In the previous article we metioned that for audit one to function properly as a validator 3 key considerations must take into account which are
- Tokens to stake on the PoS Network
- Recognizing the financial implications of running a node
Keeping the validator seat clean
As a Validator, Audit.One is responsible for keeping the processes operating by:
- Adopting the Service Level Agreements
- Recognizing market trends
Adopting the Service Level Objectives
There is no slashing for downtime, as previously stated. To avoid being booted out, any new release of the node should be locally tested and delivered with as few disruptions as possible. Investing in infrastructure-as-code can boost productivity and profitability while also simplifying maintenance. Audit.One’s operations will require an incident/response strategy, in addition to routine maintenance, to quickly fix any infrastructure failures or emergency updates.
Recognizing market trends
Validators for PoS Networks are affected by market and game-theory dynamics, such as:
1. The total number of tokens at risk in the Network
2. The stakes allocation among validators
3. Fees for transactions and inflation
The total number of tokens at risk in the Network: Consider the NEAR Protocol environment as an example (Audit.One is a validator on the NEAR Protocol ecosystem): every year, NEAR mints 5% new tokens, of which 10% go to the treasury and the rest is distributed between validators. As a result, in the first year, the 1 billion NEAR original supply will generate around 45 million tokens (4.5 percent of 1 billion) in stake rewards.
Regardless of the total amount at stake, the prize is fixed:
- Staking 100 million $NEAR tokens (10 percent of 1 billion) will reward the network with a nominal return of 45 percent (45 million NEAR for a stake of 100 million), incentivizing more staking.
- On the other side, a big stake of 720 million $NEAR (72 percent of 1 billion) will yield 6.25 percent in incentives (45 million NEAR for a stake of 720 million), leading to the network unlocking some $NEAR tokens and allowing them to be used in other applications.
It’s also worth noting that at the conclusion of each period, the NEAR Protocol automatically re-stakes with the validator rewards. If the validator / staking contract does not withdraw the staked amount, it will continue to rise.
The stakes allocation among validators: PoS Networks assign seats to validators for the following period at the end of each period: the calculation is based on the proposal in the corresponding token and the total number of seats available.
Validators (in this case, Audit.One) can reliably estimate the stake in the corresponding token per each seat by watching the proposals.
The price of a seat in these proposals is established by finding an integer number that, when divided by each validator’s stake and rounded down, yields the appropriate number of seats. This determines who will receive their seat(s) and who will receive a refund of their payments.
Divide the money at stake by the number of seats to get the seat price for the current time.
Fees for transactions and inflation: Validators are essential to any ledger because they collect transactions, arrange them, compute new state (through smart contracts), and offer data to other system participants.
In the Proof-of-Stake architecture, the system’s security and Sybil resistance are supplied by the “staking” mechanism, which requires validators to be Token Holders with a balance on their account.
Validators must also be online because they are chosen for a specific period of time. Audit.One is only necessary to be online over a certain threshold online Threshold in this architecture.