Ethereum 2.0


Exciting Moves on the Horizon!

With Ethereum switching to a PoS (proof-of-stake) from the original PoW (proof-of-work), we deep dive into the switch and what it means for the future of Ethereum.

PoW to PoS: What does it mean?

With Ethereum signaling the switch to proof-of-stake, let's review just what that means. Proof-of-stake is a well recognized mechanism that is used by blockchain networks to achieve distributed consensus. In essence, it requires users to stake their own Ethereum to become a validator within the network. Much like Ethereum miners within the proof-of-work system, Ethereum proof-of-stake validators are responsible for ordering transactions as well as creating new blocks so that nodes can all agree on the state of the network. When weighing what makes Ethereum proof-of-stake different from proof-of-work, let's highlight a few differences and improvements.

  • Ethereum proof-of-stake boasts better energy efficiency as you don't need to use a lot of energy mining blocks.
  • It has lower barriers to entry as well as reduced hardware requirements. You don't need any elite hardware to have an opportunity to create new blocks.
  • A much stronger immunity to centralization as proof-of-stake should lead to more nodes within the network.
  • More support for shard chains which play a key role in scaling the Ethereum network as a whole.

How does Ethereum’s proof-of-stake work?

Proof-of-work does have downsides, and unlike it, Ethereum proof-of-stake validators don't need to use a significant amount of computational power because the validators are selected at random and are not competing with one another. The validators do not need to mine for blocks, they simply just need to create blocks when chosen and then validate proposed blocks when they are not. This act of validation is also known as attesting. Essentially, attesting is the Ethereum proof-of-stake validators giving the thumbs up on blocks when they think they look good to go. Validators will get rewards for proposing new blocks and attesting to blocks they've seen. Consequently, if the validators attest malicious blocks, they will lose their stake. Proof-of-stake is the mechanism that activates validators upon receipt of enough stake. When discussing Ethereum, users will need to stake 32 Ethereum (ETH) to become a validator. As mentioned previously, Ethereum proof-of-stake validators are chosen at random to create blocks and are also responsible for checking and confirming blocks that they don’t create. A user's stake is always a good incentive as they can ultimately lose a portion of their stake for failing to validate.

Ethereum proof-of-stake pros and cons

  • Pros: With staking, it makes it much easier for you to run a node. It also doesn't require a huge investment in hardware or energy. And if you do not have enough Ethereum to stake, you can still join staking pools.
  • With staking, it is much more decentralized and allows for increased participation with the community. But more nodes does not mean increased percentage returns, much like mining.
  • With security, staking allows for secure sharding. Shard chains allow Ethereum to create multiple blocks at the same time, simultaneously increasing transaction throughput. When sharding the network within a proof-of-work system, it would simply lower the power needed to compromise a portion of the network.
  • Cons: While there are numerous upsides to Ethereum proof-of-stake, it is still in relative infancy and much less battle tested compared to proof-of-work.
  • The ultimate threat of a 51% attack still does exist in the Ethereum proof-of-stake, but it does remain risky for attackers as well. For this to happen, you would need to control 51% of the staked Ethereum. This is not only a lot of money, but it would more than likely cause Ethreum’s value to plummet. There remains very little incentive to destroy the overall value of a cryptocurrency that you have a majority stake in. There are much stronger incentives to keep the network secure, safe and healthy. The switch to a Ethereum proof-of-stake is already underway and with the system still relatively new, we will only have more to learn and teach about the change. Hopefully with the knowledge gained in this article, you can go into Ethereum 2.0 with confidence.

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