Ethereum’s transition from Proof-of-Work (PoW) to Proof-of-Stake (PoS) sparked many discussions in the crypto world. As the largest ecosystem for decentralized applications (dApps), Ethereum introduced this change in August 2022, marking a significant milestone.
With this update, many questions arose, and today’s lesson will help you understand what PoS is and how it affects Ethereum.
What is Proof-of-Stake (PoS)?
PoS is a new consensus mechanism that replaced the previous PoW system. With this change, Ethereum merged with a separate blockchain – Beacon Chain, which completely altered how transactions are processed and how new Ether tokens are created.
Key benefits of PoS in Ethereum:
- 99.9 percent lower energy consumption compared to PoW.
- Lower transaction fees and greater scalability.
- More efficient and decentralized transaction verification through staking.
Previously, Ethereum relied on Proof-of-Work, where miners used powerful computers to validate transactions. While this ensured a high level of security, it also resulted in enormous energy consumption and high costs.
In Proof-of-Stake, validators (Ether holders) lock up a certain amount of their coins to validate transactions and add new blocks to the chain.
How Do Validators Work in Ethereum?
Validators are a key element of PoS – they are responsible for verifying transactions and securing the network.
How to Become a Validator in Ethereum?
To become a validator, one must deposit at least 32 ETH into a smart contract. Then:
- The protocol randomly selects validators who will propose and validate new blocks.
- Validators are grouped into committees of 128 people, who vote on transaction validity.
- Rewards for validation are paid in ETH.
On Beacon Chain, there are already over 400,000 validators. New slots for validators are assigned every 12 seconds.
How Does the Validation Process Work in Ethereum?
- Beacon Chain randomly assigns validators to groups called committees, each with at least 128 members.
- Each committee is given a slot in which it processes transaction validation.
- One random person from the committee is chosen to propose a new block.
- The remaining 127 validators vote on whether the block is valid.
- If the majority approves the transaction, the block is added to the blockchain.
- The validator who proposed the block receives a reward in ETH.
This system has made Ethereum more decentralized and efficient.
Finalization of Transactions in Ethereum PoS
Finalization (finality) is the point at which a transaction becomes irreversible – it cannot be changed or undone.
In Ethereum PoS, finalization happens through checkpoints:
- The first block of each epoch is a checkpoint.
- Validators vote on which checkpoints are valid.
- When two-thirds of all staked ETH approve a checkpoint, the transaction is finalized.
This process ensures a high level of security and resistance to attacks.
Is Ethereum PoS Vulnerable to a 51 Percent Attack?
A 51 percent attack occurs when a group of validators gains majority control over the network, allowing them to manipulate the blockchain.
In Ethereum PoS, attackers would need to control 51 percent of all staked ETH, which would require billions of dollars. This is practically impossible because:
- The more people stake ETH, the harder it is to execute such an attack.
- The PoS protocol includes penalty mechanisms that prevent malicious actions.
Ethereum PoS is therefore significantly more secure than Ethereum PoW.
What is ETH Staking?
ETH staking is the process of locking up Ether in the network to help validate transactions and secure the blockchain.
In return, participants earn rewards in ETH.
Where Can You Stake ETH?
Ethereum staking can be done through dedicated platforms, such as:
- Lido Finance – allows ETH staking and provides stETH, which can be traded on other DeFi platforms.
- Cryptocurrency exchanges – Binance, Kraken, and Coinbase offer ETH staking with lower entry requirements than 32 ETH.
According to a CoinShares report, stETH does not need to be 1:1 correlated with ETH to function properly.
Summary
- Ethereum no longer relies on miners – validators now approve transactions.
- To become a validator, one must deposit 32 ETH and participate in the block validation process.
- PoS has made Ethereum more energy-efficient, faster, and scalable.
- ETH staking allows for passive income, but funds must remain locked for a period of time.
