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Overview of Validators

In the Core Chain ecosystem, validators are crucial participants who maintain the integrity, security, and continuity of the blockchain. They are responsible for processing transactions, creating new blocks, and participating in the consensus process. This role is pivotal in ensuring that the Core Chain operates efficiently and remains decentralized.

Who are Validators in the Core Network​

In the Core Chain ecosystem, validators play a crucial role in maintaining the integrity and security of the blockchain by producing and validating new blocks. These validators engage in the Satoshi Plus consensus mechanism, which blends elements of Delegated Proof of Work (PoW) and Delegated Proof of Stake (DPoS). The validators are selected based on a hybrid scoring system that accounts for both the BTC and CORE tokens staked in their favor and the Bitcoin hash power delegated to them. This unique method ensures that the validator set represents a balanced mix of stakeholder interests and mining power, enhancing the network's security and decentralization. Validator elections occur in cycles known as epochs, with each new set of validators being chosen to manage the blockchain's operations and governance effectively.

Economics​

Validator's rewards come from

  1. Base rewards, i.e. newly minted CORE tokens;
  2. Fees collected from transactions in each block;

Base rewards are calculated and distributed when the last block of a round is mined. Currently, 90% of the rewards go to the validators and 10% of the rewards go to the System Reward Contract. Of the 90% paid to validators, some percentage is taken as a commission by the validator before they pay out their delegates. Each validator has an equal probability of producing blocks, so in the long run, all stable validators should get a similar portion of the reward.

Similar is the case with the transaction fees collected from each block in a round, it is not directed completely to the validator, but is calculated similar to base rewards, i.e., 90% of accumulated fees is paid to the validators, some percentage is taken as a commission by the validator and the rest is distributed to the delegators. Whereas, the 10% is deposited into the System Reward Contract.

Validators share rewards with the entities that delegated to them – including CORE stakers, bitcoin stakers, and PoW delegators – but they decide how much to give back by deciding how much they (the validators) choose to keep for themselves. Validators can take as much or as little of the reward as they want, though they’re incentivized to be generous in order to attract more stake and hash power.

Validators are required to share rewards with the delegators who staked CORE or delegated hash power to them. Given the fact that each validator has an equal probability of producing blocks, all stable validators should get a similar portion of the rewards, in the long run. The portion validators keep for themselves (commission fees) will be distributed directly to their fee addresses at the end of each round.

Note that the settlements for rewards is done on daily basis, i.e. a round, instead of per block.

validator-reward-distribution

Let us assume that the base reward for a round is 3000 CORE and that a certain validator sets its commission rate to 20%. These tokens do not go directly to the proposer. Instead, they are shared among validators and delegators. These 3000 CORE will be distributed according to each participant's stake. Assume that the fees generated from all transactions in all the blocks in a round was 100 CORE.

    Total Accumulated Reward = Base Reward + Transaction Fees = 3,000 + 100 = 3,100 CORE

    System Reward Contract gets = 3,100 x 10% = 310 CORE  

    Accumulated Validator Reward = (Base Reward + Transaction Fees) x 90% = 3,100 x 90% = 2,790 CORE

    Commission = (Base Reward + Transaction Fees) x 20% = 2,790 x 20% = 558 CORE

    Total Reward Validator gets = Commission = 558 CORE

    All Delegators gets = Accumulated Validator Reward - Commission = 2,790 - 558 = 2,232 CORE
note

In the Core ecosystem, the rewards are distributed to each validator, from that reward valdiators are required to keep a percentage in the form of commission and distribute the rest to its delegators. Each validator can set its own commission rate. However, there is no self-bonded CORE. Validator only gets commissions if they don't want to stake on their own validator.

Potential Risks and Penalties for Validators​

In the Core Chain ecosystem, validators play a crucial role in maintaining the network's integrity and security. While this role comes with incentives like earning rewards for block validation, it also involves certain risks and potential penalties if validators fail to perform their duties adequately or engage in malicious activities. Here’s a detailed overview of the potential risks and penalties for validators in the Core Chain ecosystem:

  1. Slashing Risks: Validators in many DPoS based systems, including Core Chain, face the risk of slashing if they act maliciously or negligently. This could involve double signing, downtime (failing to be online and perform validation duties), or any actions that compromise the network's security. Slashing involves a portion of the staked CORE tokens being destroyed or taken away, which directly impacts the validator’s financial holdings.

  2. Stake Lock-up and Liquidity Risk: Validators must lock up a significant amount of CORE tokens as collateral to participate in the validation process. This stake is subject to lock-up periods during which the funds cannot be accessed, posing a liquidity risk, especially if the market conditions change dramatically.

  3. Jailing of Validators: Validators who consistently underperform or violate network protocols may be "jailed." This term refers to temporarily removing them from the validator set, preventing them from participating in consensus and earning rewards. This not only affects their revenue but can also tarnish their reputation within the community.

  4. Loss of Delegation: Validators depend on delegations from CORE token holders to increase their influence and earning potential. Poor performance or high penalty rates can lead delegators to withdraw their support and reallocate their stakes to more reliable validators, leading to a significant decrease in potential earnings.

  5. Operational and Security Risks: Running a validator node requires technical competence. Validators must ensure their systems are secure and running efficiently 24/7. Failure to manage these operational risks can lead to missed blocks or security breaches, potentially leading to financial losses or reputational damage.