Nominated Proof of Stake (NPoS)
Nominated Proof of Stake, or NPoS, is a form of Proof of Stake. Token holders choose validator candidates, while the protocol decides which validators become active.
What is Nominated Proof of Stake?
With NPoS, participants lock up tokens. This is called staking. They’re called nominators, and they choose candidates they consider trustworthy.
A validator runs a node: a computer connected to the blockchain that follows its rules. Active validators help secure the network and check which blocks are valid. So nominators don’t have to run a node themselves.
The protocol holds an election. It selects a limited group of validators and distributes the locked tokens among them. The goal isn’t just to choose the most popular candidates, but also to distribute the backing as evenly as possible.
An example of Nominated Proof of Stake
Suppose someone locks up tokens and nominates three validator candidates. By doing so, they indicate which candidates they consider trustworthy.
The protocol then selects two of these candidates as active validators. The locked tokens can then be assigned to those two validators. The nominator doesn’t have to manage this allocation themselves.
Why is Nominated Proof of Stake important in crypto?
NPoS makes it possible to help secure a blockchain without managing technical equipment or running a node yourself. The system is best known from Polkadot and Kusama.
You may come across NPoS in Polkadot news about changes involving validators, staking, or rewards. It’s important to know that nominating doesn’t guarantee a reward. Only stake assigned to an active validator can earn rewards.
There are also risks. A selected validator may perform poorly or break the rules. In some cases, the protocol may then take away some of the stake; this is called slashing. Nominators may also go without rewards if their candidates don’t become active.
