The Ethereum Beacon chain is one of few possibilities how Ethereum can be improved. So there is an existing proof of work chain. The process requires a ton of computing power. Proof of works gives more rewards to people with better equipment and connection. This means the higher your hash rate is, the better is the chance to be the first one that solves the puzzle. So the proof of work concept is really wasteful because only one miner gets rewarded and all the work of the other miners is wasted. To change that we need to implement the proof of stake concept.
The Ethereum Beacon Chain
The existing concept of proof of work on the Ethereum blockchain is going to continue to exist. Parallel to our main blockchain, there is another blockchain running. The so-called beacon chain. So there are smart contracts that run on the main chain. And as part of the main chain state, there will be a contract where users will be able to send deposit transactions. So you have a second blockchain that works with the proof of stake concept but it is still reliant on the main chain.
What are the requirements for the Beacon Chain?
So you will be able to send your 32 Ether into the deposit contract along with two other parameters. So the function has 3 parameters. First of all, any transaction that is depositing has to contain 32 Ether. You also need a specific pub key and a specific withdrawal address. So you will have a pub key for Ethereum and then you have another pub key that you use for withdrawing.
So you specify some data and at the very least you have two pub keys. When you deposit a correct transaction it will end up creating a receipt. So any client of the proof of stake beacon chain will need at least enough access to the proof of work chain. Therefore you have to know what the block hashes are and what the deposit receipts have been between any two checkpoints. So for a proof of stake client being a proof of work light client is totally enough.
How does the Beacon Chain work?
So the beacon chain is going to exist parallel to the Ethereum blockchain. Because of the attestation mechanism, it will probably have a rate that is much lower than 25 percent. So some proof of stake blocks have pointers that point back to the main chain. And later blocks of the beacon chain points to later blocks in the main chain. Therefore, there is a hard consensus rule.
So the main chain reference of a child has to be either the same or a descendant of the main chain reference of an ancestor. When you process a later block it will be part of the consensus rules that you also have to execute.
So, whoever deposited earlier would end up adding themselves into the pending validator set that is stored in the later block. Inside the beacon chain, you have some validator sets. So in the current set, you have an active validator, a pending validator, and an exited validator set. So if you deposit you will be a joint into the pending validator set.
How does the Beacon Chain operate?
The beacon chain sits between the main chain and the shards. It is like a connective tissue providing a heartbeat. A smart-contract on the current Ethereum blockchain will allow validators to participate in the proof-of-stake protocol by taking deposits of 32 Ether.
After they are put into the pending validator set on the beacon chain, they may be become active validators and can participate in the proof-of-stake protocol.
The beacon chain then generates a random number for a random sample of validators for block proposal and voting duties. With this random sampling, we stop validators colluding and influencing the system.
The Ethereum Beacon Chain – Summarized:
- The Ethereum beacon chain runs parallel to the Ethereum blockchain
- The beacon chain works based on the proof of stake concept
- If you want to participate in the proof-of-stake protocol you need 32 Ether, a pub key and a withdrawal address
- The proof of stake blocks have pointers that point back to the main chain
- Whoever deposited earlier adds themselves into the pending validator set that stored in the later block
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