Ethereum 2.0 blockchain platform validators Project’s prospects and risks
In the previous article, we talked about what is the Ethereum 2.0 network update, what this upgrade is for, and how the updated platform will work. Today we will talk about the prospects and risks of the platform, as well as about validators and their role in the Ethereum 2.0 ecosystem.
Who are validators?
Validators or staking providers are nodes that take on all the main tasks to maintain the health of the blockchain network: security, distribution of stacker rewards to delegates, provision of node statistics, and so on.
Stakers choose the validator they like and delegate their ETH coins to them, which allows stakers to get into the staking pool with a smaller amount than is required for the validator. Validators, in turn, charge a small fee for their services but take on all the necessary work.
Everstake joined the Ethereum 2.0 network and launched its own node in the testnet to search for errors and opportunities to improve the network. The network is currently running in a test mode, and rewards are not being distributed yet. However, users can track node statistics, including errors that occur during operation.
You can track the Everstake validator statistics at this address.
Why to stake?
Stakers make the platform more decentralized, maintain the stability and security of the blockchain network The more miners are in the network, the better the network works, and it is more secure. In return, the stakers receive a reward
Network validators don’t just vote on which block to add to the blockchain. They link to a specific block from the history of the blockchain and also vote for it. This is how the start and end points of blocks are linked. A block is approved if more than ⅔ participants voted for it.
What will happen to miners after the network is launched
After switching to the new algorithm, it is likely that many miners will stop supporting the old network, since the approach to mining will change and staking will not require large energy costs. Ethereum is one of the most popular coins among miners. Unlike Bitcoin, it is still accessible to small private miners. Therefore, there is a high risk of capitulation of miners, including large mining pools.
Another risk is associated with the possibility of a sharp drop in the cryptocurrency exchange rate. After validators stake the coins, they are frozen, and it will be possible to withdraw them no earlier than after 18 hours. Remember that the minimum amount of coins for staking in Ethereum 2.0 is 32 ETH. If the rate drops, it is likely that the rewards will not cover stakers losses.
The projects’ prospects
Currently, Ethereum is the second cryptocurrency by capitalization according to CoinMarketCap. Scaling the network can attract more participants, and its scope can expand significantly. Stakers can delegate their coins to the validator, and they do not have to spend a lot of money on mining rigs to participate in the Ethereum 2.0 network.
* * * * *