Over-delegation and self-bond requirements for bakers and delegators in Tezos

Published in

Cryptium Labs

3 min readAug 3, 2018

Almost all websites¹ that rank bakers currently assume a self-bond requirement of 8.25% and decide whether a specific baker is over-delegated or not based on that.

However the self-bond requirement of 8.25% that everyone currently assumes, doesn’t apply yet and most decisions on over-delegation are currently simply wrong.

Instead of just leaving you hanging and claiming that I have now idea what I am talking about I’ll explain the formula and how to calculate whether someone is over-delegated or not.

How self-bond requirements are calculated

The rational of the economic and security model of Tezos states that at least 8.25% has to be slashable and at risk. There are two other variables which influence this number — “time” and “percentage of total supply staked”.

8.25% only applies after cycle 64, which is about 6 months after launch. Until cycle 64 it scales linearly from cycle 0. This means that at cycle 0 the self-bond requirement was 0.1375% and every further cycle adds another 0.1375%. For example, at cycle 11, the self-bond requirement is 1.51% (0.1375*11).

Furthermore, it is only 8.25% if 100% of the total XTZ supply are staked. The amount of staked XTZ is calculated by adding self-bonded and delegated XTZ. You can see the total amount of staked XTZ here and caculate it by multiplying the number of rolls by 10,000, since it’s 10k XTZ per roll. The total supply is 763,306,930 XTZ. If less than the total supply is staked than this linearly increases the self-bond requirement. For example, if 50% of XTZ is staked, the self-bond requirement is 16.5% (8.25/0.5). For the current cycle 11 the staked percentage is ~36% (278,360,000/763,306,930).

Practical example with our baker, Cryptium Labs

This can be seen as a shameless plug and it sort of is, but really I just wanted a concrete example. Chris, Awa and I are running Cryptium Labs, which is a PoS validator, and hence baker, based fully in Switzerland.

We are one of the few (probably only) baker that uses the Nano Ledger S Baking application to prevent double-signing on the secure element of the HSM instead of the host. Even if all our servers got compromised it would still be impossible for the attacker to cause us to double-sign.

We charge a small 10% fee and pay compounding interest on all delegation rewards.

Furthermore, we will increase our self-bond as more and more public delegation reaches us, since we want the least amount of XTZ at risk as possible.

Self-bond requirements for Cycle 11 for Cryptium Labs

Percentage of XTZ staked: 36% (278,360,000/763,306,930)

Time-based self-bond requirement: 1.51% (0.1375*11)

Baker (global) self-bond requirement: 4.19% (1.51/0.36)

Cryptium Labs self-bond: 20,000 XTZ

Cryptiun Labs delegation: 402,619 XTZ

Cryptium Labs staking balance: 422,619 XTZ

Cryptium Labs maxiumum delegation: 477,326 XTZ (20,000/0.0419)

This means that currently Cryptium Labs has a self-bond of 4.9% (20,000/402,619) and hence is not over-delegated. We could receive up to 477,326 XTZ in on-chain delegation.

At cycle 11 all bakers only need to have a self-bond of 4.19% before they are over-delegated.

Conclusion

I hope that this gives everyone, delegators and bakers, a better understanding of what the self-bond requirements are.

If you have any questions around delegation, baking, Tezos, Michelsson (the smart contracting language) or anything else related to Tezos, please feel free to connect with us.

Feedback and discussions are welcomed and encouraged.

To reach out to us:

Telegram: https://t.me/cryptiumlabs

Website: https://cryptium.ch

Tzscan: https://tzscan.io/tz1eEnQhbwf6trb8Q8mPb2RaPkNk2rN7BKi8

Twitter: https://twitter.com/cryptiumlabs

More info about Cryptium Labs’ Baker: