Intro
Validators are the basis of the entire blockchain system. They allow data transfer between blocks and ensure the network’s security. Crypto validators play a huge role in the functioning of the blockchain network, as many cryptocurrencies are created based on the Proof of Stake algorithm. Every year, more and more of them are due to the shortcomings of Proof of Work. This article will tell you what functions the validator performs and how to become one.
Who Is a Validator?
The easiest way to understand what role validators play is to go back to the definition of blockchain.
Blockchain is a system operating based on a distributed database. A network of nodes (computers) supports this database by storing and running the same version. Blockchain is like a book (database) with countless authors (nodes). Each of these authors can contribute to this book. However, before they do this, they must get other authors' approval. That’s when other nodes or their delegators analyze the author’s data. And if it is accurate, they check it and add it to the new block.
Thus, validators are nodes of the blockchain network that support its operability. They confirm and verify transactions, record them, and add new blocks. In other words, validators are holders of cryptocurrencies with a computer with special software permanently connected to the Internet. They lock their coins and keep the network running smoothly.
Usually, the verification nodes are selected for each block automatically based on randomness. However, several things have an impact:
- the stake age (the period of uninterrupted operation of the node);
- the state of the node;
- the number of the locked coins.
The reward for checking transactions depends on the number of locked coins. For example, a node has 3% of the total coins among nodes. Then it claims the corresponding part of the profit.
Unlike traditional mining based on Proof of Work consensus, validators do not need to mine blocks but only create new ones and check the blocks of other network participants. All this happens automatically, without actual human involvement. Also, validators need less computing power than miners since, with the Proof of Stake algorithm, the number of coins is more important than the hash rate.
The number of validators varies in different blockchains. In addition, the verification process may vary depending on the consensus mechanism of each blockchain.
Why Use PoS?
The basic principle of capitalism is embedded in PoS — money must work. Validators buy a set number of coins or more and then lock them. From that moment on, a person becomes a trusted person in the system.
Staking increases the security of the blockchain. After all, large computing power is not needed. Attacks on the network become unprofitable due to the need to invest a lot of money. Staking has some key benefits:
- the speed of checking blocks increases;
- network protection costs are reduced;
- the fee for the deposit and withdrawal of funds is reduced.
It turns out that Proof of Stake is beneficial to 3 parties: validators, companies issuing coins based on this consensus algorithm, and traders (investors).
However, PoS also has negative aspects:
- a high entry threshold due to buying a set amount of coins. With a small budget, it is better to consider startups that are just deploying the network;
- not every coin has a high yield when staking;
- young organizations are at risk of capturing a large proportion of trusted verification nodes. This is due to the low capitalization of the coin. As a result, it is easier for attackers to seize 51% of coins in their network.
How to Become a Validator?
Once you have the minimum required balance, you can deposit this cryptocurrency into the network, configure the necessary equipment, and become a validator.
Crucial. The larger your balance, the more likely your node will be selected to create the next block. Thus, a larger number of coins gives more potential rewards. You will be rewarded if your node is selected to create a block successfully.
The procedure may differ depending on the network in which the system will operate. To run a node, it is recommended to initially read the instructions, which can be found on the platform developer’s website.
Steps to Become a Validator
Read and accept the terms of work on the network. The text will contain information about the obligations, rights, and risks that await the participant.
Generate validator keys. Here you also need to specify your computer's operating system and the number of nodes you will manage. Download the application to display the command line interface or develop a client based on Python code. The generated keys must be placed in a vault, the path to which depends on the network.
To simplify the configuration of the validator, there is pre-configured node hardware. This reduces the project creation time but, at the same time, does not give a complete understanding of the network and the level of security.
Deposit the required staking amount. Otherwise, the opportunity to participate will not be unlocked. The amount of the deposit also depends on the selected network.
Also, each user can turn to services that provide Staking-as-a-Service. The provider will independently perform all the work on setting up and managing the node. Owners of large assets and investors use this method. This option is unsuitable for individuals with small funds because the costs will be disproportionate to the income received.
Conclusion
It is extremely difficult to overestimate the importance of validators because they play a key role in the functioning of blockchains. Become a validator, or choose a different income path, everyone’s choice. However, it should be noted all the pros and cons:
Pros:
- A lower entry threshold in comparison with mining, where the purchase of expensive equipment is required.
- A high percentage of income compared to delegators and other additional bonuses.
- Participation in ensuring the security and functioning of the network, as well as the voting power.
Cons:
- The need to lock your coins. In case of a sudden drop in the exchange rate, you will be unable to withdraw your coins and sell them on time.
- The probability penalties in case of an error, lack of Internet connection, etc.