The Beacon Chain is one of the most important upgrades to the Ethereum network. The staker network operates on the Beacon chain. Beacon chain is a consensus layer that merges with the mainnet to provide security and scalability. It also helps to maintain a low carbon footprint.
The Beacon Chain
The Ethereum mainnet manages transactions and execute smart contracts, while the Beacon Chain controls shard chains and stakers (who validate blocks). These two functions help beacon chain to coordinate the entire Ethereum ecosystem.
The initial proof-of-stake (PoS) blockchain, known as the Beacon Chain, was launched in 2020. Before implementing the proof-of-stake model on the main Ethereum network, the Beacon Chain was developed to ensure that the pos consensus mechanism was sustainable. In the beginning, the Beacon Chain functioned alongside the original Ethereum proof-of-work (PoW) model.
Before the Ethereum ecosystem could switch from proof-of-work to proof-of-stake, it had to instruct the Beacon Chain to process transactions from Ethereum by ordering them into a blockchain using the proof-of-stake mechanism.
The Beacon Chain has set the stage for the following scaling solutions: The Merge, The Surge, The Verge, The Purge, and The Splurge. This set of beacon chain solutions is designed to tackle the Scalability Trilemma proposed by Ethereum founder Vitalik Buterin.
The original Ethereum clients shut down their mining, block propagation, and consensus logic at the same time and handed these functions over to the Beacon Chain. This event was referred to as "the merge." After the merge, there was only one Ethereum proof-of-stake chain.
What did the Beacon Chain do?
The Beacon Chain was the name given to a ledger of accounts that conducted and coordinated the network of Ethereum stakers before those stakers started validating real Ethereum transactions. It did not process transactions or handle smart contract interactions.
It introduced the consensus engine (or "consensus layer") that took the place of proof-of-work mining on Ethereum and brought many significant improvements with it.
The Beacon Chain was a foundational component for the secure, environmentally friendly and scalable Ethereum we have now.
Why Does the Merge Matter?
Switching to proof-of-stake has significant environmental benefits and lowers the barriers to entry for anyone who wants to participate.
Staking does not require expensive equipment, while crypto mining requires expensive hardware to participate. A user only needs to purchase a staking-friendly laptop to take part. The end result is that Ethereum has a large population of validators, which increases its decentralization.
In addition, proof-of-stake changes the security setting of Ethereum. This has both advantages and disadvantages. For example, one disadvantage is that tokens are easy to transfer. If tokens can be used to participate in consensus, it will be much easier to transfer tokens to bad actors than to deploy a large number of GPUs.
What is GPU Mining?
However, a solution to this problem is "slashing," the process by which a validator loses its staked tokens. The network can slash a group's tokens, rendering the entire process pointless if hackers possess the 51% of staked ETH required to begin manipulating the ledger, which would be extremely expensive. Since a user's GPU hardware cannot be "slashed" for crypto mining, proof-of-work systems lack this incentive mechanism.
Understanding PoS vs. PoW
Let's now get into more detail about what makes PoS the best option for a consensus process.
First, the Beacon Chain introduces the proof of stake consensus mechanism for computers in the blockchain network to validate transactions. In a nutshell, a consensus mechanism allows computers on a blockchain network to agree on the legitimacy of transactions.
Ethereum previously used the proof-of-work (PoW) mechanism. This involved participating "miners" competing to solve a challenging mathematical puzzle to validate new transactions, update the blockchain, and earn rewards. Although PoW has been tested and is secure, its energy-intensive approach has made it increasingly impractical.
In contrast, PoS solves this problem by selecting a small number of "validators" to verify the upcoming block's transactions before submitting it to the blockchain. In contrast to "mining" in PoW, this is known as "minting" blocks.
Since there is less competition, the computing power, and energy required to mine a new block are drastically reduced, making PoS a greener option.
First, the Beacon Chain introduces the proof of stake consensus mechanism for computers in the blockchain network to validate transactions.
Ethereum currently uses proof of work (PoW), but PoS improves many of the shortcomings of PoW to keep Ethereum secure. This includes less computational power and electricity generation, as well as increased decentralization and security,
Introducing shard chains
Once the PoS consensus mechanism is integrated into the Ethereum Mainnet, the Beacon Chain will next introduce shard chains. Shard chains, which is sub-blockchain of the main Ethereum blockchain network, facilitate transactions. The purpose of shard chains is to distribute the load of the network by splitting the main Ethereum network into smaller blockchains - specifically, 64 of them.
As such, instead of processing the transaction of the entire blockchain, nodes are now only responsible for their shard. Correspondingly, this increases the transaction speed of Ethereum and results in lower transaction fees.
| Proof-of-Work | Proof-of-Stake |
| Computational power affects mining capacity. | The network stake affects the capacity to validate. |
| Block rewards are given to miners who crack a cryptographic challenge. | Instead of receiving a block reward, validators are compensated with transaction fees. |
| To launch a malicious attack, hackers would require a machine that is more powerful than 51% of the computing network. | It is virtually impossible for hackers to possess 51% of all cryptocurrency on the network. |
How do you Become a Validator?
In order to become a validator, a node must contribute a minimum number of coins to the Ethereum network. Similar to a security deposit or collateral, this is referred to as "staking."
The probability of a validator being selected for coin staking is related to the size of the stake. For example, node X has a five times higher chance of being selected to mint the next block if it invests 160 ETH. So the selection process is not completely random.
A validator first determines whether or not all transactions in a block are genuine before deciding to validate the following block. Once everything is in order, the validator publishes the block on the blockchain to update its status. Beacon Chain manages the validators as well as the ETH staked by them, requiring validators to propose and vote for blocks in exchange for rewards or transaction fees.
Validation is the process by which a "committee" consisting of at least 128 other validators confirms this information. If the block meets certain criteria, the original validator receives a staking incentive made up of all fees for the validated transactions.
How are validators kept honest?
Trusting that stakers will behave as honest validators is crucial for PoS to function successfully, and there are several ways this is accomplished.
First, if validators approve fraudulent transactions, then they will lose a part of their stake, or get “slashed.”
The Ethereum Foundation team has really thought this through by holding the validators accountable on all fronts!
What is Binance beacon chain?
BNB Chain was originally initiated by Binance but has since grown to become a community-driven, permissionless, and decentralized blockchain ecosystem. Binance is now simply one of the many contributors operating within the BNB Chain ecosystem rather than some kind of dominant force wielding unilateral power over it.
Staking Profitability
There are two types of validator commissions on the Ethereum network: Premium and Basic. A fixed block reward became obsolete after the switch to Proof-of-Stake (PoS). Today, the additional ETH emission is based on the income of validators and automatically fluctuates each epoch. The total amount of funds locked up in staking will be used to determine the size of the new coins' annual emission.
According to the staking rewards, Beacon Chain validators earned 4.5% annually until the end of August 2022.
Conclusion
The Ethereum network underwent the second of several major enhancements with the merge. It was no small feat to swap one consensus mechanism for another while continuing to run a blockchain.
The merge was proposed as a way to put new solutions into practice for better scalability. Now Ethereum is able to handle larger transaction loads without sacrificing security or decentralization.
Ethereum's massive overhaul, which transformed the digital machinery at the core of the largest cryptocurrency by market value to a much more energy-efficient system after years of development and delay, was one of the biggest moments in blockchain history.
