Who is a Validator?
Validators are replaced by miners in a proof-of-work (PoW) blockchain. Validators and miners perform identical functions, although they achieve their goals via different methods.
Validator Explained: Components of a Blockchain Validator
Let’s look at the example below to learn what it takes to become one on a PoS blockchain like Ethereum.
An Ethereum validator is composed of different parts. They are:
- Validator Client: It is software that holds and uses private keys to make attestations about the state of the blockchain.
- Node Operator: An individual or group responsible for running and managing validator client software and hardware.
- Stake: Validators are required to deposit a certain amount of cryptocurrency as collateral to get the chance to become one.
What Do Blockchain Validators Do?
The two main functions of a validator are to build new blocks and to verify transactions in the newly proposed blocks.
In exchange for their work, validators receive rewards and earn fees every time a new block is added to the blockchain. When a validator fails to perform their duties, they incur penalties.
1. Building Blocks
Validators are responsible for proposing the creation of the upcoming block. A single validator is chosen randomly from the entire population to become the “block proposer.”
The block proposer may choose to add selected transactions in the upcoming block in order to maximize fees earned from the block (in a process called maximal extractable value).
Once the block is ready, the proposer broadcasts the proposal to the entire network.
2. Verifying Transactions
Validators are security enforcers in a PoS blockchain. They check the validity of the transactions included in the proposed block. Transactions only achieve finality after they are attested by validators.
Whenever a new block is proposed, a subset of validators consider the block and check whether it contains legitimate transactions. The proposed block is only added to the blockchain once it obtains enough attestations.
The act of a network of validators coming together to agree on the state of the blockchain is known as consensus.
Validator Rewards, Penalties, and Slashing on Ethereum
The block proposer receives payment once their proposed block is finalized by the network.
Block rewards vary with each block. The block proposer receives a fraction of the base reward (equal to a function of active validators and their effective balances) for every attestation included in the block. More attestation means more rewards.
Minor penalties are imposed on validators for being offline. Being offline when ⅔ of all validators are online leads to smaller penalties than being offline when over ⅓ are offline.
Slashing is a severe punishment imposed on validators for behaving maliciously. Slashing can result in the removal of a validator from the network and the loss of their staked ether.
Slashing is done to disincentivize coordinated attacks and dishonest behavior. When a validator is found guilty, 1/32 of their staked ether is immediately burned.
How to Become a Validator?
If you are wondering how to become a crypto validator on Ethereum, the checklist below will help you prepare for the role.
- Validators will need to run validator client software which process, broadcast, attest, and store transactions.
- Hard drive of minimum 1 TB storage space. According to an official blog, the Ethereum main net is growing at over 1 GB per day.
- SSD storage.
- Reliable, 24/7 internet connection.
- Internet bandwidth of at least 1.2 GB download and 1 GB upload per hour.
- 32 ETH for staking.
Validators are required to stake 32 ETH to activate validator software. This deposit is used as collateral to punish them for malicious behavior or inactivity.
As of October 2023, there were 865,353 active validators on Ethereum.
Validator vs. Miner
Validators operate on the PoS blockchain.
Miners operate on the PoW blockchain.
Miners use specialized hardware to solve complex mathematical puzzles to verify transactions.
Validators do not need specialized hardware to run validator software.
Miners are required to upgrade their hardware as better mining hardware comes up. This may increase the risk of miner centralization due to high investment costs.
Popular liquid staking platforms like Lido are increasing validator centralization.
Miners are not required to stake crypto.
Validators are required to stake crypto to activate validator software.
Crypto mining is an energy-intensive operation.
The replacement of miners with validators on PoS chains reduces energy consumption by power 99%, according to Ethereum.
Validators play a pivotal role in ensuring the functionality of blockchains. It would be impossible to create a decentralized blockchain environment without a diverse network of validators.
They are a cornerstone of the decentralized blockchain revolution, providing the framework for trustless, peer-to-peer transactions and decentralized finance.