The Use of Validators & Risks Involved
Dubai, UAE, 12th January 2024, The growth of the blockchain industry is inseparably linked to finding weak points and problems, rethinking them, and inventing new approaches. Therefore, the crypto community spends a lot of time examining the drawbacks associated with each component of the blockchain ecosystem to ensure progress and develop more robust and efficient solutions. One such component is validators, which are crucial for various consensus mechanisms, including proof-of-stake (PoS) and delegated proof-of-stake (DPoS).
Validators bear the responsibility of maintaining the network’s credibility and integrity by verifying transactions and maintaining the consensus. Therefore, they play a significant role in making blockchains operate smoothly and securely, directly affecting the user experience.
PoS & DPoS
In PoS consensus mechanisms, validators are selected based on the amount of crypto assets they have staked in the smart contract. This way, they are motivated to work ethically and diligently, ensuring that the network operates in a dependable manner. If they fail to do so, they risk having their staked assets confiscated, leading to significant financial losses. Thus, this system safeguards against malicious validators who may want to harm the network.
The DPoS mechanism is a continuation of the previous approach that introduces the concept of so-called delegates. Designed to make PoS more efficient and centralization-proof, DPoS tries to find a way to empower the token holders and simultaneously decrease the number of validators needed. Delegates are validators selected by token holders, who can both give power and take it away by voting out dishonest players. The number of validators chosen for each block is limited and may vary between consensus mechanisms. Moreover, the delegates’ position is not permanent since others can be voted in instead.
The essential role of validators also presents several prominent challenges that must be thoroughly evaluated and resolved. One of the most critical ones is centralization, which occurs when a group of validators achieves considerable power in the validation process, thus gaining power over the network. While the DPoS was created to help mitigate centralization risks, the attempt was mainly unsuccessful. Since DPoS utilizes a restricted number of delegates to create new blocks, the delegation process does not exclude a lack of rotation, leading to the network’s concentration in the hands of a small group all the same.
In addition, these select few representatives can easily collaborate and push through malicious transactions. Therefore, collusion is possible in both the case of PoS and DPoS, and even staking assets does not stop them since the potential gains may outweigh the losses incurred from penalization. Collusion can damage blockchains severely by undermining their safety and fairness. Consequently, it can sabotage user trust and support.
The third risk is the vulnerability of validators. Hackers often choose to attack validators to disrupt consensus and exploit the network. One example is a 51% attack, which requires more than half of validators to turn malicious to take control of the network. Arguably, such an attack is even easier to carry in DPoS since there are fewer people to organize or bribe.
Tending to said risks is crucial for maintaining blockchain’s key principles of transparency, fairness, and decentralization. By doing so, the blockchain community can ensure the technology’s robustness and uphold its foundational ideals. Centralization-wise, developers must find ways to promote decentralization by enforcing measures that encourage a diverse range of participants and regular rotation of validators.
For example, one solution is the nominated proof-of-stake consensus mechanism (NPoS), which requires both validators (delegates) and those nominating them to stake assets. This way, both parties get punished for inadequate behavior. This approach distributes responsibility and influence across a broader scope of users.
Additionally, consensus mechanisms should include powerful penalty tools to discourage validators, delegates, and nominators from harming the network. This way, participants thinking of malicious activities must consider severe economic consequences, which may reduce their interest.
Last but not least, the network’s community involvement may play a vital role in ensuring that validators are held liable and act transparently and justly. By empowering communities to participate more in the validation process (as in the cases of DPoS and NPoS), networks can ensure more security and trust.
The role of validators is to ensure that the network systems are reliable and secure while maintaining trust. Yet, many associated risks make this role challenging. This is why it is crucial to prioritize meticulous design and active community participation to enhance security and mitigate any threats.
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