The Ethereum Beacon Chain Explained: The Purge, Surge and Merge

The Ethereum Merge is the most exciting event in the World of crypto. Beacon chain can be seen as the new immigrant in the PoW chain that is constantly verifying, scanning and validating different operations on the PoS Beacon chain. With the emergence of Beacon chain terms like block finality, epoch and slots came to Ethereum. The Beacon chain Merge with Ethereum will transform the miner centered blockchain to a sustainable and efficient blockchain. The Beacon chain is the powerhouse that will connect all the participants of Ethereum. 

The Beacon chain is a standalone proof of stake blockchain which will merge with ETHPOW to transform Ethereum into a Proof of Stake blockchain. 

Let’s deep dive into how Beacon chain will merge with Ethereum. 

What is the Ethereum Beacon Chain?

With the advent of the Ethereum Beacon chain, the way users interact with hot wallets will not change. Be it swapping, sending or receiving ERC-20 and NFTs. 

The beacon chain will be the point of coordination of the network where blocks will be validated and validators will receive rewards for validating blocks after a thorough inspection of the transaction.

According to Vitalik Buterin, co-founder, of Ethereum, Proof-of-stake was always a part of the Ethereum development roadmap and will address the shortcomings of the PoW chain like accessibility, centralization, and scalability.   

The Ethereum Beacon chain is an independent proof of stake blockchain developed by the Ethereum foundation.

It is a ledger that coordinates with the network of stakers. The beacon chain will merge with the Ethereum network to reform the network into a proof-of-stake blockchain. It is the consensus layer that will replace the PoW consensus mechanism.

Beacon chain plays a pivotal role in making Ethereum a carbon-negative and scalable blockchain as it is the core software that manages the staking process and will introduce ‘Sharding’ to the network in the next phase. 

What are the features of the Ethereum Beacon Chain?

Beacon chain is the first phase that will set the stage for the Ethereum Merge upgrade. The Beacon chain is the core network that will transform Ethereum to Proof of Stake and will also introduce ‘Sharding’ to the network in the final phase.

Ethereum Beacon chain went live on Ethereum on December 1, 2022. 

Staking: Users can opt to become validators on Ethereum Beacon chain by staking their ETH holdings to verify transactions and earn ETH rewards. According to DeFi Lama, Total Value Locked (TVL)  of ETH is 13,276,042.72. (Source: Glassnode)

Storing attestations: Beacon chain will store the validator signed transactions (hash of all transactions) on the network. Any tampering with these attestations will result in different hash outputs making it easy for network participants to detect any illicit transactional attempts. 

Random validator explorer: To keep data safe and secure the chain randomly chooses validators for running a node to validate transactions on the network. This minimizes the chances of blockchain becoming centralized. 

Reward and penalty mechanism: The Beacon chain will track the validators progress to reward participating nodes for their fair work and penalize malicious nodes with a deduction in their staked ETH. 

Sharding on the cards: Beacon chain will play an instrumental role in accommodating sharding as its proof of stake consensus mechanism. 

Read More: Ethereum Price Prediction 2025

How will the Beacon chain work? 

Ethereum’s Beacon chain will act as a consensus layer where any transactional data verifying activity will be validated and distributed to the validators for their work on the network. The beacon chain verifies validator activity by rewarding active validators and penalizing malicious validators on the network. 

Additional Read: How Ethereum Proof of Work will Work after the MERGE Upgrade

Proof of Work vs Proof of Stake

Proof of Work vs Proof of stake are the two most preferred  consensus mechanisms   

What is Sharding? 

Sharding refers to a unique Proof of Stake mechanism where units of data are added to smaller blocks called ‘Shards’. These shards are distinctive from each other. Instead of adding the same data to all nodes, each shard holds its own information or data. Shards are responsible to manage its own transactions. In addition, all nodes have data of all shards but only for book-keeping. In comparison to Proof of Stake, Sharding will not handle smart contracts and transactions directly. Layer 2 solutions like roll-ups will be deployed to send bulk transactions by batching them in phases to the execution layer. This will reduce network congestion and gas fees. 

Shard Chains – An overview 

Shard chains are small units of independent blockchains that carry out their operations on their own. These transactions can be traced on the blockchain explorer of the main chain. In this case, Ethereum’s Beacon chain will have a copy of all transaction logs on shard chains. These records are sent to the main chain via Validator Manager Contract (VMC).

Some examples of Shard Chains are:

• Near Protocol
• Polkadot Parachain
• The Ethereum Beacon chain

How do you become a validator? 

To become a validator on the Ethereum network one needs to send a minimum of 32 ETH to Ethereum’s contract. Once the assets are deposited, the user needs to run three pieces of software: an execution client, a consensus and execution client. In the later step the participant will be placed in a queue of validators. When the user has cleared through the activation queue, validators receive blocks from Ethereum peers. The transactions on the block are re-executed and the digital signature is checked by the validator. 

Additioanl Read: How to stake ETH

When can validators on the Ethereum Beacon Chain collect rewards?

The Ethereum Beacon chain primarily channelizes the staking aspect of the Ethereum Beacon chain. On ETH2, users can stake a minimum of 32 ETH units into the smart contract to validate transactions on the chain to gain rewards.     

Ethereum Beacon validators receive rewards for participating after an epoch which is 6.4 minutes. An epoch is the time taken to process blocks on the blockchain. The rewards earned by validators are called ‘Base Rewards’. The rewards are adjusted depending on the active validators on the blockchain. 

Wrapping up

The Beacon chain is the beacon of hope to bring inclusivity to the Ethereum blockchain. The aim of the Ethereum Merge is to alleviate network congestion issues caused due to its previous PoW mechanism. With the completion of the Merge, the energy consumption will reduce drastically as told by Vitalik Buterin,  co-founder, of Ethereum. For more information, keep track on Ethereum Merge Upgrade blog!