How To Choose A Validator
In this educational piece I want to highlight the true risks and considerations you need to make when choosing a validator to stake your valuable CSPR tokens. There are a lot of misconceptions that you have to pay a higher fee to ensure the safety of your tokens or have to delegate to a larger node, is is all incorrect.
Staking is the process of allocating your tokens with a validator on the network. A validator approves transactions on the network and receives a fee for doing this. The total fees paid on the network is equal to the network inflation rate (8%). This amount is paid to all participants who are delegating. Therefore if more people are delegating across the network, this amount is spread a lot thinner. If every single token is delegated the rewards will equal the floor of 8%. If less people are delegating, as the total reward pot is the same, each delegator will receive a larger share of the pot (therefore a higher apy) — note, you can check the latest network apy on our website (see below)
- First misconception. If you place your tokens on a validator node with more coins, you will receive a larger reward. This is NOT TRUE. The reward you get from delegating to any node will be the same (excluding the fees charged by the node). The reward calculation is an apy which is equal to 8%*(total supply/total staked)/
- Second misconception. Delegating means giving your tokens to the validator. This is also NOT TRUE. When you delegate, you are simply using the validator as a means to participate in the staking process. The validator has no ability to access your coins and the only means to control the coins is via the secret key (which the delegator should NEVER share)
So what are the RISKS?
- One of the LARGEST risks to any PoS system is a single node holding more than the threshold amount of coins to bring down the network. As the voting power for transactions is proportional to the number of coins on a node, if a node holds a large enough balance of coins, they could easily bring down the entire network at will. The whole point of distributed ledgers is for decentralizations, if there is not sufficient decentralization in a network, it then holds the same risks as a centralized network.
- In some networks if the validator acts maliciously (i.e. tries to validate an incorrect transaction), the node is fined and all delegators to the node will lose some or all of their coins. This IS NOT the case with CSPR. In CSPR if a node acts maliciously, the node then gets jailed for a period of time, meaning that in that time you will not earn any rewards. At no point on the CSPR network are your coins at risk of any principal losses. If your validator is jailed, CSPR is currently implementing a feature where you can transfer your coins between validators instantly, therefore you will not lose out on most of the rewards.
- If the node goes offline — for the period the node is offline, you will not be earning any rewards. A node can go offline for many reasons (A) a pre-scheduled upgrade (B) a wider network issue which affects all the nodes © a node specific issue. Node specific issues will typically be related to the power of a server and if the validator is running my different projects node on it. For example, a validator may run a VPS (virtual private server) which means they only have access to part of the CPU and memory on a physical server. If this is the case then the node is at risk of spikes in CPU from other users. Similarly, if the validator is running a dedicated server but ALSO RUNNING OTHER PROJECT nodes, then there is a risk that a spike in one of the other nodes could bring down the server.
- A lesser known risk is that a validator may aggressively raise their fees after you have staked with them. This is a problem as if you believe you are staking to a low fee node, but have to constantly check the fee level to ensure the validator has not hiked it up.
Right, so we know that all nodes pay the same (excluding fees) and we know there is no risk to your coin principal balance, but we need a server that has reduced risks to any downtime. So how do we choose a validator? Well, it seems obvious, but the choice should be a validator with the lower fees, running a dedicated high powered server and who DOES NOT run any other project nodes on the server….but we can see each validators fees (as its advertised), but how do we know if a validator has a high power server? Well, the validator should make available a public monitor so you can see in real time the CPU utilisation on the node.
Now to finish with a little about us. We are GHOST STAKING (and you may have read many of our research pieces on CSPR):
- Low fee node – 3%
- Guarantee of no node fee increases EVER
- Bare metal high powered fully delegated node with
- No other network nodes running on it and
- Where the CPU utilization is typically less than 3% and can be monitored live here.
Read more about us, with detailed instructions on staking, our original research and also our LIVE NODE STATUS monitor on our website: https://ghoststaking.com/about-us/