Proof Of Stake – The Important Aspect You Need To Know To Succeed

proof of stake

The recent upgrade to the proof of stake (pos) network may have brought some questions that need clarification. Be it the difference between proof of stake to proof of work, the pros and cons, the process of staking, or misconceptions. We’re here to clarify all these topics in hopes that by the end of the article, you’ll be able to answer the questions of others.

proof of stake

Validators – What are they?

The most important component of the proof of stake network is a validator. A validator is responsible for processing transactions on the Ethereum network. Network validators also play a big part in securing the network by validating transactions. There are no special requirements other than staking a minimum of 32 Ether to become a validator. Then, the protocol chooses people at random to make and vote on new blocks. An execution client, a consensus client, and a validator are the three software pieces necessary for becoming a validator on Ethereum.

How does the selection of validators occur in a Proof of Stake system?

The selection of validators in a Proof of Stake (PoS) system is often based on predetermined criteria. The actual method may differ based on the PoS protocol or network. Here are a few techniques for validator selection in PoS :

Coin Age Selection: Some PoS systems utilize a coin age selection mechanism, in which the likelihood of being picked as a validator is directly proportional to the number of coins and the length of time they have been in possession. Validators with a more significant stake and longer holding periods are more likely to be chosen.

Randomized Block Selection: Another technique is choosing validators randomly for every new block. Cryptographic approaches such as Verifiable Random Functions (VRFs) or random number generation algorithms can aid in selecting. This strategy attempts to maintain accountability while avoiding manipulation or power consolidation.

Delegation and Voting: Token holders in specific PoS protocols can distribute their stake to certain validators or vote for validators. Validators with a more significant delegated stake or a greater number of votes have a better chance of being chosen as active validators.

Reputation or Identity-Based Selection: Some PoS networks pick validators based on reputation, identity verification, or historical performance. Validators with a proven track record, high reputation scores, or compliance with specific criteria may be given a higher probability of selection.

What are epochs?

In blockchain language, an epoch is a time that determines when specific events will occur. An example of an epoch is the rate at which rewards are distributed or when a new group joins as validators for verifying transactions. The time span that defines an epoch varies between blockchain protocols that use it.

proof of stake

With the proof of stake Ethereum network, an epoch occurs about every 32 slots, approximately 6.4 minutes. A committee of validators which is at least 128 validators who can propose and testify to (vote on) the validity of new blocks throughout each slot in an epoch.

How are Validators Rewarded?

Validators are rewarded with block rewards. As we discussed, 32 sets of committees are in each epoch. Once a committee is assigned to a block, a random person from the 128 committees is chosen – the block proposer. The block proposer is the only one to propose another block of transactions. Meanwhile, 127 people vote and attest to the transactions. The block is uploaded to the blockchain when a majority approves it. The validator who suggested the block is awarded a variable sum of ETH.

The Notion of Finality on Proof of Stake

The concept of finality is when transactions on the blockchain network turn immutable. Immutability guarantees data will not be touched, altered, erased, cancelled, or lost once entering the canonical chain. Depending on the latency of blockchain technology, finality can take some time.

The finality of proof of stake in Ethereum is through deterministic protocols – “checkpoint” blocks. The first block out of the existing 32 epochs is a checkpoint. The participants then vote on checkpoint pars that are valid. The moment a checkpoint reaches a supermajority vote, it is then justified. All prior epochs are upgraded once their child checkpoint goes through justification. A checkpoint’s position in the timeline determines whether it is justified or finalized.

proof of stake

Finality requires two-thirds of votes; an attacker could prevent this by voting with one-third of staked ETH. But here is where the leak caused by inactivity comes in. The inactivity leak will lower staked Ether from validators voting against the majority. If the chain fails to reach finality for more than four epochs, then honest validators can complete the chain.

What is Solo Staking?

Solo staking is the best method of staking in the industry. Why so? Solo staking allows for complete autonomy over an individual’s hardware and funds. Besides solo staking, there are methods such as SaaS and pooled staking.

As mentioned above, a regular validator must stake a minimum of 32 ETH. However, a staking service or pooled staking is for people who need help handling the hardware necessary or cannot meet the 32 ETH requirement.

proof of stake

What if I don’t have 32 ETH – Can I Stake?

Interesting in joining staking, but you don’t have enough ETH. A staking pool is an alternative method for individuals who cannot deposit the 32 ETH. As with SaaS, it also eliminates the requirement for hardware maintenance, but there are risks with allowing a third party to run and maintain the node, which will cost some fee.
Many staking pools offer a liquidity token that acts as a claim on ETH that has gone through staking. In addition to rewards given and offering prizes for ETH staking. Staking pools also allow customers to keep control of their money and utilize staked ETH as security in Defi (decentralized finance) apps.

Closing Thoughts

In conclusion, the main benefit of the proof of stake upgrade is the lower ongoing costs. Along with lower prices, it consumes less energy, unlike proof of work. The proof of stake network is here to benefit the industry; we hope by now you have a complete understanding of the proof of stake network, the staking process, and the notion of finality.

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Proof Of Stake – The Important Aspect You Need To Know To Succeed
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