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Staking Overview

Vara Network uses an inclusive and reliable Nominated Proof-of-Stake (NPoS) mechanism to select validators for its consensus protocol. It chooses validators based on their own stakes and the funds nominated by other token holders. This approach helps make the process more democratic and decentralized. NPoS ensures decentralization by preventing a situation where only the richest entities can be validators.

Let's explore the benefits of NPoS in more detail:

• More People Involved: NPoS encourages active participation and governance by attracting more users to join the network. As a nominator, you can show your trust in different validators, which results in a diverse and strong group of validators.
• Stronger Network Security: With NPoS, stakes are spread across multiple validators, boosting network security. It's harder for hackers to harm a system with diversified support.
• Optimal Stake Allocation: NPoS improves stakes distribution among validators, ensuring better security. The concept of "eras" motivates both nominators and validators to behave well and contribute to a healthy and secure blockchain ecosystem.

In the Vara network, validators can publicly announce their candidacy for validation, and nominators can endorse up to 16 candidates. The validators with the most VARA backing are elected and activated in the next era. Nominators must stake a minimum of 50 VARA to register as a nominator. Both nominators and validators can be slashed in NPoS.

Vara Staking Constants

Constant	Value	Description
Bonding duration	7 days	The duration it takes for staked assets to become liquid again once they have been unstaked.
Round Duration	1 Era	Defined periods during which validator sets are chosen, rewards are distributed, and other important network functions are performed.
Minimum Delegation per Candidate	50 VARA	The lowest amount of VARA a delegator can stake to a validator.
Max Active Validators	1000	The maximum number of active validators in each era.
Slash defer duration	7 days	The period during which a slashing event remains unapplied.

Vara Staking Concepts

Validation and Nomination role

Validators

Validators are crucial for maintaining the integrity of the NPoS model. They have important roles within the network, such as creating new blocks and confirming transactions. In each era, the algorithm selects the required number of validators needed to ensure consensus.

Once elected to the validator set, validators embark on their main task - creating genuine and accurate blocks. To show commitment to the network's rules, Validators must stake VARA, the native token of the Vara Network. Validators who break the rules will lose their stake in the network. Any node capable of handling these responsibilities can publicly declare its candidacy for validation.

Anyone can take on the validator role by running a node and staking VARA.

Nominators

Nominators play a pivotal role in the NPoS model by supporting specific validators with their stake. Their job is to help validators become active and produce blocks.

Nominators publicly announce a list of validators they trust and stake a certain amount of VARA to show their support. If these validators are elected, the nominator shares rewards and penalties based on their staked VARA. By carefully selecting and supporting validators who follow good security practices, nominators can earn a portion of the VARA rewards.

In simpler terms, nominators help decide which validators are trusted to secure the network. Unlike other Proof-of-Stake networks, there is no limit on the number of nominators, encouraging more people to participate and reducing entry barriers.

For their trust and the risk of staking tokens, nominators generally receive a part of the staking rewards earned by the validators they support. The token encourages them to select reliable and high-performing validators, indirectly contributing to the overall stability and security of the network.

NPoS Election Algorithm

In each era, which lasts 12 hours, a maximum of 1000 active validators are selected. The responsibility of choosing these validators and distributing rewards among them lies with the NPoS Election Algorithms or Phragmén. The algorithm aims to select the necessary number of validators to ensure decentralization of power and optimizes the following factors:

• Maximizing the total stake amount.
• Maximizing the stake behind validators with the minimum stake.
• Minimizing the stake variance within the set.

The algorithm considers several factors to determine the validators for the next era:

• Stake Amount: Validators with a high stake, including tokens they own and those delegated to them, will likely be chosen for the active set. The stake amount shows how much validators support the network economically and their commitment to taking on risks.
• Era Points: Validators earn era points based on their performance and contributions in previous eras. The more points a validator has, the greater their chances of being selected for the active set. High-era points show the validator has a reliable track record and has been actively participating in the network.
• Security Considerations: The consensus algorithm aims to maintain a decentralized and secure network. To achieve this, the active set selection process considers factors such as geographic distribution, avoiding concentration of stake or influence, and minimizing the chance of validators working together in a harmful way for the network.
• Validator Performance: Validators are expected to fulfill their duties diligently, including block production, participation in consensus activities, and follow the network's rules and protocols. Validators with a history of reliable performance and minimal downtime are favored in the selection process.

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The algorithm used in the system gives validators with a higher stake a greater chance of being selected for the active set. However, it also allows block production by validators with a smaller stake to prevent centralization and keep the system fair.

Eras and Sessions

Let's break down eras and sessions into easily digestible points:

• An era lasts for 12 hours.
• Validators are split into two groups: active and inactive.
• The active validator group produces blocks and performs actions during an era.
• The composition of the active group can change between eras.

Each era is further divided into smaller units called epochs or sessions. An epoch/session lasts for 2 hours. During each epoch/session, validators are assigned as block producers for specific time frames or slots.

Having sessions adds a layer of security because it decreases the chance of having multiple validators assigned to a slot colluding to harm the network.

Era Points

Era points are crucial for electing validators and distributing rewards in Vara Network. They determine which validators become active and influence their chances of selection. Validators with higher era points have a better chance of being chosen because of their past performance and contributions.

Validators earn era points by performing various tasks such as producing blocks, participating in consensus activities and handling network-related responsibilities. The more diligently and reliably a validator carries out these duties, the more era points it gains.

On the other hand, if a validator fails to fulfill its responsibilities or engages in malicious behavior, it may receive penalties leading to a deduction of era points.

Era points validator incentives to act in the network's best interest, maintain a high uptime and contribute to its overall security and reliability.

Reward Distribution

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All validators are paid almost equally, but someone a little more.

Validators receive rewards in every era based on the inflation-based economic model. These rewards are allocated among all validators, and the amount each validator receives depends on their accumulated era points. The distribution of rewards is not affected by the number of tokens staked behind a validator.

The NPoS algorithm aims to achieve a fair and equal distribution of rewards among all validators, with some possible but not substantial variation. Validators receive a portion of the reward as compensation for their work, while the remaining portion is distributed among their backers proportionally to their respective stakes. This ensures validators and their nominators receive a fair share of the overall reward pool.

Claim Rewards

The distribution of staking rewards to nominators is not automated and requires manual triggering by an authorized entity. Typically, validators are responsible for initiating the payout process. However, in a permissionless manner, anyone can trigger the reward distribution for all nominators who have supported a specific validator in the active set of that era.

Here are essential points to understand about staking rewards:

• Staking rewards are available for a total of 84 eras.
• Validators and their nominators can start the payout for all unclaimed eras.
• When the payout is triggered, the network will distribute rewards to all nominators who supported the validator during those eras.

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It is crucial to be aware that if the reward payout is not requested within 84 eras, the rewards for those eras will be forfeited and lost. Additionally, if a validator unbinds all of their own stake, any pending payouts for unclaimed eras will also be lost.

84 eras × 12 hours in a single era ÷ 24 hours in a day = 42 days

Slashing

The slashing mechanism on Vara serves to maintain network security and deter bad behavior by penalizing validators who misbehave. It plays a crucial role in the Nominated Proof-of-Stake (NPoS) consensus algorithm in Vara Network.

Validators can face slashing if they go against the network's rules or engage in malicious actions like double signing, equivocation or other misconduct. Slashing involves reducing or taking away the tokens that a validator has staked as a penalty for their misbehavior.

Here are actions violations subject to punishment:

• Double Signing
• Late or Missing Block Production
• Downtime
• Collusion

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Not only the validator's own stake can be slashed, but also the stake of their nominators. It is crucial to exercise caution and carefully choose trustworthy validators when nominating. When a validator and their associated nominators are slashed, the slashed amount of tokens is not lost but instead added to the Treasury.

When a validator is slashed on Vara, it goes into a state called "unapplied slash" for 7 days. During this time, there is a chance to submit a governance proposal to undo the slashing decision. This proposal allows for a review of the slashing and potential mitigation of its effects.