Key Takeaways:
- A crypto validator is a participant on a blockchain that checks and verifies transactions on a Proof-of-Stake (PoS) blockchain network.
- A validator works on a blockchain to make sure all the transactions are valid and accurate.
- A crypto validator actually has a very similar role with a crypto miner, but they approach the validation process in different ways.
After Ethereum migrated its consensus from Proof-of-Work to Proof-of-Stake, a few weeks ago, the Ethereum development Core team announced that they would launch an upgrade to the mainnet on April 12, 2023. One of the changes is the Shanghai Upgrade upgrade, which will allow Ethereum validators to withdraw ETH that has been staked so far. What is a crypto validator, and how does it work on the Ethereum blockchain?
What Is a Crypto Validator?
A crypto validator is a participant in a Proof-of-Stake blockchain that checks and verifies transactions on a blockchain network. In simpler terms, it's like a digital accountant ensuring all cryptocurrency transactions are valid and accurate.
When someone makes a transaction using a cryptocurrency like Bitcoin or Ethereum, the validator checks to ensure that the person sending the cryptocurrency has the funds to do so and that the transaction is being sent to the correct recipient. Once the validator has verified that the transaction is valid, it adds it to the blockchain, and the transaction is complete.
Validators play an important role in the security and reliability of blockchain networks. They help to prevent fraud and ensure that all transactions are processed accurately and efficiently. With validators, cryptocurrencies could function properly as a means of exchange.
Proof-of-Stake at A Glance
Proof-of-Stake (PoS) is a consensus algorithm some cryptocurrencies use to validate transactions and add new blocks to the blockchain.
In PoS, instead of miners competing to solve complex mathematical equations and being rewarded with newly minted coins, users who hold a certain amount of the cryptocurrency can become validators. Validators are chosen to add new blocks to the blockchain based on how much of the cryptocurrency they have and are willing to "stake" or lock up as collateral.
Validators are incentivized to act honestly because validators can take their staked cryptocurrency if they validate a fraudulent transaction. This helps to secure the network and prevents malicious actors from gaining control.
In simpler terms, think of PoS as a group project where the more tokens you have, the more say you have in the final product. Validators are like team leaders who are trusted to do a good job because they have put up some of their own money as collateral. This way, everyone is invested in making the project a success and ensuring it is completed accurately and efficiently.
Crypto Miner vs Crypto Validator
Miners are required participants in blockchains that use Proof-of-Work consensus. One of the blockchains that have miners is Bitcoin. In contrast to validators, miners rapidly decode math to validate cryptocurrency transactions on a blockchain network and add them to a distributed ledger to locate them.
Miners need high-capacity hardware to help them mine easier on the blockchain. The hardware is often expensive and badly impacts the environment because it requires a lot of electricity. Meanwhile, a validator only needs crypto staking and does not need a high-capacity device.
In conclusion, both miners and validators have a very similar role on a blockchain. They must verify that the network they are assisting grows based on correct data. Yet, they approach the validation process in quite different ways.
How Do Validators Work on a Blockchain?
The validator works on the blockchain when someone makes a transaction using a cryptocurrency like Bitcoin or Ethereum, the validator checks to make sure that the person sending the cryptocurrency actually has the funds to do so and that the transaction is being sent to the right recipient. Once the validator has verified that the transaction is valid, it adds it to the blockchain, and the validator receives its rewards in cryptocurrency.
Benefits of Being a Blockchain Validator
Passive income
Validators are rewarded with cryptocurrency for verifying transactions and adding new blocks to the blockchain. Being a validator can be a passive income source for those with the necessary technical skills and infrastructure.
Network security
Validators play an important role in maintaining the safety of the blockchain network. By verifying transactions and adding them to the blockchain, validators help prevent fraud and ensure the network runs smoothly.
Decentralization
Validators help to maintain the decentralized nature of blockchain networks. Instead of relying on a central authority to verify transactions, validators work together to preserve the integrity of the network.
Flexibility
Unlike traditional jobs, being a validator can be done anywhere worldwide as long as you have a computer and an internet connection. This provides a lot of flexibility and can be especially beneficial for people who want to work from home or travel while still earning income.
How To Be a Validator?
Many well-known blockchains, such as Ethereum, Solana, and Polkadot, require a validator. Of course, each blockchain has different requirements for validator candidates.
To become an Ethereum validator, you must meet certain requirements and follow a specific process:
Hold a Minimum of 32 ETH
To become an Ethereum validator, you must hold a minimum of 32 ETH. This is the minimum stake required to participate in Ethereum's proof-of-stake consensus mechanism.
Set Up a Validator Node
You must set up a validator node on your computer or server. This requires technical knowledge and infrastructure, including a reliable internet connection, a computer with sufficient specifications, and an Ethereum client software like Prysm or Teku.
Deposit 32 ETH into The Ethereum Deposit Contract
Once you have set up your validator node, you must deposit your 32 ETH into the Ethereum 2.0 deposit contract. This contract is designed to hold and distribute staking rewards to validators.
Start Validating
Once your deposit is confirmed, you can validate Ethereum transactions and earn rewards for your work as a validator.
It's important to note that becoming an Ethereum validator requires a significant amount of technical knowledge and infrastructure, and risks are involved, such as slashing penalties for misbehaving. Therefore, it's important to thoroughly research the process and weigh the potential benefits and risks before becoming an Ethereum validator.
