DeFi
September 28, 2022
What is Token Burn and it's effects on price
An A-Z guide on token burning and how it is largely impacting the cryptocurrency industry.
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The blockchain technology being used in cryptocurrency can sometimes be overwhelming, especially when one is not aware about certain terms related to it. Blockchain validator is one such aspect of blockchain which cannot be ignored.
If you are just looking for the meaning of blockchain validator or if you want to understand blockchain technology and its termes in detail, this article is for you. Here we will discuss the definition, function and role of blockchain validators in different consensus mechanisms.
Let’s get started with understanding what a blockchain validator is.
The Role of Blockchain Validator is quite complex as well as vital for the crypto world. Blockchain Validators are the ones who verify all the transactions and hold the responsibility for the verification.
The verification is important because after verification the transaction is added to the Distribution ledger. To understand more about the Blockchain Validator, let’s first understand what exactly they do apart from verification.
Blockchain validators in PoW are considered as miners because whatever a typical miner does to get a reward, Validators have to go under the same process (i.e. Solving Complex Math equations) to get the right to verify.
The Blockchain Validator in PoS works as a stakeholder; they have to do and undergo the process to get rewarded. They have to stake in systems like Avalanche and hold their network tokens.
To understand the working of a Blockchain validator, you need to be comfortable with the two consensus mechanisms first. Later on we will see if miners are different from validators and if they are, what makes validators different from miners but before that, let us try to understand the difference between PoW and PoS.
Proof–of-Work and Proof-of-Stake are two consensus mechanisms a blockchain might use. The functioning of a particular blockchain depends on the consensus mechanism used. Validators in the PoW system are usually called miners whereas in PoS, they are just called blockchain validators.
The proof-of-work system requires the miners to have expensive computer setups with high computing power so that they can solve complex mathematical equations faster than the rest of the miners on the network.
The miner which solves this equation first will be allowed to add a new block to the blockchain and hence will be rewarded with newly minted cryptocurrency. The amount of energy spent to add a new block to the chain is considerably higher and hence the PoW system is not efficient.
As a solution to this problem, the Proof-of-Stake system was introduced which eliminates the need of having expensive set ups and uses less energy to run the blockchain. In PoW, a random validator is selected to verify and add a new block to the blockchain based on the number of tokens stacked by the validator.
Here the walidator receives an incentive in the form of transaction fee and network fee paid by traders. Although both the miners and validators are blockchain validators in terms of their role, validators in the Proof-of-Stake system are more commonly called as blockchain validators.
Miners are the ones who provide the surety to the users for the protection of PoW based networks. This is done to ensure that only one version exists, this helps to achieve consensus. Generally Miners are the ones who operate high-end crypto mining devices, they earn by troubleshooting the problem and writing it to the next block.
By resolving the issue, they are rewarded with a good sum and they get some portion from the transaction fees that users generally are charged. This whole mining system is built upon a consensus process and it is said to be quite expensive plus there are talks around the world on the consumption of energy that this mining process eats up.
Miners face huge electricity bills too, but their rewards back them and helps them to pay and make a good living. But for miners, it’s not as simple as that, they need such machines that can solve complex cryptographical and mathematical problems or equations to mine new coins.
Validators are also called miners, because of the process they undergo to earn their right to verify transactions; this process comes under PoW. Apart from that, validators have a whole different working and function in crypto space.
Validators are known for verifying the transaction and later adding that to the distribution ledger. In PoW, they have to solve complex problems where in PoS the case is completely different. In PoS, they have to hold their stake in a system like Avalanche. The longer they hold, the better they are rewarded.
Thus the stake holding eliminates all the energy consumption problems, machines maintenance, bill issues and risk of mining operations. Thus all these factors differ from a miner, where validators have completely different work to perform.
As we already saw, PoW and PoS blockchains perform very different tasks as their requirements are different. Now Ethereum has also launched its own network which is based on PoS. This network is known as Ethereum 2.0.
Ethereum runs this network parallel with the main network which is based on PoW. In a short while, Ethereum would have completely moved to this new version of blockchain.
If you want to become a validator for Ethereum 2.0, you will have to lock 32 ETH on the network, which when converted to USDs will be around $152,000.
But keep in mind that having 32 ETH in your wallet would not be sufficient as you need the 32 ETH to be locked away or at stake. If validation is required by the transaction block then your node might get chosen but that would be done in a random way.
You will also need to remember that it would not guarantee you being selected for the block validation just because you lock more than 32 ETH.
If you need to have the best chance at getting the next block, then you can set up multiple nodes and then assign 32 ETH to every node, this will increase your chances of being picked statistically.
Making a verifier node for the Ethereum 2.0 would cost you a lot less because it is not as hungry of top-class tech as Ethereum or Bitcoin based on PoW. Although, ensure that you still use a computer system with at least above-average specifications.
If you don't want to dedicate 32 ETH to become a validator then you can stake your money in pools but remember that the rewards for them would be smaller.
Becoming a blockchain validator would help you earn a lot of money that you might not earn with the regular kind of crypto trading. So it is essential that you understand this topic completely before you try and get picked to verify the next transaction on the blockchain. Hopefully this article must have provided you all the details you need but if you face additional issues, do contact us.
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