Ethereum (eth1) is a proof of work blockchain that enables developers to build and deploy decentralized applications. With eth2, the protocol is transitioning to proof of stake and improving its scalability and decentralization without sacrificing security. The new protocol design enables regular users to run validators and secure the network. It is optimized for hundreds of thousands of validators with low startup costs plus forgiving slashing and downtime penalties.
eth2 will be launched in phases to allow all current users to shift to the new consensus mechanism without interruption. During the early phases of the transition, eth1 and eth2 chains will run in parallel, with their own state and inflation. Eventually, eth1 will be merged into eth2.
Unlike other proof of stake protocols that are trying to start from nothing to build and scale a new protocol, Ethereum is already a protocol that has tokens in the hands of millions of people with tens of thousands of dApps. It’s starting from a very different place. This is important for the ecosystem as a whole as well.Joe Lallouz, CEO
eth2 will have a Beacon Chain in Phase 0 and 64 shard chains in Phase 1. The Beacon Chain holds the shards together and enables consensus and cross-shard communication. It has a registry of validator addresses, the state and balance of each validator, attestations, and links to shards; it is the central controller of the eth2 system.
→ For more on the phased roll-out, read our guide to eth2.
eth2 allows participation on the network for a broader set of token holders than most PoS chains. 32 ETH represents a relatively low staking requirement and low entry point for running a validator that earns rewards. Please note: there is no delegation or stake pooling at the protocol level.
Only 900 validators can be activated a day (4 per epoch) until 327,680 active validators are in the network. Once that goal is achieved, 1125 validators a day (5 per epoch) can be activated in an epoch.
The number of validators that can be activated every day increases by 225 (an additional 1 per epoch) with every additional 64k validators. The same pattern applies to validator exits. This could result in congestion—a wait of a few hours or days—if validators attempt to join or leave the network simultaneously.
Validators earn three types of rewards for participating in consensus.
The inflation rate on eth2 decreases as the staking rate increases. Because so much depends on how many people lock up ETH to support the transition to eth2, it is difficult to clearly identify a rate of inflation and reward rate. Given the risks and opportunities apparent with eth2, we assume that:
Rewards are designed to incentivize early validators starting at a 23% rate of reward at network launch. Anyone considering participating on eth2 benefits from running their validator as early as possible.
Rewards do not compound on eth2. They are earned based on the effective balance on the validator, which is capped at 32 BETH. As long as the validator is earning rewards and not being penalized, the true balance will start at 32 BETH and increase while the effective balance will remain consistent at 32 BETH. After Phase 2 is live, validators will be able to withdraw all their rewards, combine them, and run additional validators.
On eth2, validators can experience penalties and slashing. Penalties are significantly less severe than slashing.
Penalties act like negative rewards. If a well-performing validator can make a 10% reward rate in a year, a poorly-performing validator could lose 10% in the most extreme circumstances, such as being offline regularly or voting on blocks that do not get finalized. In most circumstances, the penalty for being offline is simply not earning rewards. If a validator is online greater than 53.6% of the time, assuming no inactivity leak, it will break even.
Slashing carries a heavy punishment for validators that commit a significant offense, burning a minimum 1 BETH and a maximum of the entire stake. The validator is automatically ejected from the Beacon Chain active set.
The two slashing conditions for validators are:
Emitting a slashable vote is uncommon for validators that correctly follow the protocol: forming a slashable message without malicious intent only occurs as a result of some bug or accident. Because these errors are bound to happen, eth2 minimizes the slashing amount by destroying stake in proportion to the number of validators slashed around the same time. However, if a large number of validators commit an offence at a similar time, a large amount of their stake is burnt (up to their full balance) because an attack is assumed. This is called correlated slashing. All slashed validators, whether due to a mistake or a malicious act, are forcibly exited from participating in the protocol and can not return until Phase 2.
For more on the risks associated with participating, read our eth2 guide.
eth2 products are built on the Bison Trails platform: a fully-managed solution for powering mission-critical applications. Our enterprise-grade infrastructure is used by pioneering companies across the blockchain ecosystem, from exchanges and custodians to VCs and financial institutions. We’re committed to the long-term success of the ecosystem.
As long-term infrastructure providers, we know how important a smooth transition will be for the community, token holders, and the blockchain ecosystem as a whole. Bison Trails provides fully managed infrastructure and consolidated APIs to technical partners to enable reliable and secure management of their non-custodial eth2 offerings.Aaron Henshaw, Co-founder and CTO
You can join us now by becoming an eth2 Pioneer. Participants in the Bison Trails eth2 Pioneer Program have early access to our suite of eth2 products:
Some of the leading enterprises in the space have already joined our eth2 Pioneer Program and are beginning to integrate with our validator management API.
As an eth2 Pioneer you’ll be in the front of the line to integrate our upcoming eth2 product offerings when they become live, including:
It’s not too late to be an eth2 Pioneer. Contact us to learn more about the eth2 Pioneer Program. We want you to have early access to build on the Beacon Chain!Contact us
What to Consider When Choosing Your eth2 Provider Choosing a secure and reliable infrastructure provider is critical for participating in eth2 successfully. Here are three things to keep in mind when making your decision.
eth2 update 014 We cover eth2’s first incident, how a similar incident would impact eth2 post merge and EIP-1559, and announce our support for Lighthouse.
A guide to eth2 including how consensus, staking, rewards, exiting, and slashing work.
eth2 terminology: a non-exhaustive list of key terms to understand the eth2 protocol
eth2 insights: network performance The fourth post in our eth2 Insights Series discusses Medalla’s arc of development, the metrics to gauge overall network health, and shares perspective on eth2 Mainnet
eth2 insights: validator effectiveness The third post in our eth2 Insights Series discusses the parameters governing validator effectiveness in eth2 and how validators were distributed along those in Medalla
eth2 insights: slashings The second post in our eth2 Insights Series zooms into slashings in Medalla, examining their correlates and probable causes
eth2 insights: aggregation performance The first post in our eth2 Insights Series reveals important insights into the performance, and importance, of validator attestation aggregation in the eth2 network
eth2 Medalla Data Challenge: Q&A with Protocol Specialist Elias Simos A deep dive with Elias into the challenges faced during the eth2 Medalla Data Challenge and how data-informed research can help improve eth2 in the progression to a mainnet launch
Modern Consensus: Finally, Ethereum 2.0 launches
The Coin Republic: Bison Trails Added Support for Features of Ethereum 2.0
Modern Consensus: Bison Trails rolls out support for Ethereum 2.0
Europe World News: Bison Trails announced support for Ethereum 2.0 on its platform
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