Ethereum 2.0 is a large-scale update to the Ethereum network. It’s been in the works since the release of the original proof-of-work blockchain and is a paradigm-shifting event both for network users and the crypto community as a whole.
In this post, we’ll dabble in the specifics of the update and its key features: sharding and proof-of-stake. You’ll find how Ethereum users can support the update and what’s in it for them.
What is Ethereum 2.0?
Ethereum 2.0 is the network update designed to improve scalability, mitigate the challenge of high energy consumption, as well as other redundancies.
The development team divided the roadmap into four phases:
- Phase 0: introduction of PoS and the deployment of the Beacon Chain (in fact, it went live 1st 2020).
- Phase 1: Expanding the data layer and introducing sharding.
- Phase 1.5: Merging the beacon chain and the mainnet, introducing ETH2.0 withdrawals.
- Phase 2: Allowing shards to execute smart contracts and crypto transfers.
Along with the updates that fit into the roadmap, there’s one that doesn’t — rollups. It is a scalability solution that helps reduce network congestion by moving state storage and computation off-chain (you can read more about it in Vitalik Buterin’s Incomplete Guide to Rollups).
What is Proof of Stake?
Proof-of-Stake is a consensus mechanism according to which you need to make a deposit (a stake) to become a validator. In Ethereum’s case, validators need to stake 32ETH to check blocks and earn tokens (these are not block rewards but transaction fees).
A stake serves as proof of legitimacy and leaves attackers with no incentive to take the network down (to be able to influence decision-making, malicious validators need to invest millions in tokens — after taking the network down, their huge stakes will go under the drain as well).
Also, staking is an effective way to keep the community in order. If a validator is malicious, he’ll get slashed and lose a fraction of the stake. Those unavailable for block attestation will also lose their day income as well as extra tokens due to a quadratic leak. Many investors find it convenient to join staking pool on Redot, Kraken and other exchanges.
What is Sharding?
Sharding is not an Ethereum-unique concept. It’s a computer science technique used to facilitate scaling by splitting a large dataset in smaller databases.
For Ethereum, blockchain networks are the centerpiece of sharding. Simply put, it splits the blockchain into 64 smaller chains. This update is impactful and awaited by the community because:
- It allows users to run a node on basic hardware like a laptop or a mobile phone.
- It reduces network congestion, increases the TPS rates, and reduces gas fees.
- Users can easily run several clients at once.
While the community was worried about security, Vitalik Buterin elaborated on ways to protect shard chains and verify decisions made by each side chain — you can check out his blog post for the technical nitty-gritty.
Is it Hard to Become an Ethereum 2.0 Validator?
If you have the necessary 32ETH, you can become a solo validator. It’s not as hard as mining but it takes patience and tech savvy. Let’s break the process down step by step:
Step #1. Generate two pairs of crypto keys using BLS12-831 (an encryption algorithm). One of these is a validator key used for attestations and signing proposals. The other is a withdrawal key that allows you to trade ETH2.
Step #2. Send the 32ETH deposit to a deposit smart contract.
Step #3. The smart contract converts ETH tokens into ETH2 and stores your stake on the beacon chain.
Step #4. Install and run the validator client.
Step #5. Start the Beacon Chain client and keep it running 24/7.
How Do I Start Staking?
You already know how to become an ETH2.0 validator if you have 32ETH. Another question is: can you stake ETH2 when you don’t have enough tokens?
In fact, there are staking pools that allow staking as little as 0.01 ETH and getting rewards. They have extra benefits as well:
- You don’t need to run and keep a validator client running — staking-as-a-service providers ensure constant uptime through redundant infrastructure.
- It’s common for staking pools to keep a reserve amount of ETH for liquidity and allow withdrawals.
- Some staking-as-a-service providers insure users against slashing and quadratic leaks.
Whether you want to become a solo validator with full autonomy or join a staking pool with a reliable infrastructure is up to you. Either way, you will be able to stake Ethereum, get rewards, as well as contribute to and support the network.
