A newbies guide to the world of Proof-of-Stake Blockchain’s Staking terminologies
The Village Trades
Back in the days, village councils may wish to make a record of what trades are occurring within their village, or with other villages. What are the trading activities and for what sort of goods? The village council simply cannot keep track of everything. Hence they elect noblemen to help be the bookkeepers of the commerce within their village.
Noblemen
All the capable noblemen are summoned, to take turns to be responsible to taking care of the accounts of a ledger book of the daily village trades. The announcement proclaims that for any nobleman who takes his turn to handle the books, and properly records all trades, verified by all other noblemen, everyone will be rewarded a daily commission for their effort.
Most noblemen decide to participate. How does the town council select which noblemen to handle the books then?
Vouching
The noblemen are then asked to present themselves and their plans on doing the work judiciously and with honor to the entire village. All the villagers, including noblemen and the town council, will then “vouch” for which nobleman to handle the books — by placing in a stake of one’s own treasuries to be assigned to the noblemen of their choice. Not everyone need to vouch for a noblemen, nor vouch with ones entire treasury, but there’s an incentive in doing so.
Incentives
To those that risks their treasury through these “vouches” or “delegations”, the town council decides to reward a fixed daily amount to all delegators whenever their noblemen are selected to perform the bookkeeping properly, or if they helped verify the work. The more one delegates, the higher portion of rewards goes to them.
The Catch
There’s a catch. The delegators risk losing part of their treasury if the noblemen chosen acts maliciously or records wrong entries, since the ledger entries are verified by all other noblemen. This penalty means that all villagers that are delegating must choose their noblemen wisely.
Selection
The first day arrives. Which noblemen gets to go first? In some villages, a select few noblemen are randomly chosen at the start of every day, with a dice roll. Other villages may pre-select, say on a weekly basis, the list of noblemen to handle the ledger for the rest of the week. In most villages, the noblemen that received higher amounts of treasuries vouched to their name will have equally higher chances of being selected on a daily or weekly basis.
Bookkeeping
Imagine each “day” in the village, noblemen will record a page on the ledger for all the trades which occurred. No other trades can be done if the page is full. Also, a majority of noblemen must sign off on the day’s trades, and in most villages, a two thirds majority is needed.
Summary
To summarize the above:
- The “noblemen” handling the ledger books are “validators”. Validators are network operators of the blockchain.
- The act of vouching their treasuries is an act of “staking” or “delegating”, hence villagers are “stakers” or “delegators”.
- Each page on the ledger is a “block” in a blockchain. When the block is full, transactions will need to wait for the next block.
- The reward distributed to noblemen (validators) are “commissions”, and the commission rate is pre-determined by the validators.
I hope you’ve enjoyed this illustration. These are just some of the common terminologies and mechanisms behind Proof-of-Stake blockchain. If you wish to find out more, please reach out below
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