What Is Ethereum Staking?
The limitations of Proof of Work were well known by Ethereum’s founders. A completely different solution was found for Ethereum 2.0. This will eventually allow the network’s efficiency to process thousands of Ethereum transactions per second.
Ethereum 2.0 uses the Proof of Stake consensus mechanism, which is quicker, more resource-intensive and (at least theoretically), more secure. In that a network participant is selected to verify the latest transactions and update the blockchain, the end result is very similar to Proof Of Work.
- Proof Of Stake does not require a network consisting of miners who race to solve a puzzle. It requires a strong network of participants who are invested in the success and development of the enterprise.
- These stakeholders are known as validators. Validators don’t contribute processing power like miners, but they do so by contributing ETH to a stake pool.
- Staking is the act of contributing Ethereum to the pool. You will receive rewards proportional to how much you stake. Staking is similar to an interest-bearing savings bank for most users.
- The network chooses the winner based upon the amount of Ethereum each validator has in their pool and how long they have had it there. Rewarding the most invested participants.
- After the winner has verified the latest block of transactions as valid, other validators can attest to the accuracy of the block. Once a certain number of attestations have been received, the network updates its blockchain.
- Each validator who participates in the program receives a reward, in ETH. This reward is distributed by network proportionally to each validator’s stake.