January 13, 2023

What is a Validator?

Proof of Stake blockchains like Umee rely on network participants called “validators” to keep the network operational, decentralized, and secure.
By AJ Scolaro
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What is a Validator?

Many people have heard of miners, or network participants who earn revenue in return for adding blocks to proof of work blockchains like Bitcoin. Miners allow Proof of Work blockchains to operate in a decentralized and secure manner. Most newer blockchains no longer use Proof of Work, and have transitioned to more customizable and environmentally friendly consensus mechanisms like Proof of Stake. Proof of Stake blockchains like Umee rely on network participants called “validators” to keep the network operational, decentralized, and secure. 

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. 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.

 

How Are Validators Incentivized?

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.

 

Validator Responsibilities

Securing the Network

First and foremost, validators are responsible for maintaining an active node which helps commit new blocks to a blockchain. Validators must ensure that their nodes remain online at all times and function as intended in order for the network to run smoothly. 

Actively Governing the Network

Strong active governance is crucial to the success of any network. As the industry continues to develop, changes need to be made in order for networks to adjust and grow. All stakers have the ability to vote on governance proposals to help shape the future of the network. While the democratization associated with blockchains provides an incredible opportunity for anyone to vote on various proposals, many users may not be familiar with issues at hand or have the time to regularly follow governance discussions.

In the real world several countries use representative democracies to address these issues. In a representative democracy, citizens elect representatives to handle the day to day decision making involved in governance processes. These representatives are expected to monitor the needs of the citizens who have elected them and closely follow governance proposals in order to vote in the best interests of their communities.

In the crypto world you can think of validators as representatives/elected officials, and stakers as citizens who elect these representatives.

Stakers have a vested interest in the network, and are expected to delegate their stake to validators who will actively participate in governance and vote in their best interests. This way if a staker is uninformed on a specific governance topic, or fails to vote on time, his/her vote will be inherited by the validators he/she has delegated to. These validators have a responsibility to stay informed and actively vote in the interest of the community members who delegate to them.

Adding Value to the Network

While active governance can help bring more value to a network, it should be seen as the bare minimum for validators. Since validators are earning a commission on staking rewards and profiting from securing the network, they also should be expected to contribute value to the network and the communities that support them.

There are a number of ways validators can help add value to a network, all of which involve being active members of the community. Validators should work with the community to identify areas they can help with, whether it be technical support, tooling, community support, education, marketing, partnerships, etc.

 

Delegator Responsibilities

There’s a lot to think about when selecting a validator to delegate your stake to. In order for a blockchain to remain decentralized and secure, it’s incredibly important that delegators support validators with lower amounts of voting power. If a network secured by 100 validators is optimally decentralized, each validator would have 1% of the total amount staked. So if a validator set has 100 active validators, delegators should delegate tokens to the validators who have less than 1% of the total amount staked in order to support the decentralization of a network. 

It’s a good idea to get to know a validator in order to make an informed decision before delegating. Community members should delegate to experienced validators that they are well aligned with, actively participate in governance, and contribute additional value to the network. Check out the list of Umee’s active validators here, and get to know them in the Umee Discord.

 

Take the Quiz

 

Badges serve as proof a user has completed the corresponding Umeeversity Quiz. Badge owners should not expect to receive any UMEE tokens or additional rewards.

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