The Beacon Chain is a Proof-of-Stake (PoS) blockchain launched in 2020 that lies at the core of the much-awaited Ethereum Merge, the technological spine enabling the establishment of shard chains (explained below) in the new Ethereum ecosystem.

What does the Beacon Chain do in more detail?

In essence, the Beacon Chain is the coordination mechanism of the new Ethereum network, responsible for creating new blocks, making sure those new blocks are valid, and rewarding validators with ETH for keeping the network secure.

It is a ledger of accounts conducting and coordinating the entire network of stakers. However, unlike the Ethereum network that we know today, it does not process transactions or handle smart contract interactions.

The Beacon Chain is set to permanently replace Proof-of-Work (PoW) mining, marking a significant improvement in making blockchain technology more scalable.

There are many key aspects to the functioning of this exciting coordination mechanism:

• managing validators and their stakes; 
• nominating the chosen block proposer for each shard at each step; 
• organizing validators into committees to vote on the proposed blocks; 
• applying the consensus rules as well as applying rewards and penalties to validators; 
• being an anchor point on which the shards register their states to facilitate cross-shard transactions.

As Ethereum currently uses PoW, the Beacon Chain has introduced the PoS consensus mechanism for the network computers to validate transactions.

Once the mechanism is merged into the Ethereum Mainnet of today, the Beacon Chain will be able to introduce shard chains – the process known as sharding. In very simple terms, sharding allows the distribution of the network load by splitting the main Ethereum network into smaller blockchains. To be more specific, in 64 of them. This way, sharding enables greater scalability by allowing the network to process multiple transactions simultaneously.

Merging the Beacon Chain and the Ethereum Mainnet is a huge step forward in improving the scalability, security, and sustainability of blockchain technology, which in the long term will not only benefit the network users but will also create a greener blockchain scape, by significantly reducing energy consumption.

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