This section introduces the concept of staking and outlines how staking works in the CUDOS platform.
# What is staking
Staking is the process of locking some coins or tokens to support a blockchain app or network. More precisely, it usually involves sending tokens from a wallet to a staking smart contract, in order to receive rewards for the support provided to the network receiving the stake.
# Proof of Stake
Staking allows for a good alternative to the PoW consensus mechanism. Instead of having a very costly computational task to perform, PoS achieves consensus by having only a few nodes validate each block. These nodes are typically selected using probability algorithms that give a higher chance to the nodes holding (staking) more coins in the network, among other factors.
While the exact rules depend on each implementation of this algorithm, the system is generally much more efficient than PoW, and thus it scales much better. In terms of security it is also very robust, as for example a 51% attack in this case would imply a single malicious entity controlling over half of the total amount of that currency.
Furthermore, all participants are incentivized to keep a healthy platform running, as they have “skin in the game”. This system has gained popularity in the last few years, and Ethereum is moving towards Ethereum 2.0, which will implement PoS using sharding.
# How to stake
Staking will be available both via staking providers and directly in the CUDOS network. The staking process through a staking provider can be done directly through each interface provided by each different staking provider, and CUDOS will soon be releasing an interface to stake tokens directly with instructions to be found on this page.
# Becoming a validator
Validator nodes are essential for the CUDOS network. They are the bridges connecting the layer 1 blockchain and the CUDOS smart contracts with the external world, and as such they constitute the backbone of the network. This contribution is rewarded accordingly, for powering the network and allowing it to exist.
Becoming a validator early on is beneficial for all sides: the CUDOS network gets extra security and functionality, and the validators will enjoy a head start on building a trust score, over other nodes that join later the network. Please get in touch with us using this application form (opens new window) if you’re interested in becoming a validator.
# Becoming a staking delegator
Please get in touch with us using this application form (opens new window) form if you’re interested in the staking delegation.
# Automated staking
Nodes in the CUDOS network can stake tokens to receive compute tasks from the blockchain. Similarly, in Cudo’s layer 3 platform workers need to stake in order to receive compute jobs as well. The higher the stake, the more valuable jobs can be run.
CUDOS nodes need to stake 2,000,000 CUDOS in order to qualify to become one, however beyond that, and all workers in the Cudo platform do not need to pre-purchase any tokens initially to use the platform and use tokens. All workers can start by mining cryptocurrency using Cudo’s application, and choose to automatically stake as CUDOS the rewards for the work.
# Staking rewards
CUDOS validators nodes earn rewards for their contribution to the network. These rewards are calculated based on the staking each node has, and are proportional to the amount of nodes in the network. While the exact formulas and numbers will be made public shortly, CUDOS is aiming to provide around an 8% rate when 70% of the circulating tokens are staked, with higher rewards when the percentage staked is lower, and lower rewards when it is higher.