Not so long ago, users of Ethereum blockchain were shocked by the news of the transition from the mining process to staking which will come with the upcoming upgrade called Ethereum 2.0. But what does staking mean for Ethereum users? Will it be a flop upgrade or Ethereum 2.0 really merits your attention? Hurry up to read our staking review to understand how this mechanism works.
What is Ethereum 2.0 Staking?
The main thing that will come with the upgrade of Ethereum is switching to the transaction validation process called staking. It works on a blockchain consensus proof-of-stake (PoS).
In staking, the validator acts in the interests of the entire network, — confirms transactions and generates blocks. All validator`s tokens, during his operation, are frozen. Thus, it becomes unprofitable for the validator to perform malicious actions on the network since his funds are stored there.
How does Proof-of-Stake Differ from Proof-of-Work?
The main difference between these two mechanisms is the process of obtaining currency.
Proof-of-Stake (PoS) is a mechanism by which the owners of a certain share of the network's tokens are rewarded for checking and validating blocks. Which, in turn, is the opposite of the Proof-of-Work (PoW) mechanism. PoW gives the right to confirm blocks to those who have the most computing power. The first one to successfully solve the task and sign the block of transactions receives a reward.
Costs To Become a Validator
In order to become an Ethereum 2.0 validator, you need to place at least 32 ETH for staking. At the moment, this amount equals to more than $70k. This exact amount supports the network and allows you to earn rewards. As soon as the validator starts operating in the chain his ETH assets freeze. But if you don’t have this amount of money, you can join a pool of other investors on Redot crypto exchange.
When unlocking and withdrawing the funds, the validator immediately stops his work, and at the same time the ability to receive rewards. You can track the number of active validators on Ethereum chain explorer.
How to Set Up an Ethereum Validator Node?
It is as easy as pie. All you need is 32 ETH and a little technical knowledge regarding the process. Follow our setup instruction to understand full process:
- First of all, you should install one of the ETH 2.0. clients.
- To sign up as a validator you should generate a validator public and private key pair.
- The next step is to simultaneously start your client with a Beacon chain. Use Beacon node or some public server for this.
- Make your ETH deposit.
- After the previous steps are done you should wait for your assignment as a validator. It can take from a couple of hours to a couple of days. That's because the process of adding new validators to the chain takes a certain amount of time.
- When your validator is activated, you can start generating blocks, confirm transactions and receive awards.
The Ethereum 2.0. as well as the staking process definitely deserves attention. Staking will allow the network to become more scalable than it is today. At the same time, the staking process will allow users to make their income stable. It seems like gradually all cryptocurrencies will switch to staking soon. Since it significantly reduces electricity consumption and does not require such a high computing power like mining.