Velas is a AIDPOS ( Artificial Intelligent Delegated Proof of Stake) network with delegations, which means that anyone who holds VLX tokens can choose to delegate some of their VLX to one or more validators, who process transactions and run the network.
Delegating stake is a shared-risk shared-reward financial model that may provide returns to holders of tokens delegated for a long period. This is achieved by aligning the financial incentives of the token-holders (delegators) and the validators to whom they delegate.
The more stake a validator has delegated to them, the more often this validator is chosen to write new transactions to the ledger. The more transactions the validator writes, the more rewards they and their delegators earn. Validators who configure their systems to be able to process more transactions at a time not only earn proportionally more rewards for doing so, they also keep the network running as fast and as smoothly as possible.
Validators incur costs by running and maintaining their systems, and this is passed on to delegators in the form of a fee collected as a percentage of rewards earned. This fee is known as a commission. As validators earn more rewards the more stake is delegated to them, they may compete with one another to offer the lowest commission for their services, in order to attract more delegated stake.
There is a risk of loss of tokens when staking, through a process known as slashing. Slashing involves the automatic removal and destruction of a portion of a validator's delegated stake in response to intentional malicious behavior, such as creating invalid transactions or censoring certain types of transactions or network participants. If a validator is slashed, all token holders who have delegated stake to that validator will lose a portion of their delegation. While this means an immediate loss for the token holder, it also is a loss of future rewards for the validator due to their reduced total delegation.
It is the goal of the network rewards and slashing to align both validators' and token holders' financial incentives, which in turn help keeps the network secure, robust and performing at its best.
Note: Slashing is not enabled on Mainnet Beta at this time.
How do I stake my VLX tokens?
In order to stake tokens on VLX, you first will need to transfer some VLX into a wallet that supports staking, then follow the steps or instructions provided by the wallet to create a stake account and delegate your stake. Different wallets will vary slightly in their process for this but the general description is below.
There are two options for staking in the Velas system — creating your own pool and becoming a validator or Join an existing pool as a delegator.
- To become a Validator user should have at least 1 mln of VLX Tokens
- To become a Delegator user should have at least 1 VLX
- Every 6 hours (currently) 19 nodes are chosen based on their reputation. When a node is chosen, it will generate a reward at the end of the epoch and it will be distributed between and all delegates.
- Nodes and delegates generate rewards based on balance, the distribution of the reward generated in a node is 40% the for pool organizer (as a minimum), and 60% to be distributed among all the delegates based on their balance.
- The process is done through a smart contract that the user can finish and withdraw their balance whenever they want, totally safe, and secure for the user.
Velas command line tools can perform all stake operations in conjunction with a CLI-generated keypair file wallet and paper wallet. Staking commands using the Command Line Tools.
Create a Stake Account
A stake account is a different type of account from a wallet address that is used to simply send and receive VLX tokens to other addresses. If you have received VLX in a wallet address you control, you can use some of these tokens to create and fund a new stake account, which will have a different address than the wallet you used to create it. Depending on which wallet you are using the steps to create a stake account may vary slightly. Not all wallets support stake accounts, see Supported Wallets.
Delegate your Stake
For staking your VLX tokens use supported wallet, choose the validator and amount of VLX that will be delegated, then confirm to execute the smart contract.
Stake Account Details
For more information about the operations and permissions associated with a stake account, please see Stake Accounts