Preamble
The fact that blockchain is a technology based on a decentralized approach is accepted and understood by everyone who has ever been interested in this topic. However, not everyone asks themselves the obvious question: if no one trusts anyone in a decentralized network, how is the authenticity of completed transactions ensured? In fact, this is a very important issue, since verifying the entry of data into the distributed registry is an important step in maintaining the functioning of the blockchain network. It is this verification that is carried out by special software nodes - validators. The node that is selected as a validator must have special software and also meet certain fairly stringent requirements. If any company is creating its own blockchain network, especially using proof-of-stake consensus, then as a first step it would be very useful to contact the specialists in this field. The company can receive not only professional advice or consulting, but also the practical implementation of blockchain tools, in particular the launch of Blockchain Validator Nodes.
Economic selection criterion
How to choose a validator if there are not two or three of them on the list, but a fairly large number. Obviously, when choosing, you must be guided by certain criteria that the validator must meet. The first criterion is economic and means the amount of commission for the validator. Let's remember that there is such a thing as inflation or, in other words, the number of new coins that are issued during the year. Let's see what this looks like in practice. For example, an analysis of a certain decentralized network showed that the inflation parameter is 14.15%, which means that for every current 100 coins, another 14 coins will be added next year, which will appear with each new block. Continuing to analyze this decentralized network, the user can see the difference between the parameters of coin inflation and network profitability: 14.15% and 19.6%, respectively. This happens because coin inflation is not distributed among absolutely all existing tokens, but only among those that are in the stake. It must be said that there is no set number of coins that should be in a stake; it all depends on the blockchain network itself and the level of stability of the consensus.
So, the coins of a participant in our conditional network are in a stake, which means that in a year he will have not 100, but 119 coins, which he is going to invest anywhere. At the same time, a validator node is deployed on this decentralized network, which verifies transactions and invests its money to maintain the infrastructure. Naturally, the validator, ensuring the vital activity of the network, must receive a reward for this, and this reward includes a commission from the profit that network participants receive from their staked coins. The amount of commission for services provided is determined by the validator himself, so different validators will have different commission amounts. That is, if the validator set a commission of 20%, then each user will only get 80% of their profit. The conclusion here is obvious - the higher the validator’s commission, the lower the profitability of the network participant. Therefore, this criterion is one of those that is considered first when choosing a validator.
Validator activity criterion
Practice has shown that not all validators are trustworthy; among them there are both “harmful” and “good” validators. “Harmful” validators do nothing for the development of the network, they work exclusively to realize their own interests and are often even a negative factor both for the network itself and for its participants. In contrast, “good” validators primarily care about the development of the network. They not only make a profit from the income of network participants, not only sell coins in order to pay for the maintenance of the infrastructure, but also ensure the security of the blockchain network, and also create various tools and applications to improve it.
If a network participant wants to delegate his coins to someone to increase his own profit, then it is better to choose for this purpose some “good” validator who constantly contributes to the development of his network. The fact is that the cost of the coin will be higher in a network that is constantly developing, improving its functionality and thereby bringing more profit to its participants. Figuratively speaking, delegating a network participant’s coins to a “good” validator means investing his money in his own investments.
When choosing a validator, you also need to be guided by another important point - whether it has compensation in case of slashing. If a validator does not participate in blocks acceptance during 10,000 blocks, the network defines the situation as slashing and imposes a penalty of 0.1%. If the validator compensates the delegator for this amount, then the problem is resolved. However, it is not the responsibility of the validator to compensate the delegator for the penalty, so when choosing a validator, the network participant must find out whether the latter will compensate him for the penalty in the event of a slash. However, if we compare the criteria for selecting a validator by their importance, then the participation of the validator in the development of the network is still a more important indicator than the economic one. You can find out about the activity of a particular validator by looking in the network at his “participation rate”.
