Blockdaemon Guides - Polkadot NPoS

Introduction to NPoS

Polkadot operates on a Nominated Proof of Stake (NPoS) consensus mechanism, which has gained prominence within the blockchain space for its inclusiveness, scalability, and environmental sustainability. The key parties in this mechanism are validators and nominators, both of whom play essential roles in ensuring the network's security and functionality.

Role of Validators

Validators are crucial to the operation of the Polkadot ecosystem. They:

Process transactions for all parachains on the network.
Build reputations by maintaining good performance and behaving honestly.
Commit stake to the system, pledging that they will behave responsibly, with their own DOT tokens acting as collateral for good behavior.

Validators are rewarded with the native DOT token for participating in consensus and minting blocks. These rewards can be traded or exchanged for other currencies, providing financial incentives for validators to act honestly and efficiently.

Role of Nominators

Nominators, on the other hand, are DOT token holders who do not directly validate blocks but play a key role by:

Nominating trusted validators to produce blocks.
Allocating stake to their selected validators, with the understanding that they will share in the block rewards if the validator they selected is chosen to produce a block.

Each nominator can submit a list of up to 16 validators they support with their stake. The reward distribution remains constant across all validators, meaning validators with fewer nominators can offer higher rewards to their nominators. This system encourages nominators to diversify their support across multiple smaller validators, promoting decentralization.

Block Reward Distribution

The block reward for validators is the same for all, regardless of their stake. However, validators with fewer nominators will be able to distribute higher rewards per nominator, creating an incentive to support smaller validators. This reward structure helps spread nominations more widely among validators, reducing the concentration of power in a few large validators.

Validator Selection Process

Validators are selected to participate in block production through an era-based election process. Each era lasts 4 hours, and validators with the highest amount of stake delegated to them are selected for the active set to mint blocks. Every validator's goal is to be included in this active set, as only these validators participate in block production.

Proportional Representation and Equal Voting Power

Polkadot aims for proportional justified representation in the selection of validators. This ensures that no validators or their nominators are over or under-represented in the consensus process. To achieve this, elected validators are granted equal voting power in the consensus protocol, meaning each validator's vote is weighted equally when deciding on network consensus.

Party	Role	Responsibilities
Validators	Block producers	Maintain performance, process transactions, commit stake for good behavior
Nominators	Supporters	Nominate validators, allocate stake to them, share in rewards
Rewards	Distribution	Equal rewards to validators, higher reward per nominator for smaller validators

Joining the Network

Validators can participate by running their own validator node. While running a validator node requires technical expertise, there are no specific requirements to become a nominator.
Nominators can join the network by simply supporting validators with their stake, without the need for technical skills.

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Info

For more information on NPoS equal voting power, refer to the official Polkadot documentation.