What is Staking?
Staking means locking up some of your tokens in order to participate in a blockchain network's operation, increase its security, and earn some passive rewards.
Fetch is a public, decentralized blockchain network which uses proof-of-stake (PoS) as its consensus protocol. The operators of PoS-based networks, known as validators, must lock up some tokens in exchange for the right to earn rewards from their work.
There are certain conditions for becoming a validator, such as staking a minimum token amount. Users with lower amounts of tokens could still participate by delegating stake to a particular validator to earn a share of the rewards that they receive. Note that the more tokens locked up, the more decision power a validator has and thus the higher the chances of them earning rewards.
Benefits to the user¶
- Earn rewards: Validators in the Fetch network participate in the maintenance of network's operation and earn rewards for their work. As someone who staked tokens with validators, you are eligible to earn a share of their rewards. Note that your stake could also be slashed in case a validator misbehaves and acts against the network's protocol. Therefore, you must do your own research when choosing validators to stake your tokens with. It is therefore often a good practice to distribute your tokens and stake with multiple validators.
- Voting rights: As a stakeholder, you will be eligible to vote on proposals for the future improvement of the network. The more you stake, the greater your influence and voting power.
Benefits to the network¶
- Decentralization and Security: The level of decentralization in any highly secure blockchain network is dependent on the number of validators involved in the consensus or block production. The larger the number of validators and the more distributed the total stakes, the more decentralized or safe the network is. As a result, it's always a good idea to distribute your stakes across several validators, not only to prevent staking risks but also to keep the network decentralized and secure.
- Network improvements, DAO and decentralized decision-making: Having a DAO (Decentralized Autonomous Organization) make network enhancement decisions is an important aspect of any decentralized network. As a stakeholder, you have the right to vote on proposals that could be crucial for the network's improvement and use-cases in general. The greater the number of stakeholders, the more individuals vote on network upgrade proposals, resulting in highly decentralized decisions.