An ordinary person is accustomed to the fact that in the world around him there are physical objects that can be seen, felt, touched. However, gradually began to appear such non-material concepts as energy and information. New sciences and technologies associated with them have arisen, and these abstract concepts have become part of the surrounding world. Blockchain can be described in the same way. Today, this technology is gradually turning for us into something familiar, inherent in our daily life.
Since the blockchain is not a centralized network, there is no single governing body in it. And this means that the network must be managed by its members themselves. In other words, the network must have a set of software that will allow you to check the network and ensure its security. So, it is obvious that validator nodes perform the most important functions related to maintaining the blockchain registry, checking the integrity of the network and monitoring the relationship of the primary chain block with the current one.
It is known that there are two categories of consensus in the crypto currency world – PoW mining (Proof of Work) and PoS staking (Proof of Stake). Today, PoS networks prevail over PoW networks. Previously, there were miners, traders and holders in the blockchain. Miners provided security to the network and received coins in return. Traders traded coins and received rewards for this or suffered losses. Holders held the coins and brought additional security to the network. But, apart from the increase in the price of the coin, they did not receive any additional reward. It should be added that miners could be both traders and holders at the same time. Today, the situation is such that miners have changed to validators. Validators also bring security to the network, for which they are rewarded in issuing new coins. The raiders have not disappeared anywhere, they continue to trade coins. And holders became stakers. They still continue to hold coins, but now they are rewarded for this and provide the network with additional security. In addition, holders began not only to hold coins, but also to delegate them to validators. By becoming delegators, they thereby acquired the right to participate in network management on an equal basis with validators.
Validators: people and machines
Let’s start with the fact that there is a validator-machine and a validator-human. The validator-machine is a computer with a hard disk, with RAM, it is in communication with other computers, with which it jointly stores information and performs the necessary calculations. And the validator-human maintains the validator-machine. In other words, the validator-human contains the infrastructure. It monitors both the physical state of the validator-machine and the installation of new software. In addition, the validator-human makes any decisions that cannot be written in the code. The fact is that the consensus within the blockchain can be divided into two types. Consensus between machines is entirely provided by the code. Consensus between people cannot be written in code, because, in fact, it is an agreement between people on how the network will develop further. And this process of coming to a consensus between people is the process of network management.
Network management process
The network is managed by creating proposals with subsequent voting for these proposals. But not only the validator can participate in the network management process. The delegator can also participate in the management of the network and also create proposals and vote on the adoption of these proposals. The whole process looks like this: the validator contains the infrastructure, it has a certain amount of coins that it holds, which brings additional security to the network. And the network pays the validator a reward for the provided security, the additional issue of coins goes to the validator.
The new issue of coins is distributed among the validators in direct proportion to the number of coins that each validator holds. The more coins the validator holds, the more coins he will receive in the end. The delegator is the same validator, but which does not contain the infrastructure, but simply delegates its coins to the validator. Thus, the delegator keeps the coins, and, bringing additional security to the network, receives a reward for this.
Real life example
Now let’s consider a situation where the network has a validator and a delegator. The validator maintains the infrastructure, pays for electricity, for the Internet and holds 1000 coins. Let’s say the network pays the validator 100 new coins annually for this. The delegator also holds 1000 coins, but does not want to maintain the infrastructure. One day, the delegator offers the validator his thousand coins. In return, he wants the validator to return him the new 100 coins that he will receive as a reward from the network. However, the validator does not agree to such conditions, because it maintains the infrastructure, pays for electricity and the Internet, and bears certain risks. He is not ready to return exactly as many new coins as he receives, and offers the delegator his commission percentage. The delegator can either agree to the validator’s terms or find an alternative, such as another validator that offers a lower fee.