Interest in Ethereum remains one of the fundamental ones after Bitcoin, and all changes associated with it raise many questions to which we have to look for answers.
Ether is a decentralized digital currency, also known as ETH. In addition to the fact that this cryptocurrency can be traded, the Ethereum network is built on ether, in which it serves to pay transaction fees and computing services.
Ethereum (ETH) is not only one of the most popular cryptocurrencies, but also a decentralized blockchain platform on which you can create smart contracts, decentralized applications (DApps) and other decentralized services.
DECENTRALIZATION is a way of organizing public administration in which lower-level bodies are not hierarchically subordinate to higher-level bodies, but carry out the tasks assigned to them by law, independently and independently of each other, under supervision only in relation to the criterion of legality. In a decentralized blockchain network, no one needs to know other participants or trust them. Each network participant has a copy of the same data stored in a distributed ledger. If an individual participant's copy of the LEDGER is altered or corrupted in any way, that copy will be rejected by the majority of participants in the network. Decentralization usually requires some trade-offs, such as reduced transaction throughput. Ideally, these trade-offs do not outweigh the importance of stability and service levels that they provide. Each network architecture has its advantages and disadvantages. For example, decentralized blockchain systems, as opposed to distributed ones, prioritize security over performance. This means that scaling up or down in a blockchain network increases its security, but also reduces performance since each participating node must verify all data added to the ledger. Adding participants to a decentralized network can make it safer, but not necessarily faster.
Ethereum, the second largest cryptocurrency, has switched to a Proof of Stake (PoS) model to reduce the amount of energy consumed. Ethereum co-founder Vitalik Buterin announced this on his Twitter.
Previously, Ethereum worked according to the Proof of Work (PoW) model - in this case, the success of mining depends on the power of the equipment on which the calculations take place, and not on the number of tokens in the account.
PoS is a token mining mechanism in which the probability of forming a new block depends on the amount of cryptocurrency in the participant’s account. The more ethers a user has, the higher the chance that he will form a new block and receive a reward for it.
In PoS there are no miners as such, but there is a staking mechanism. The validator allocates a certain number of coins that are blocked, and he receives rewards for confirming transactions. Validators, like miners, vote for certain initiatives to develop the network.
On the one hand, PoS provides a number of obvious advantages. Besides the fact that it allows you to make transactions very quickly, it is environmentally friendly. A PoS blockchain can consume orders of magnitude less electricity than PoW. However, the downside of this simplicity is the threat of loss of decentralization.
In PoW blockchains, the largest coin holders do not have to be the largest miners. The power over the development of the blockchain belongs not to those who have more coins, but to those who provided the network with more computing power. In PoS, however, the power is in the hands of the largest validators who stake the maximum number of coins.
