After EIP-1559 scheduled to be included in London, there was an uprise in miners that threaten to do a show of force by gathering 51% of all hashing power on April 1st. If you don’t know what that means, here’s an explainer:
With the majority control of the network, miners could interrupt the recording of new blocks by preventing other miners from completing transactions and blocks. In other words, they wanted to show they have the power to do so and wanted to hold the whole network a hostage.
Vitalik's response was quick and firm. He proposed a quick merge.
Before we dive into and explain what it is, here’s a bit of a history.
Vitalik’s grand vision
In 2015, Vitalik Buterin released the first public version of Ethereum. It was a significant release of Blockchain that is still shaking the landscape of different Blockchain ecosystems today. At the time of its release, Vitalik knew that it wasn’t yet a “final” product as it still had apparent limitations, so he carefully planned Ethereum’s next steps. Vitalik knew what had to be researched and developed for his original vision to come true. One of the major planned upgrades was to switch from energy-hungry Proof of Work to more energy-efficient Proof of Stake.
Proof of Stake
In PoS, there are no miners. Instead, participants are known as “validators” who can propose new blocks and validate blocks from another validator (but only if they stake at least 32 ETH by depositing the funds to the official deposit contract). Only then can validators run client nodes to participate in PoS. Validators who are randomly chosen by the Beacon Chain and correctly propose and attest blocks will receive a reward in ETH as a percentage of their stake. However, if a validator attempts to compromise the truthful continuation of the Blockchain, their deposit will be “slashed” – meaning they will lose some of their 32 staked ETH. This expands even further if a validator fails to stay online and complete their share of the duties as the block reward will be decreased for them. This incentivizes validators to stay online as consistently as possible.
The Proof of Stake mechanism offers more crypto-economic security (staked ETH) than the more abstract disincentive of losing the cost associated with electricity. Previously, the cost of mining was in buying and investing in the mining equipment and paying extremely high electricity bills. Ethereum 2.0 will only require consumer-level hardware to run a validator node. Even your smartphone could be a validator node! Thanks to this development, the network can be more decentralized as the point of entry is much lower. You don’t even need to have the full 32 Eth to become part of the validation network because some staking services will offer “pooled staking” where you can combine resources with others. If you don’t have any technical knowledge to run your validator with 32 eth, a staking service will do that for you while still allowing you to remain in control of your funds.
The key function of the Beacon Chain is to manage the Proof of Stake protocol itself and all of the Shard Chains (this will come in Phase 1). The Beacon Chain manages all the validators and their stake. It is responsible for choosing validators every Epoch (6.4 minutes) for different duties, e.g., block proposals and attestation of the proposed blocks organize validators into committees to vote on proposed blocks and applied consensus rules.
Beacon chain is a fully independent network that is already live as of December 1st, 2020. It is running in parallel to the Ethereum 1.0 network, which is using Proof of Work. Beacon chain provides an elegant solution to the transition period between Ethereum 1.0 and 2.0. You can think of it as the heart of the future Ethereum 2.0 operations. Beacon chain and Ethereum 1.0 won’t live in parallel all the time. Eventually, one will need to merge with the other.
ETH 2.0, to be compatible with what was happening on Ethereum 1.0, will need to know all of its history. Ethereum’s history on the PoW network will be preserved as the PoS consensus layer is merged as a replacement for PoW. This event is called “The docking” or “The merge”. This will signal the end of proof-of-work for Ethereum and start the era of a more sustainable, eco-friendly Ethereum running on a Proof of Stake consensus mechanism.
Next, we will explore EIP-1559 and what has happened to the miner's uprise (hint: nothing).
If you want learn more about Ethereum 2.0, I wrote an article about this exact topic some time ago for Leocode. Link here. Also more information about "The Merge" you can find on dedicated website just for that.
Another day, another post and I couldn't be prouder to have finish this week with 7 blog posts, each every day.