In DeFi, staking has gained popularity since it allows you to profit from your crypto without much hassle. But staking goes beyond that—it contributes to the network’s safety and decentralization, ensuring no one has too much control. Staking involves locking up your coins for a predetermined time to improve the related blockchain network's overall security and functionality.
Selecting the right staking validator is a crucial decision for anyone looking to maximize their rewards while maintaining the security and integrity of the blockchain network. Whether you're staking tokens on networks like Cosmos, TRON, or Solana, you chosen validator can directly impact your returns.
In this guide, we navigate the essential factors to consider when picking a reliable staking validator, especially when staking huge sums in Tangem Wallet. Let's first review the definition of Proof-of-Stake and the operation of a staking validator.
What is a staking validator?
A staking validator is a critical participant in Proof-of-Stake (PoS) and Delegated Proof-of-Stake (DPoS) blockchain networks. Validators are responsible for verifying transactions, adding new blocks to the blockchain, and ensuring the network’s security and stability. To become a validator, individuals or entities must stake a certain amount of the network's native cryptocurrency, which serves as collateral and ensures their commitment to the network’s integrity.
Validators secure the network and earn rewards for their services through newly minted tokens or transaction fees. Token holders who don’t want to run their own validator can delegate their tokens to existing validators, allowing them to participate in staking and earn a share of the rewards. Delegation is a key feature of PoS networks, as it enables broader participation in securing the network without requiring extensive technical knowledge or resources.
However, validators can face penalties if they act maliciously or fail to meet network requirements. A process known as "slashing" can result in the loss of staked funds for both the validator and their delegators. Therefore, choosing a reliable validator with a good track record is essential to maximizing rewards and minimizing risks. Validators are fundamental to the decentralization and functionality of PoS networks, making their role vital to the blockchain ecosystem.
What to look for in a staking validator
When selecting a Proof-of-Stake (PoS) validator, numerous important factors must be considered. These qualities assist you in making an informed selection and getting the most out of your staking experience. A good staking validator is critical for ensuring a blockchain network's security, decentralization, and efficiency. Here are the key factors that make a good validator:
High uptime and reliability
Validators must maintain near 100% uptime to maximize rewards and ensure the network operates smoothly. Downtime can result in missed rewards or penalties, so reliable performance is essential.
Low commission fees
Validators charge commission fees on the rewards they distribute to stakers. A lower commission rate means more rewards for stakers, but this should be balanced with the validator’s operational costs and quality of service.Security and infrastructure
Validators should have robust security measures, such as redundancy, backup nodes, and protection against hacking or malicious attacks. Strong infrastructure ensures the validator can handle network demands and remain resilient in failures.Reputation and track record
A validator's performance history, uptime, and behavior in the network are important. Validators with a good track record of transparency and ethical behavior build trust within the community.Decentralization support
Choosing validators that promote decentralization (instead of large, centralized ones) helps maintain the network's health. Smaller or community-oriented validators often contribute to a more distributed, secure system.Active participation in governance
Validators often participate in governance decisions for blockchain networks. Good validators are actively involved in governance and align with the interests of the network and their delegators.Low slashing risk
Validators should have a low history of slashing, which occurs when they engage in malicious behavior or fail to meet network requirements. A reliable validator minimizes this risk, protecting stakers from losing their funds.
These factors can help you can select a validator that balances performance, security, and contribution to network health, ensuring a positive staking experience.
Penalties for validators
If a validator is penalized, their collateral or staked tokens are frozen for a predetermined time. During this locked time, access to these tokens is not possible. As a result of bad behavior, penalties are applied and might vary in severity. This has a direct impact on the total revenues of the validator, which impacts the staking returns.
Penalties typically only affect the rewards obtained—not the initial stake amount. The staked sum is unaffected, and your tokens are still there. This guarantees that your initial investment is safe, even with fines. StakeKit—Tangem' native staking provider—covers any losses incurred due to penalties for slashing and node downtimes.
How long does it take to stake with a validator?
You can start staking with them as soon as you delegate your tokens to that validator and the warmup period is over. It's that simple. Most blockchains have the warmup and unbonding period during which you won't earn any rewards on your staked tokens.
Conclusion
Validators who stake their claims are essential participants in the blockchain ecosystem. These guardians ensure the security and accuracy of transactions on the blockchain. In a Proof-of-Stake (PoS) system, they verify transactions by locking up their tokens, which enables them to receive incentives and enhances network reliability. Factors such as reputation, governance alignment, and security are crucial when choosing a staking validator. It is important to consider each of these aspects when selecting a validator. Choosing the right validator can help reduce your risks and provide a greater sense of security.