Explained: What is Ethereum staking and how does it work?

cnbctv18.com:

In its effort to be faster and more energy-efficient, the Ethereum blockchain (version 1.0), which is the second-largest cryptocurrency network, has also now set out to upgrade to Ethereum 2.0 and a process called staking is one of the key changes.To understand what staking is, let us take a look at what the original Ethereum looked like and what the transition to Ethereum 2.0 involves. The Ethereum blockchain was initially launched on the proof-of-work (PoW) consensus mechanism just like Bitcoin.

This meant the native miners of its native currency Ether (ETH) would have to devote an astonishing amount of computing power to decrypt users’ transaction data and validate them. The decrypting process involved intense calculations, which also guzzled massive gas fees over and above hardware costs.To make the network more energy-efficient, the Ethereum blockchain has now planned migration to a proof-of-stake (PoS) mechanism, which will have a new native cryptocurrency – ETH2.

This new consensus mechanism requires miners called validators to pledge a certain amount of cryptocurrency to the blockchain, making them transaction authenticators.Also Read // Explained: Proof-of-work vs Proof-of-stake mining and why Ethereum is transitioning to latterSuch a mechanism does not require the miners to devote a tremendous amount of computing power to scrutinise transactions. This, in turn, reduces the money being consumed in gas fees and hardware costs as compared to the PoW mechanism.