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A lot of hope is placed on the London Hard Fork upgrade. The London Hard Fork consists of five Ethereum improvement proposals (EIPs). EIP-1559 focuses on changing the speed and incentivization of Ethereum mining. Inflation is the process by which a currency loses value over time, where you have to pay more of the currency to pay for goods.
Ethereum is an inflationary cryptocurrency, and the purchasing power is expected to decrease with time. Currently, ETH uses PoW, and very soon, it will transit to PoS. ETH miners with PoW are rewarded with ETH every time they validate a block. Miners get compensated for their service from the transaction fee paid by users. As miners create new blocks (on average, one every 10 seconds), they are rewarded with one newly issued Ether, where Ethereum’s inflation rate stood at 4%. With the current upgrade, miners will not receive income from the transaction fees paid by users.
Miners exist to make sure that everyone agrees over the order of the transaction. Miners solve a computationally difficult puzzle to produce blocks. Thus, securing the network from attacks.
PoS is a part of the plan to scale Ethereum using the ETH2 upgrades. However, getting PoS right is taking a lot of work as it is not as straightforward as PoW.
For PoS users should stake their ETH to become a validator in the network. Validators do the same job as the miners, but they do not mine but attest. They will be ordering transactions while creating new blocks, eventually making it possible for all the nodes to agree on the state of the network.
PoS is hailed to be better than PoW in several ways. It provides for better energy efficiency, lowers barriers to entry, less hardware requirements, stronger immunity to centralization, and strong support for shard chains.
Users should stake 32 ETH to become a validator. They are choosen randomly to create blocks, and they are responsible for checking and confirming blocks, which they do not create, but rather they attest. Those who attest malicious blocks will be losing their stakes.
The threat of 51% attack is there in PoS. However, the complication is that the attackers should hold 51% of the staked ETH, which is a lot of money. There is no incentive to destroy the value of a currency in which someone has a majority stake in. Rather they get better incentives to keep the network secure and healthy.
Staking makes it easier to run a node. There is no need for huge investments in terms of hardware or energy.
