Nominated Proof-of-Stake Definition
In a nutshell, Nominated Proof-of-Stake is the process of selecting validators to be allowed to participate in the consensus protocol. NPoS is a variation of Proof-of-Stake and used in Substrate-based Blockchains such as Kusama, Edgeware or Polkadot.
Different Roles within Nominated Proof-of-Stake
While there is a variety of different stakeholders in the Polkadot network, the main two actors involved in NPoS are Validators and Nominators.
Validators provide the infrastructure and maintenance for the network. They are responsible for the production of new blocks, the validation of parachain blocks, guaranteeing finality and ultimately the security of the network. They need to be responsive at all times and run secure, reliable infrastructure. Additionally, validators need tokens backing them, which incentivices them to abide by the rules since part of these tokens might be taken away otherwise (a concept called “slashing”). For their services, validators are paid in rewards denominated in the underlying network’s native token (e.g. DOT in Polkadot).
For validators to be able to perform their services for the network, they need to be in the active set. Validators in the active set take turns in proposing, validating and appending new blocks.
Nominators are token-holders who contribute to the security of the network by economically backing (aka “nominating”) up to 16 validators of their choice with their tokens (aka “stake”). Nominators share part of the rewards earned by the validators in the active set that they nominated. It is important to note that nominators are also subject to slashing in case of misbehavior by one of their nominated validators.
