To make highly scalable DApps possible, Loom has been building out a network of high-throughput Layer 2 sidechains linked to Ethereum as the backbone.

These sidechains use Delegated Proof of Stake (DPoS) as a consensus mechanism. This means they use a limited number of high-performance validator nodes to secure the network, which in turn enables sub-second confirmation times at scale. (We compensate for DPoS’s tradeoff in decentralization by inheriting the security of Ethereum mainnet via Plasma Cash).

Last month, we announced the requirements for running a Basechain Validator.

This caused some users to ask us, “What about the little guys? If I don’t have the 1.25M LOOM tokens required to run a validator, how can I be involved in helping secure Basechain?”

The answer, which we’ll discuss in this article, is by becoming a delegator and proxying your tokens to a validator who validates transactions on the network.

But before we get into that, let’s talk about the purpose of having validators stake such a large amount of LOOM tokens in the first place.

Validator Staking to Secure the Network

Validators take on a huge responsibility. They need to run and maintain the server hardware that processes all the transactions on Basechain.

If a validator goes offline, has insufficient server specs, or is otherwise unreliable, this would reduce the security and reliability of Basechain. So in order to be incentivized to stay online and do their jobs well, validators are compensated by splitting the fees paid by DApps hosted on the network, as well as transactions occurring on the marketplace.

But what if validators don’t do their job? Or what if they don’t treat users fairly and try to censor some transactions?

In this case, validators need to be punished — which is the purpose of the staked tokens. Validators lock up those tokens as a bond, and if they’re caught failing to perform their duties or being dishonest, those staked tokens are slashed as a penalty.

This further incentivizes validators to do their jobs — and encourages only those who are experienced in running and maintaining server hardware to attempt to run a validator. (Without penalties, a lot of under-qualified users might attempt to run a validator for the rewards, and undermine the reliability of the network.)

But how are these validators chosen? How can we ensure that they continue to represent the wants and needs of the community — the actual users and developers using and running dapps on Basechain?

Fortunately, there’s an inclusive process by which DPoS can achieve all of the above — delegation.

Validation Without Representation — I Think Not! ✊️

In DPoS, the users of the network can help choose the validators who they want to run the network.

The mechanism by which this is achieved is “delegation” — in which users give a validator (or validators) their support by proxying their tokens to that validator.

This temporarily puts the tokens under the validator’s control, so the validator can use them in their staking pool. The validator candidates with the largest staking pools become the official validators of the network.

In this way, validators keep the network honest by proposing new blocks and verifying transactions, and delegators keep the validators honest by ensuring they follow the protocol. If not, they will get the boot…

If a validator is unreliable or tries to cheat the system, the delegators can reallocate their tokens elsewhere to appoint another validator in their place.

Any malicious behavior puts validators at risk of being kicked out — losing their stake and future rewards.

The system inherently requires validators to compete for delegated tokens, which creates healthy incentives to carry out their function to the highest standard (i.e., constant uptime, signing and broadcasting valid blocks, participation in network governance, transparency with the community, and so on). Otherwise, they risk losing their position… which would ultimately mean a loss of their rewards.

Remember, in exchange for their work in securing the network, validators are paid based on the fees generated on Basechain (marketplace commissions, dapp hosting, token transfers, and more). So there’s constant competition to become one of the chosen validators.

Validators can also choose to give a portion of their rewards back to the delegators who proxy their tokens — but this is entirely up to the validator. So multiple validators or delegates who did not have enough tokens individually could choose to pool their tokens together, and split the rewards proportionally.

Where, How, and Who Can Become a Delegator?

Any LOOM token holder will have the ability to become a delegator and support validators in securing Basechain.

While we’ve been throwing around some heady concepts throughout this post (excuse the excessive, but necessary blockchain jargon), the delegation process itself will actually be pretty straightforward.

Here’s what it will look like for you:

Create an account on the Staking Dashboard

Deposit your LOOM tokens onto the Basechain

Search the list of available validator candidates, and select the one(s) that suits your preference. (You’ll likely evaluate based on criteria such as reputation, rewards, community engagement, etc.)

Enter the amount you’d like to delegate

Click the [Delegate] button and voila! You’re now delegating…

Note: Rest assured, you still have full and absolute ownership of your tokens when you stake them. You’re only temporarily assigning your tokens to the validator.

Stay Tuned! Delegators Are Just Around the Corner

With delegation, we’re super excited to begin implementing the features that will make the Basechain network far more inclusive and representative.

Any and every LOOM token holder can partake!

Support for delegators will be released on Basechain mainnet in Q1 2019.

In the meantime, stay tuned for additional details to make sure you’re ready to start staking on day one!

Update: