The CUDOS Validator Network Explained

Presently, there is an evolution in the blockchain industry that is lowering prices, increasing speed and replacing the high-energy consumption negatively associated with blockchain and cryptocurrency. This inevitable evolution is called Proof-of-Stake (PoS) and it’s quite the big deal. Below, We’ll briefly explain how the Cudos PoS network is run by independently-operated validator nodes and the benefits that includes for the operator (aka. Service provider).

Bitcoin and Ethereum, the two largest blockchain networks in both size and adoption currently use a consensus mechanism called Proof-of-Work (PoW). These networks have grown to millions of nodes, ‘working’ as hard as they can to validate the next block on the blockchain. As a reward, they are paid in BTC or ETH respectively. PoW has enabled these two networks to achieve recognized decentralization as well as secure their respective networks. To manipulate a PoW network, a bad actor would require 51% of the total network hash rate — the term given to the total combined computational power of the network. The downside? These networks consume an unprecedented amount of electricity, and by design, will only ever increase in their energy consumption.

Proof-of-Stake (PoS) was first suggested back in 2012, but has only recently within the last few years been adopted as a suitable alternative to PoW. PoS means that a token holder stakes their tokens for a chance to validate the next block, instead of adding as much computing power as possible to increase the chance of validating the next block. The outcome being a significantly more efficient use of both electricity and hardware.

Because blockchain is a decentralized technology the network is governed by code and community, rather than a central organization or government, and therefore a PoS network requires independent operators to host a node. Depending on the protocol it’s built upon, the number of nodes on a validator network can vary. Cudos is built upon the Tendermint protocol, which has a current recommended limit of 100 validator nodes. Each node plays an important part in the security and uptime of the network and also the validation of computing tasks being completed (aka. reaching consensus). The data is then recorded on the blockchain as a permanent record.

Yes, a high percentage of new blockchain projects (and older initiatives through conversion) are now using PoS as the preferred consensus mechanism. Blocks can be validated with far fewer nodes than a PoW network, it is not only more energy-efficient, it also provides higher scalability and significantly reduced network fees for data being moved around.

PoS networks are driving a new type of service provider marketed as Staking-as-a-Service, who specifically run nodes for PoS projects, marketing to their target audience and charging a commission for token holders of that project who delegate their stake to the service providers validator node. Companies like Staked, Stake.fish, Staking Facilities and many others are driving this Web3 phenomenon forwards with much higher earning potential per node.

More recently, traditional cloud service providers are moving into the space as they are often hosting the Staking-as-a-Service providers nodes, becoming ever more aware of the innovation within the blockchain industry and the financial opportunity that it presents.

A validator for the Cudos network will earn in a multitude of ways:

  • Staking rewards: similar to interest in traditional finance terms, a validator will receive rewards based on a variable APR
  • Staking bonuses: an accelerator of up to 100% of rewards earned based on term length and network staking amounts
  • Commission: the validator is able to set their own commission percentage for those token holders delegating their stake to the validators node. This is typically up to 10%
  • Network transactions: All stakers receive a proportionate share of the network’s transaction revenue. The more you stake, the more you earn and as a validator, you are earning commission from those delegating their stake to your node
  • Compute fees: Cudos will mainly be a computing platform built on a PoS blockchain network. As such, a large proportion of the network usage will be generated by general compute demand and execution

Cloud is transitioning. Innovation is inevitable. By being a Cudos validator, service providers will be on the leading edge of innovation in providing decentralized cloud and compute technology.

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