Vara’s Nomination Pools Unveiled: Staking, Slashing and More
Nomination pools represent a pivotal aspect within proof-of-stake blockchain protocols. They empower users to collectively pool their tokens on-chain, enabling them to nominate validators and benefit from a healthy network. Nomination pools improve a system’s scalability through its functions.
Here are points to note about nomination pools:
- They allow members who want to participate in the staking system with a stake much lower than the minimum active nomination threshold on the network.
- Nomination pools allow members to pool their funds and act as a single nominator account.
- Members in the pool receive benefits proportionate to their stake in the bonded pool, ensuring equal staking benefits as nominators. Importantly, any slashes also affect actively bonded members proportionally.
More members participate in network governance and decision-making through nomination pools. And that is the case with Vara.
Understanding Nomination Pools in Vara
Vara Network employs a dependable and automated inclusive Nominated Proof-of-Stake (NPoS) mechanism for choosing validators in its consensus protocol. Validators are selected based on their stakes and the funds nominated by other token holders, which promotes a selection process that is more democratic and decentralized. The NPoS mechanism mitigates the risk of centralization, ensuring that the validation role is not exclusive to the wealthiest entities.
Key Components of the Nomination Pool
- Bonded Pool: Tracks the distribution of actively staked funds.
- Reward Pool: Tracks rewards earned by actively staked funds.
- Unbonding Sub Pools: Collection of pools at different phases (i.e. eras) of the unbonding lifecycle.
- Members: Accounts that nominate to the pools.
So, how does one join a pool?
Vara Nomination Pool Membership
A member transfers funds to the pool’s bonded account to join a Vara pool. Additional bonding or re-staking of rewards is allowed for actively bonded members. Members may only belong to one pool at a time, with the minimum bond to join a pool as 1* VARA.
Note:
Funds nominated to a pool won’t be visible in the member’s account balance on Vara, as they are transferred to the pool’s system account, and are inaccessible to anyone except the pool’s internal logic.
On using Proxy Accounts:
Participation in nomination pools requires non-transfer proxies or nomination pools proxies. Staking proxies are not applicable as they can’t make calls to the nomination pools pallet.
The Benefits of Nomination Pools
Vara pool members can claim their share of accumulated benefits since their last claim or joining era. Rewards are distributed proportionally among actively bonded members.
Pool members can set permissions for others to claim or compound rewards on their behalf. Options include default, compound, withdraw, or both.
The Vara Nomination Pool Lifecycle
Slashing in Nomination Pools
If a staking system slashes a pool’s underlying nomination account, the slash is distributed evenly across the bonded pool and unbonding pools in the specified eras. This affects members either unbonding or actively bonded during the slash era+1 through the slash apply era. Members face proportional slashes based on their stake relative to the total slash amount.
Unbonding pools must undergo slashing to penalize nominators associated with the bonded pool supporting a validator who committed an offense. This prevents nominators from unbonding right after a validator misbehaves without consequences. Although this strategy might seem unfair to members joining after a slash, it encourages quick unbonding for security reasons.
The Difference Between Nominating vs Joining a Pool
Nominating involves actively choosing validators, monitoring their behavior, and ensuring they act in the network’s best interests. Nomination requires a minimum of 50 VARA and rewards require a balance exceeding the minimum active bond. The minimum active bond may render your nomination inactive if it exceeds your bonded balance. Stake a balance above the minimum active bond to earn rewards while nominating.
Nomination pools allow the community to join the staking process in Vara with as little as 1 Vara and receive rewards. These pools differ from services provided by centralized exchanges in the following ways:
- Nomination pools give full control over the staked VARA.
- They are open to every Vara community member.
- The Vara community manages operations in the nomination pools, not a single organization.
Ensure the pool aligns with your preferences before joining, as it involves trusting the pool operator. Regularly check the nominated validators and consider changing pools if needed.
