose between running a validator node by yourself. You can use staking pool, custodial or non-custodial staking services that permit people with less than 32 ETH to stake on Ethereum 2.0. Running a validator node yourself is somehow technical, and you are required to run some command lines.
If you are using non-custodial services, you won't be hosting the nodes yourself; rather, you use services that help you do that while you remain in control of your funds. Meanwhile, custodial staking allows you to stake with a third-party who has complete access to your private keys.
The Proof-of-Stake Vs. Proof-of-Stake Consensus Mechanisms
It is a relatively new consensus mechanism that executes the same tasks as proof-of-work but follows a different process. In a proof-of-work consensus algorithm, miners use computer hardware that runs complex computations to verify new transactions. These miners compete to solve complex puzzles before they can generate blocks through a process known as mining. Mining simply means the creation of new blocks of transaction that are added to the Blockchain network. These miners process and approve pending transactions on the Blockchain network, and they are rewarded for such tasks.
Unlike proof-of-work, where miners use computation power to add blocks to the Blockchain, proof-of-stake requires users to stake an ETH amount for the right to verify transactions. These users are known as validators and not miners. While miners compete for who will verify transactions, validators depend on an algorithm to choose them randomly. The algorithm is based on how much the validators are willing to stake and the length of time they will hold on to the staked ETH.
Proof-of-stake is more energy-efficient since it uses less computing power to verify transactions and add blocks to the Blockchain.
Why Ethereum Is Adopting Proof-of-Stake Consensus Mechanism?
You may wonder why Ethereum is moving away from the proof-of-work consensus mechanism and embracing the proof-of-stake. There are enormous benefits to Ethereum, which includes the following:
- It is more sustainable.
Since validators do not need energy-intensive computer hardware to verify transactions, it will be more sustainable as it requires less computational power. This is certainly good for the environment, unlike what is obtainable with miners that use proof-of-work.
- The mechanism is readily accessible.
Since validators do not have to purchase expensive computer hardware to solve complex puzzles, users can easily become validators. All you have to do is stake a minimum of 32 ETH to become a validator. The cost is only a fraction of what miners spend in the proof-of-work consensus mechanism. Even if you don't have up to 32 ETH, you can still contribute through staking pools.
- PoS Unlocks Sharding.
Sharding is a feature of Ethereum 2.0, allowing the Ethereum network load to be distributed into bits known as "shards." It means that a validator can only run the validating data, not the entire network. This invariably increases speed and the number of transactions per second (TPS).
- Protects Against 51% Attack
With the proof-of-stake consensus mechanism, there is a reduced chance of 51% attack. Theoretically, it may be impossible to defend a decentralized network if a group gains control over 50% of the nodes. Such a group will be able to prevent or confirm any transaction, thus giving them total control of the network.
With the proof-of-work consensus mechanism, such an attack is highly improbable because it would be too expensive to control 51% of the stake. Even if a group manages to gain control of the network, they won't dare attack it because it will certainly affect them as well.
There is no doubt there are lots of benefits when you stake on Ethereum 2.0. The upgrade will certainly impact the value of Ethereum. Once the implementation takes full effect, many more use cases and projects will be built on the Ethereum network.
Also read about Hybrid And Federated Blockchain Networks.
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