Ethereum is the most popular blockchain solution in the crypto world. It can offer a means of exchange with the Ether currency and ensure developers a safe space for creating new applications. Ethereum is also one of the few blockchains that continuously improve the user experience, which is why it’s the leader in the crypto world. 

Ethereum's development has many impressive aspects, from the Ethereum Improvement Proposal (EIP) document to the Ethereum Virtual Machine (EVM). Most of these additions have made it easy to buy Ethereum with debit card, encouraging investors and traders to prioritize it in their portfolios.  

However, one of the most important things about Ethereum is the Beacon Chain, the technology that maintains the Ethereum blockchain. Lets’ see what’s it about. 

The Beacon Chain and the Ethereum transition 

In 2022, Ethereum changed its consensus mechanism for scalability and cost purposes. From the old proof of work, it transitioned to the modern proof of stake, which made Ethereum more sustainable and faster. 

At the bottom of the update lay the Beacon Chain, now the blockchain's consensus layer, whereas the execution layer is separated. The Beacon Chain is responsible for creating, validating, and maintaining the blockchain’s blocks, an essential component of the network’s success.

The Beacon Chain is subject to numerous features, such as the following:

  • The slot is a few seconds window in which a validator receives the responsibility to propose new blocks;
  • The epoch is a set of 32 slots proposed by the validator, determining when blocks are finalized;
  • The committee is a group of random validators who need to reach a consensus. It involves block proposers and attesters; 

The Beacon Chain helped Ethereum transition and improve 

The introduction of the Beacon Chain allowed Ethereum to have a seamless transition from PoW to PoS, which was one of the most ambitious crypto projects. Most importantly, it offered the following:

  • Energy-efficient features. Instead of the old mining technique of solving complex mathematical puzzles, the blockchain now selects random validators to create new blocks and add them to the network;
  • Cost-effective scalability and transactions. The Beacon Chain helped reduce Ethereum’s gas fees during transaction processing by making it more scalable. Therefore, the network is unrestricted by various aspects;
  • Security and decentralization. Since all validators require 32 ETH as a security measure, this ensures the network is secure. At the same time, the decentralization feature comes from the lack of central points on staking;

What is staking? 

The Beacon Chain's staking process employs validators who are responsible for storing data and processing transactions to add data to the blockchain. This is possible only after depositing 32 ETH into the network to activate the necessary software. 

There are many reasons why people choose to be validators, including the following: 

  • Earning rewards by contributing to the consensus;
  • Improving the blockchain’s security by adding more staked ETH;
  • Making the network more sustainable through modest hardware and little energy for staking 

There are also multiple ways to stake, allowing users to choose what’s more profitable for them. You can stake:

  • Alone at home, having the most control and rewards in a trustless environment. You need a computer that’s constantly connected to the internet and some know-how;
  • As a service, you only earn the native block rewards while others do the hard part. However, you need to delegate this to someone you trust;
  • In a pool, if you don’t have the 32 ETH required. This is called liquid staking and allows you to leverage the ERC-20 token while holding custody of your assets;
  • In a centralized exchange. This measure is less safe and impactful, but you won’t be required to hold ETH in your wallet;

What are the drawbacks of Ethereum staking? 

However beneficial and revolutionary staking is for Ethereum, it brought several challenges to the network. For example, stats on stake distribution showed a questionable centralization inclination, with only a few pools holding considerable amounts of staking assets. These most centralized third parties allow users to get into staking more easily. These exchanges use people’s ETH to stake on their behalf and cut their rewards, which risks decentralization concepts considerably. 

Another problem is the censorship following the MEV (maximal extractable value) practice. Validators started operating on this after the Merge for additional profits, allowing them to collect taxes from users to insert or reorder their transactions. 

Besides centralization, this practice heavily censors the network, as the main idea of blockchains is that everyone has equal chances to get into staking or participate in the ecosystem. The popularity of this practice has created special software solutions that reduce its negative side, but we’re not sure of their efficiency. 

Is staking better than mining? 

From numerous perspectives, crypto mining is already obsolete, as it requires expensive hardware and consumes a lot of energy. At the same time, it’s highly competitive, and component companies continue to introduce new and more costly solutions. However, mining ensures security, decentralization, and high potential rewards. 

These features can be challenges in staking, especially since the staking wallet is compromised. Moreover, users cannot use their staked coins until the staking period ends. Therefore, people depend on a series of factors and rules that impede them from leveraging income. 

Therefore, depending on what users want from their investment portfolios, some may choose mining for better rewards, while others prefer staking for less hassle with hardware. Each practice has its benefits for the native blockchain and the audience, so we can only compare them from a technical perspective. 

Ethereum’s Beacon Chain is a great technological advancement 

As the Ethereum blockchain became more congested, raising gas fees and increasing transaction processing times, it became clearer that it needed improvement. That’s when the Merge update was introduced to make Ethereum faster, cheaper, and more sustainable. It was delivered through the Beacon Chain solution, through which users would create and validate blocks efficiently without needing expensive hardware. The Beacon Chain allowed Ethereum users to stake the cryptocurrency instead of mine, which qualified for considerable returns and enhanced network security.