Delegated Proof of Stake (DPoS) is a Sybil protection mechanism invented by Dan Larimer and used by certain distributed ledgers, including Radix. In DPoS, holders can delegate their network tokens to validators in exchange for a share of the staking rewards. Usually, inclusion in the approved validator set is conditional upon token holdings.
Staking
Staking, in the context of distributed ledgers, involves participants of a blockchain network committing (or ‘staking’) a designated amount of the network's native tokens to support operations like transaction validation and consensus maintenance. This process is central to Proof of Stake (PoS) consensus algorithms, a contemporary alternative to the traditional Proof of Work (PoW) systems.
Benefits
- Validators receive rewards for staking, typically in the form of new coins or transaction fees. These are often termed ‘staking rewards.’
- Staking enhances blockchain security, decentralization, and energy efficiency.
Challenges
- Possibility of network control centralization amongst significant stakeholders.
- Risks of losing staked coins due to network attacks or validator misconduct.
- The network's security is reliant on a high Nakamoto Coefficient (the smallest number of nodes that could disrupt the network).
Radix and Staking
Radix uses a specialized staking mechanism to fortify its network's integrity and security.
Staking Mechanisms
- Radix mandates nodes to have a meaningful stake to deter malicious actors from gaining undue influence over the network.
- Staking rewards on Radix are distributed in proportion to the staked amount, encouraging network security.
DPoS (Delegated Proof of Stake) on Radix
- DPoS in Radix appoints validators responsible for adding new blocks and maintaining transactional integrity.
- Users can delegate tokens to particular validators, who subsequently share block rewards with them.
- Delegation on Radix involves "locking" tokens in trust of certain node operators, signaling trust rather than a physical transfer.
Staking Components & Validator Interaction
- In Radix's new staking model, users can stake and unstake XRD tokens to gain emission rewards.
- Upcoming dApps will interact with "validator components" via method function calls, akin to other components.
Understanding Staking Rewards
- Staking rewards in Radix are not listed as individual transactions every epoch. For verification, one has to contrast the staked amount initially and presently. Detailed information is accessible on radixscan.io.
Tax Implications
- In the U.S., only emission rewards are taxable events, treated as regular income.
- Tools such as staketracker.app, radixscan, and Koinly aid in tracking emissions and other related transactions. Always consult with a tax expert.
Detailed Staking Process on Radix
Eligibility and Procedure:
- Any XRD token holder can stake and gain emission rewards.
- Users stake tokens through the Radix Desktop Wallet, with a list of available validators on the Radix Explorer.
- After initiating staking, from the subsequent epoch, stakers earn emission rewards, which are then automatically re-staked.
- There's a 10-14 days delay for unstaking, serving as a security measure to detect and handle any malicious node activity. During this period, no rewards are earned.
Understanding $XRD Emissions:
- Emissions pertain to the creation of new XRD tokens as rewards, occurring at the conclusion of fixed intervals termed epochs.
- Approximately 300 million XRD tokens are minted as rewards each year.
- Emissions can be penalized if validators are lax in participating in consensus. This ensures stakers select efficient nodes and nodes maintain their efficiency.
- Each epoch's onset involves checking the total XRD staked to every validator, and based on this, 100 validators are chosen. Minted tokens at the epoch's end are distributed based on this list.
- Individual XRD Staker Emissions: Stakers receive a percentage of total emissions proportionate to their stake, reduced if the node they're staked to has penalties or fees.
- Validator Node-runner Emissions: Validators receive rewards based on their fee percentage and the total stake delegated to their node.
Example Calculation:
Example Calculation:
Earnings as a Validator:
- Potential validators must register their nodes, but only the top 100 nodes by staked amount are selected as validators.
- Validators not only earn from staking but also through specific validator fees.
Special Incentives:
Radix Tokens Jersey Limited (RTJL) offers a distinct "subsidy" for validator node-runners, which is sourced from a 600 million XRD token reserve set up at the network's inception. This is separate from the standard protocol.
Potential Risks
Delegating staking to validators isn't devoid of risks. The introduction of slashing mechanisms is expected to mitigate the risk of dishonest validators. Caution is vital, and the Radix team is actively working on mechanisms to prevent issues like front-running.
Guidelines:
Radix recommends the 5-by-5 rule: Distributing your stake across five dependable validators, each with less than 5% of the total stake.