KEY POINTS

  • Ethereum 2.0 will transition the popular blockchain to Proof-of-Stake (PoS) where transactions are confirmed by validators instead of miners
  • Validators will be given rewards based on the amount of ETH they staked
  • Each participant is required a minimum of 32 ETH staked to become a validator

The Ethereum Foundation has unveiled details for anyone who wanted to become a validator in the upcoming Ethereum 2.0 testnet called Medalla. In partnership with companies Deep Work Studio and ConsenSys, the foundation is hoping to make the process "as easy as possible" for everyone to participate in confirming transactions in the upcoming version of Ethereum.

Ethereum 2.0, dubbed Serenity, is the next upgrade to the popular blockchain network that will transition its method of confirming transactions from Proof-of-Work (PoW) to Proof-of-Stake (PoS). While PoW relies on physical computing power to build blocks on the blockchain, PoS relies on validators staking their Ether to confirm transactions. Serenity will also introduce "shard chains", which would allow Ethereum nodes to process transactions in parallel instead of doing so in a consecutive manner. 

Through the validator launchpad, participants will first be educated with everything related to Ethereum 2.0, what it is and why they are needed to keep 2.0 secure. They will also be briefed on the phases of Ethereum 2.0. Phase 0  will set up the Beacon Chain as well as track validators. In Phase 2, data associated with the upgrade will be added and stored. In Phase 3, programs will finally be allowed to run on top of it.

Participants will also be educated on the potential rewards of becoming a validator. Rewards are dynamic and will depend on the current number of validators and the number of ETH staked by the participant. A low number of ETH staked will lead to higher rewards. However, rewards per validator will decrease the more ETH staked.

The total minimum staked amount is 32 Ether, worth $10,247.

Running a validator comes with risks and responsibilities as well. For example, a validator who is offline while two-third of all participants are online will lead to small penalties. Validators who are not responsible stand to lose a minimum amount of 1 ETH. Validators who are offline at the same time as more than one-third of all participants stand to lose up to 50% of their staked tokens.

Validators must also secure the keys they generated. The mnemonic, which is the 24 words used to generate the private keys, must be safely secured as it is the only way to retrieve the validator’s deposits. Once that is finished, the participant will be guided to upload their public keys and become a validator. To run the validator node, the participants must finally choose a client to set up their node. Choices include Prysm, Nimbus, Lighthouse, and Teku.

For ETH holders who do not want to have their own validator nodes, they can stake their tokens through a staking provider, which act like mining pools where participants collectively pool their tokens. It is expected that various staking providers will launch on the lead up to Ethereum 2.0.

For now, the current Ethereum 1.0 will continue as is. It will slowly be upgraded to eventually become a shard chain of 2.0 at some point. Finally, ETH holders do not need to do anything with their tokens or even become a validator at all. According to ConsenSys, ETH will continue to function as it does today even after the transition.

ethereum If you happen to be wondering whether selling Bitcoin to buy Ethereum is a taxable event, the answer is yes. Photo: Pixabay