What is Staking and why is important for Cartesi investors?
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If you’re into the rabbit hole of crypto you may have heard of that buzz word… ‘staking’, if not or you don’t know what’s all about, we’ll try to explain it in this article in a simple manner.
As you may know crypto is based on the Blockchain technology (that elistist computer engineering term…), in brief, it is a decentralized database made of blocks that are chained to one another sequentially…anyway, it’s a decentralized database to store data in a secure manner. For that blockchain database to work in a decentralized way, a network of computers is needed.
Decentralized? As oposed to a normal database (centralized) where just one computer is needed to operate the database, in a decentralized database a network of computers is needed, these computers are talking to each other and reaching agreements to store and update the data in the database (decentralization is a broad topic that we’re not treating in this article).
The important thing about this decentralized database is that those computers that are part of the network, need to reach agreements. These agreements are made following a set of predefined rules, established by the network itself, these rules are what those freaky engineers call a consensus algorithm. In simple words, a consensus algorithm is a program that runs inside the blockchain network and rules how the computers of the network reach agreements between them.
As nerdy engineers spend a lot of time doing nerdy things, they’ve designed several consensus algorithms that can rule these agreements inside a blockchain. You may have heard of: Proof of Work (PoW), Proof of Stake (PoS), Proof of History (PoH), Proof of Reputation (PoR), … and many more to come. What you have to know about these consensus algorithms is that each blockchain network (Bitcoin, Ethereum, Solana, Cardano, Polkadot, or Cartesi) uses one of those to make the network secure, stable and resilient.
Umm, Proof of Stake, Stake, that buzz word again…let’s get into it.
Let’s define Stake as a stash/bag of tokens owned by a computer running in a blockchain network (a PoS), so each computer of the network has it’s own stash of tokens (Stake) and uses it to help run the network. In particular, the blockchain network is producing blocks to store new data in time intervals, so a new block with new data is mined, for example, each minute.
And what does this block mining thing has to do with the stake of each node?
Easy, the consensus algorithm chooses which computer of the network mines the new block based on the amount of stake it has, and gives that computer a reward in tokens for mining that block.
So in simple words, a Proof of Stake blockchain network assigns block producing to computers of the network based on how many tokens those have staked, and give them rewards for helping run the network.
There are many implications in this Proof of Stake consensus algorithm, but we’re not going into details about it in this article. So, that’s it!!
You’re now probably thinking, “Wait a moment! what do I have to do as a token holder in this Proof of Stake thing if computers are the ones with the stash/stake and the ones receiving the rewards?”.
Yes, there’s one more thing, the thing where we token holders come into play.
The computers of the network have a stash/bag of tokens that they put in to be part of the network, but they also allow token holders to delegate their tokens into the computer stash in exchange of receiving a portion of the rewards that the computer receives from the network for mining blocks. Again, being simple, you delegate your tokens to a computer of the network and receive rewards for it.
Why? because you’re helping run the network and you deserve being rewarded as anyone that helps with the task.
As you may have figured out, Cartesi uses this Proof of Stake consensus algorithm to run its network, so you have the possibility to delegate your CTSI tokens into computers of the Cartesi network (Staking Pools) to help run the network, and be rewarded for that.
If you want to delegate your CTSI tokens into a Pool validator you can check the Everstake post for a nice explanation, or our Cartesi delegation Spanish post for a detailed explanation in Spanish, and of course feel free to delegate into Blockscope Staking Pool.
There are serveral topics about Cartesi’s Proof of Stake details that will be discussed in future articles, but for now this article serves as a nice introduction to the world of crypto staking and explanation of some of its techy terms, such as blockchain, decentralization, consensus algorithms, delegation and block production and mining.
Hope this served you to understand better these terms that may be kind of complex depending on your knowledge background, and if you want to get more info about Cartesi staking, check the links we’re attaching below.
