▶️Staking in Proof-of-Stake Blockchain Protocols


In proof-of-stake (PoS) blockchain protocols, network security is achieved by allowing token holders to lock up, or "stake," their assets in exchange for staking rewards. The locking of assets helps protect the chain against certain types of attacks. While beneficial for security, this mechanism also prevents the staked capital from being utilized for other purposes, such as participating in decentralized finance (DeFi).

Validators and Delegators

Most PoS blockchains, including those based on the Cosmos SDK, involve two main parties in the staking process: validators and delegators.

  • Validators: Validators are responsible for maintaining server infrastructure and operating software to propose and validate blocks on the chain, working in consensus with other validators.

  • Delegators: Delegators provide a security deposit in the form of the chain's native staking token to prevent misbehavior by validator operators. In the event of misconduct (accidental or malicious), a portion of the staked deposit is burned or "slashed" as a penalty. The penalty can range from 0.1% for persistent downtime to 5% for a double-signing violation (where a validator signs more than once for a given block height).

Staking Rewards and Commissions

As compensation for providing the security deposit, delegators earn staking rewards proportional to the value of their staked assets for each validated block. Validators charge a commission on these rewards in return for providing the validator service.

Unbonding Period

Several PoS consensus algorithms, including Tendermint consensus, implement an unbonding period during which staked assets remain locked, typically ranging from 14 to 28 days. The purpose of the unbonding period is to mitigate the nothing at stake problem, where "participants have nothing to lose by contributing to multiple blockchain forks."

Validator Incentives

Since validators earn commission on block rewards proportional to their delegated stake, it is in their best interest to ensure proper and efficient behavior in validating the chain.

Current Limitations

On most Cosmos SDK chains, delegators may face a maximum penalty of 5% of their staked assets, resulting in 95 percent of capital being illiquid and unutilized. Quicksilver aims to solve this inefficiency.

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