Validators
What is a Validator?
Validators are network participants who verify transactions and add new blocks to a blockchain in order to ensure that a blockchain’s data isn’t corrupted. Proof of Stake blockchains like Umee rely on validators to keep the network operational, decentralized, and secure.
Validators operate “validator nodes,” devices that permit a blockchain to reach consensus in a decentralized manner and thus make up the foundation of a blockchain. Every validator node stores a copy of the data on the blockchain so there is no centralized point of failure.
Validator Incentives
In order to run a validator node on a Proof of Stake blockchain, validators must provide a blockchain’s native cryptocurrency as collateral as part of a Proof of Stake blockchain's security mechanism. Validators are selected to propose a new block (the new data to be added to a blockchain) based on the amount of collateral they post, which means that the validators with the most to lose have more influence than the validators with smaller stakes. When validators successfully add a new block to a blockchain they earn “block rewards,” or newly minted units of crypto used as an economic incentive to motivate validators to run and secure the decentralized network. Currently, some blockchains are experimenting with different economic incentives (e.g. redistributing protocol revenue) to incentivize validators.
In order to run a validator node on large blockchains a significant amount of collateral is required. Validators rarely post all of the collateral themselves, but rather work with a community of stakers to accumulate a large stake. When token holders on blockchains like Umee stake their tokens they are “delegating” them to a validator, and thus contributing to the validator’s total stake. Delegating allows users who don’t know how to operate validator nodes to contribute to the security of a network and earn a portion of the block rewards. Stakers maintain custody over their tokens while they are delegated to a validator, and are free to unstake or redelegate to another validator at any time. When validators earn block rewards, the block rewards are typically redistributed to all of the users who contribute to their stake in proportion to the amount contributed. In return for the services provided, validators typically charge a small commission (5-10%) of staking rewards in order to fund their operations.
Since validators need to post significant collateral in order to participate in a blockchain’s consensus, they are financially incentivized to properly verify the data being added to the blockchain. Validators who fail to keep their validator nodes operational are penalized through “slashing” or having a portion of their total stake removed. Slashing rarely occurs since validators are financially incentivized to do their job.
