How Does the “Staking” Mechanism in PoS Create New Economic Incentives for Validators?
Staking requires validators to lock up a significant amount of the native cryptocurrency as collateral. This collateral acts as a security deposit, aligning the validator's economic interest with the network's health.
The validator is rewarded with newly minted tokens and transaction fees (including MEV) for proposing and attesting to blocks. Conversely, they can be penalized (slashed) for malicious behavior, such as double-signing or downtime.
Glossar
Validators
Role ⎊ Validators are the network participants, typically in Proof-of-Stake systems, responsible for verifying the correctness of new transactions and proposing new blocks to be added to the blockchain ledger.
Native Cryptocurrency
Foundation ⎊ The consensus mechanism underpinning the native cryptocurrency dictates the baseline energy consumption for the entire network, setting the ecological context for all derivative and financial activity built upon it.
Incentives
Motivation ⎊ The concept of incentives, within the context of cryptocurrency, options trading, and financial derivatives, fundamentally describes the drivers influencing participant behavior.