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Beacon Chain

Beacon Chain is a blockchain that lays the foundation for Ethereum 2.0, managing the registration of validators and the staking process to facilitate the proof of stake (PoS) protocol.

Launched in December 2020, Beacon Chain was formed as part of Ethereum’s eventual 2.0 Serenity upgrade in order to introduce the proof of stake (PoS) protocol to replace the existing proof of work (PoW) consensus mechanism, thereby making the mining process of Ethereum secure and more efficient.

Within the Beacon Chain, users are required to stake 32 ETH to become validators before they can process transactions and create new blocks in the chain. Users can also combine their assets to make up 32 ETH within a staking pool, although this would split the returns based on the amount of staked ETH. These returns can be in the form of staking rewards and transaction fees to incentivize users to become validators.

What is Beacon Chain?

Beacon Chain is a PoS blockchain that incentivizes users to become validators through staking. Validators can process transactions by creating and validating blocks, hence paving the way for the future development of Ethereum 2.0, which will move on from the PoW consensus model. Beacon Chain stores the data and registry of validators, including their addresses and states, while coordinating shard links, which contain fragments of the chain that can expedite the validation process of transactions. 

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. A committee of at least 128 randomly selected validators will be formed through Beacon Chain to perform votes and monitor behaviors of proposers, in order to report any malicious activities by other validators, thereby minimizing hacking risks. Validators who are reported will then have their staked ETH slashed as a penalty for acting against the interests of the system. On the other hand, validators who detect, record and report such activities will receive incentives for whistleblowing. These rules serve as a basis for the PoS protocol to run smoothly and safely by the time it reaches the stage of Ethereum 2.0.

How Does Beacon Chain Work?

To understand how Beacon Chain works, we have to first understand the PoS protocol that the blockchain is based on. As an alternative to the existing PoW consensus, the PoS protocol replaces miners with validators to verify and process transactions on the blockchain. As opposed to shouldering the excessive costs of PoW hardware and mining, these validators will need to provide a certain number of coins to stake as collateral in order to ensure they perform the tasks required of them. 

One of the main tasks of a validator is to validate blocks, which are assigned to them by the system in accordance to the amount they’ve staked. Validators who have staked more coins have a greater chance of being assigned a block and receiving a reward in return.

Becoming a Validator for Beacon Chain

To qualify for Beacon Chain, aspiring validators are required to stake at least 32 ETH, whether individually or in a staking pool, under Ethereum’s mainnet smart contract. Their staked coins will be locked under a Merkle hash, which helps to validate the ownership of the coins with a record of each validator’s entry. Validators will not be able to retrieve their staked ETH until Ethereum has moved to the next phase. To fully adopt the PoS protocol in the transition to Ethereum 2.0, the Beacon Chain system requires at least 16,000 validators for. 

Each validator will perform the role of either proposer or attestor. The former creates blocks within a 12-second time frame, earning a reward for each block that’s voted by the attestors. An attestor votes for the validity of the blocks created by proposers, and is responsible for monitoring and reporting proposers who have created invalid transactions (which may lead to losing their staked ETH). Validators with fewer than 16 ETH staked will be removed from the Beacon Chain. In addition, validators who don’t diligently add blocks or shards to Beacon Chain to fill their epoch slot every 12 seconds — thus causing a quadratic leak by missing about 8,000 epoch slots — will have their staked ETH reduced as a penalty.