The world of cryptocurrency or the market of digital currencies, only to normal transactions or investments in the world NFTs will not be limited. One of the processes that has attracted the attention of many investors is called digital currency staking, which is clearly profitable by placing a digital deposit and participating in securing the network. One of the most important components of digital currency staking is a validator. The task and role of a validator in blockchain networks is something similar to the role of a banker. Validators verify the incoming transactions of a blockchain network so that a new block is added to the network and the transaction is formed.
The important point in digital currency staking is that the blockchain network in question has a proof-of-stake (PoS) consensus algorithm. Each blockchain network based on the PoS algorithm consists of more than one validator that is formed according to the needs of the system. But what is the complete and comprehensive definition of a validator and how to choose the best one for digital currency staking transactions? We will answer these questions in the rest of this article.
Examining the concept and application of the validator
According to the definition provided on the Coinmarketcap.com site, the validator is an important part of the Proof of Stake algorithm, whose main task is to approve new blocks to earn rewards. The decentralized nature of blockchain technology has made the concept of validation more prominent and more people are expected to join the ranks of validators. Each blockchain has many different blocks, so to speak node or node are called (node). The responsibility of nodes is to maintain data and information. Of course, these data must first be approved in the blockchain network. This is where a validator, also known as a validator, comes into play.
In general, there are two common validation algorithms for blockchain networks, which are:
- Proof of Work (PoW) consensus algorithm
- Proof of Stake (PoS) Consensus Algorithm
A transaction in the blockchain network system evolves and is added to the set of previous blocks when its legitimacy is checked. A validator is also responsible for legally checking the structure of a new block. In the proof-of-stake consensus mechanism or algorithm, the validator determines whether the desired transaction matches the network’s valid rules or not. This process makes blockchain networks in the cryptocurrency world more secure and transparent.
How a validator works in the blockchain network
Validation in interoperable networks such as Avalanche maintains system efficiency, participates in voting and forms new blocks in the blockchain. New blocks are selected by the validators to be added to the fixed network system by multi-stage voting by the validator. A validator gets the right to add a new block when his block is voted by two-thirds or more of the network’s validators.
A validator’s role in a network is to fully implement a node and participate in network consensus as well as voting. Validators that To add new blocks They operate, both for providing security and for Digital currency stakingearn income.
Each blockchain network based on the PoS mechanism or algorithm has its own incentive methods to encourage and improve the performance of validators. For example, a validator in the Cosmos network must have a bonded token so that his activity takes on an incentive color. These validators have the duty to contribute to the better management of the blockchain system by voting on the proposals. The amount of reward and profit a validator earns is measured by the stake or capital they lock into the network.
Proof of stake consensus mechanismPoS(against the proof-of-work algorithm)PoW)
The system of adding new blocks in blockchain networks is done according to consensus mechanisms. For example, in blockchain networks based on the PoW algorithm, miners have to solve complex mathematical problems in order to achieve profit or reward. In this way, miners are practically responsible for validating new blocks of the network.
But what is the problem with the PoW system? Mining or extracting digital currency is not the best solution due to its requirements. As a miner, you need to have specialized and expensive hardware as well as enough expertise for the computational power of complex formulas. After all, digital currency mining consumes a lot of electricity and is not economical at all in terms of costs and environmental issues.
On the other hand, the proof-of-stake consensus mechanism and digital currency staking do not require any specialized hardware or knowledge. This method, by determining participation Validator instead of miner It goes forward and does not consume special energy. In such a system, a part of the transaction fee is considered as a reward for the validator so that he has enough incentive to continue the activity. Basically, both validation mechanisms pursue a specific and single goal. With all these features, the proof-of-stake consensus mechanism is considered safer and more efficient than the proof-of-work consensus mechanism.
How to a Validator Become a digital currency?
Anyone can join a public blockchain and become a Validator. Meanwhile, other people need to obtain permission to enter private blockchains. The most common consensus mechanism implemented so far in the cryptocurrency world is the PoS algorithm, where validation occurs randomly and validators cannot predict their turn in advance. Nodes selected as validators or block producers show their commitment and willingness by depositing or staking coins they have as assets.
How validators are chosen depends on the amount of deposits they lock into the network. When a validator is selected and offline, the validation opportunity is handed over to the next (randomly selected) node. The validator is rewarded if the block produced by him is fully added to the blockchain.
To become a professional blockchain validator, you must be a so-called Engagement announcement transaction (declare candidacy transaction) should be provided with some important details. The details of this transaction are:
- Validator Pubkey (account used for validation)
- Validator name and description (not mandatory)
- Determining the initial commission rate (for adding each new block)
- Determining the maximum commission received
- Determining the commission change rate (maximum daily amount)
- Determining the minimum self-bond amount
- Determining the initial self-bond amount
What is the guarantee that the validation is not dangerous?
You might be wondering why a validator should place his deposit safely on the network? Or what happens if validation fails against the specified block? According to the rules that exist in blockchain networks based on the PoS algorithm, the validation and staking of digital currency must be done according to the things that have been determined in advance.
For example, if validation takes place with respect to a block that is not already selected, the security deposit equal to the block reward is lost. This process is a guarantee to prevent any abuse in blockchain networks. A validator, following such rules, can be sure that nothing is at stake.
What are the validity criteria of a digital currency validator?
After the voting process, the selected validator is introduced to propose a new network block. According to the rules of the blockchain network system, the selected validators are called proposers. The more shares or digital capital a validator has, the higher his chances of being selected as a bidder.
In general, the responsibilities of validators in PoS-based blockchain networks include these two things:
- Always run the correct version of the software using network servers and keep private keys in a safe place.
- By voting on every proposal and actively participating in the network, contribute to the administration of the system and ensure its security.
If a validator does not consider honesty in his decisions or is not proactive, he will be penalized. The most common penalties for incorrect validators are:
Slashing: An operation in which a certain percentage of the validator’s shares are wasted and his shares are reduced.
Loss of authentication power: In this situation, the validators are limited to the use of the validator’s personal authority and are deprived of the rest of their rights, such as making decisions or voting.
Loss of credibility and reputation: In this punishment, the validator will lose his reputation and credibility in the network, and his voting chances will decrease by two thirds. When the validator loses his reputation, his chance of being selected as a proposer drops to zero.
Loss of voting rights: Incorrect and unprofessional behavior of validators will cause their right to vote to be revoked for a short period of time or even forever by system moderators.
Inability to propose new blocks: Sometimes, the validator is penalized by losing the power to propose new blocks.
Permanent blocking: In the worst case, if the validator commits gross mistakes (such as fraudulent behavior), his access to the network will be permanently lost and blocked. This is despite the fact that after the credit meter is blocked, all his shares will be lost.
The role of validators in securing blockchain data
Data validation is a process to check the correctness, consistency and quality of data or information of a blockchain. In this process, again, a validator takes the responsibility to ensure that all important information such as specific texts, digital wallet addresses, dates, and more are completely secure.
Data and information form the basis of all the application methods in blockchain networks. For example, in the Web3 technology space, the effective presence of information and data can be clearly seen to improve the performance of developers, to improve the knowledge of analysts and participants in blockchain networks. In the meantime, the presence of the validator is very important to prevent any errors, inconsistencies and jeopardizing the integrity of the cryptocurrency project.
What are the challenges of validation in cryptocurrency?
Due to the fact that the implementation of important inter-network processes and intra-network transactions of blockchains requires data validation and synchronization, challenges arise in this regard. Validation for a validator is more complicated than what you are reading right now. The easiest way to properly implement validation in blockchain networks is to use a centralized server in such a way that only one entity is at the top of the decision. This method helps to improve network performance and increase its speed and eliminates the need for consensus throughout the system.
Despite all this, the centralized system in validation also has significant gaps that cause errors and abuse. On the other hand, if the validation process is centralized, it means that there is no incentive for others to act as validators. In addition, such conditions create the basis for information hacking and full control of the system by hackers. In general, if hackers take more than 50% of the entire system, they can surround the network; This happened in the world of cryptocurrency terms with the title 51% attack (%51 attack) is known.
If the blockchain network, which consists of different nodes, prevents the occurrence of validation errors and any bias of the validator, the field of activity of hackers will be eliminated. In general, the most important thing about the activity of validators is that they do not do any illegal activities and do not get punished even once.
Validation, staking and high earning
The concept of validator is one of the most important definitions of digital currency staking transactions. The responsibility of a validator in blockchain networks based on the PoS algorithm is to secure the network, approve new blocks, and participate in voting on proposals made by other validators. By identifying the definitions and principles of validators’ activities, one can become a successful validator and achieve significant profit by investing in digital currency staking.
What do you think about validation in blockchain networks based on the PoS mechanism? Do you want to work as a validator in the cryptocurrency world and earn money?
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