Tezos Proof of Stake
What is Tezos Proof of Stake?
Proof of stake is a method of verifying transactions on a blockchain that offers high security, decentralization, and energy efficiency. Tezos uses a unique proof-of-stake mechanism called liquid proof of stake (LPoS), which is highly compatible with the Tezos on-chain governance mechanism.
In PoS, validators (referred to as bakers in Tezos) are chosen to create blocks based on the amount of their stake, not by solving complex mathematical problems. This method not only reduces energy consumption but also incentivizes users to participate in the network's security by rewarding them for their involvement.
Staking v. Baking
In the Tezos blockchain, staking and baking are two related but distinct processes that help secure the network and validate transactions. While both involve locking up tokens, the roles and responsibilities are different.
Staking in Tezos means locking up Tez (XTZ), the native cryptocurrency, to participate in the network’s Proof-of-Stake (PoS) consensus mechanism. Stakers help secure the network by supporting validators (bakers) with their stakes.
Baking is the process where bakers validate transactions and create new blocks on the blockchain. Bakers can either bake on their own or rely on the stake delegated to them by other users (stakers). To become a baker, a user must have at least 8,000 XTZ, which is the equivalent of one "roll" in Tezos.
Key Differences Between Staking and Baking
| Feature | Staking (Delegation) | Baking |
|---|---|---|
| Role | Stakers delegate their tez to bakers and earn a portion of baking rewards | Bakers create blocks and validate transactions on the network |
| Involved Parties | Stakers delegate their tez to bakers | Bakers create blocks and earn rewards |
| Reward Source | Delegators earn rewards based on the baker’s performance | Bakers earn rewards for block creation and validation, which are distributed to delegators |
| Network Participation | Stakers participate indirectly by delegating their tez to a baker | Bakers participate directly by creating blocks and validating the network |
| Risk | Delegators face minimal risk, as they don’t need to manage a baking node | Bakers take on more risk, as they could lose their staked tokens if they misbehave or fail to validate |
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Updated about 1 month ago