Nominators

November 21, 2023 - Around 3 mins mins to read

Understanding Nominators in Blockchain Networks

Nominators are crucial participants in blockchain networks that utilize the nominated proof-of-stake (NPoS) consensus algorithm. Alongside validators, they play a vital role in maintaining the operations of the network.

In traditional proof-of-stake (PoS) networks, an entity’s mining or validation power is determined by the number of network tokens they possess. The more tokens they hold, the greater their mining power. This power is also utilized in governance functions, where validators vote on proposals for the network’s future development.

However, not all validators or miners actively exercise their voting power in every decision-making event. This can be due to various reasons, such as unavailability or a lack of understanding of the technical considerations involved.

To address this issue, a variation of PoS called NPoS was introduced. NPoS involves the selection or nomination of validators who are allowed to participate in the consensus protocol. This variation is commonly used in Substrate-based blockchains like Polkadot and Kusama.

Both validators and nominators play significant roles in NPoS.

The Relationship Between Validators and Nominators

Validators are responsible for securing the network and maintaining its services by producing new blocks and validating parachain blocks. They continuously operate using the network’s native tokens as backing and incentives for following the protocol’s rules. Failure to comply with the rules results in penalties, while adherence leads to a share of the fees generated by the network’s services.

In NPoS, validators must be elected to participate in each active set, which is a defined period of time that typically increases as block heights progress. This is where nominators come into play.

Nominators are also token owners who, for various reasons, do not actively participate in the consensus process. Instead, they use their tokens to nominate validators of their choice for active slots. Nominators are motivated by the opportunity to earn a share of the rewards received by their nominated validators in active slots. Similar to validators, they must adhere to the protocol rules to avoid penalties.

Validators are assigned active slots based on the proportion of nominations they receive. Therefore, validators with more nominations and a higher token value backing them have a greater chance of being elected into the next active set.

Ensuring Fair Representation

Since rewards are distributed proportionally to a validator’s overall stake, nominators can earn higher rewards by nominating less-established validators with smaller stakes. This incentivizes nominators to seek out a diverse group of validators instead of repeatedly nominating the same ones.

On the other hand, misbehaving validators face penalties, which reduces rewards for nominators. This encourages nominators to conduct due diligence on validators and choose those who exhibit good behavior.

Through these mechanisms, NPoS enhances the decentralization of blockchain networks by maximizing decision-making power while maintaining fairness through proportional and justified representation.

Author:

PlasmaFinance is a DeFi dashboard that aggregates popular decentralized finance protocols from multiple blockchains. The platform offers comprehensive analytics, user-friendly tools, and access to profitable DeFi yields across various protocols.

PlasmaFinance includes a range of DeFi products, including its own PlasmaSwap DEX, advanced trading and gas optimization tools, a fiat on/off ramp for DeFi, and an IDO launchpad called SpacePort.

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