Understanding Ethereum Validators - the guardians of the blockchain

The Ethereum network is now an energy-efficient and scalable Proof-of-Stake (PoS) model. With this change comes a new set of participants called validators, who play a crucial role in securing the network and processing transactions.

In this guide, we delve into the inner workings of Ethereum validators, their responsibilities, and how they contribute to the overall stability and security of the network.

The basics of Ethereum validators

Ethereum's proof-of-stake recap

Ethereum transitioned to a proof-of-stake system in a process called The Merge.

In this system, validators take on the role of miners in a traditional proof-of-work system to propose and validate blocks on the network.

The probability of a validator being chosen to propose a new block or attest to existing ones depends on the size of their stake. The more a validator stakes, the higher their chances of being selected.

The role of an Ethereum validator

Validators in a proof-of-stake network are the primary actors responsible for creating/proposing new blocks, validating transactions, and securing the network.

• Proposing blocks: creating new blocks by aggregating transactions and broadcasting them to the rest of the network for validation.
• Attesting to blocks: verifying the validity of proposed blocks and vote on them
• Finalizing blocks: participating in a multi-round voting process to reach consensus on the final state of the blockchain

The key takeaway here is that validators help to build and order transactions, verifies data against the protocol rules, obtain consensus, and keeps the network secure.

Validators are selected on a random basis

The selection process for Ethereum validators is designed to be fair, transparent, and secure.

Validators are chosen through a combination of randomness and their staked amount. The more Ether a validator has staked, the higher their chances of being selected to propose or attest to blocks.

Ethereum uses a system called RANDAO to provide its in-protocol randomness and select a random validator each time and assign it duties.

Requirements to become an Ethereum validator

To become an Ethereum validator, interested participants must meet certain financial commitment and technical capabilities.

On the financial side, an Ethereum validator needs to have 32 ETH – currently ~US$60,000 – as collateral to show his commitment to the network and helps ensure that they have a vested interest in its success.

On the technical side, they must have the necessary hardware infrastructure to provide and maintain a validator node, including installing and configuring Ethereum software clients to participate in the process.

Validator onboarding and maintenance

After meeting the necessary requirements, prospective validators must go through an onboarding process to become an active participant in the network.

This process typically involves:

• Generating Validator Keys: generating a unique set of cryptographic keys for their node, which includes a validator keypair for signing blocks and attestations, and a withdrawal keypair for accessing staking rewards and withdrawing their staked ETH
• Submitting a Deposit: depositing 32 Ether into the contract, which locks their stake and signals their intent to participate in the network
• Configuring Validator Software: installing and configure their chosen Ethereum client software (e.g., Prysm, Lighthouse, or Teku)
• Maintenance of validators: utilizing tools and resources available to help them monitor their nodes in real-time and recieve alerts on for validator performance, network health, and other key metrics

Economics of Ethereum validators

Block validation is an ecomomic activity, and to incentivize validators to perform their duties diligently and honestly, the Ethereum protocol employs a carefully designed system of rewards, penalties, and slashing.

Staking with 32 ETH as collateral

As mentioned above, there is a minimum deposit stake required of 32 ETH, which serves to demonstrate stakers' commitment to the network. Staking requirements help maintain a high-quality validator set, as only those willing to make a significant financial commitment can participate.

While the 32 ETH staking requirement may appear daunting to some, staking pools and services allow users to stake smaller amounts of Ether and share in the rewards and responsibilities.

Rewards for staking

Validators receive rewards when they make votes that are consistent with the majority of other validators, when they propose blocks, and when they participate in sync committees.

Penalties for bad activities

Everything is good for well-behaved validators. But those that go offline or fail to perform their duties will be penalised as well.

Validators who experience significant downtime or fail to remain online consistently can incur penalties, as their absence disrupts the network's stability. Those that provide incorrect attestations, either due to software errors or intentional dishonesty, can also face penalties.

These penalties are typically equal to the rewards the attestor would have received had they submitted them.

In more severe cases, validators can be slashed for actions that are considered direct attacks on the network, such as double signing where the validator proposes and signs two different blocks for the same slot; or double voting where the validator attests to two candidates for the same block.

In these cases, 1/32 of their staked ETH up to a maximum of 1 ETH is immediately burned, then a 36 day removal period begins.

*Varies based on the total number of validators in the network. Approximated for 435,000 active validators

Conclusion

Ethereum validators play a pivotal role in securing and maintaining the network by proposing and attesting to new blocks, finalizing the blockchain's state, and ensuring its overall health and integrity.

As the network evolves, validators will play an increasingly crucial role in securing the network and fostering its growth. The journey of a validator promises to be both rewarding and challenging, as well as an opportunity to contribute to the future of Ethereum and DeFi.