• Abstract

In this dashboard, we want to review all the Terra submissions to date that discuss validators and delegators. On the other hand, we want to provide a brief summary of what we have learned so far, via various bounties, about Terra's validator network.

• The Concept of Blockchain

The word Blockchain is a combination of the words Block and Chain. This technology is actually a chain of blocks. In each block, any information can be recorded. The information is stored in blocks and the blocks are linked together in a chain. This chain forms the blockchain.

This technology is actually a kind of database that is not located on one or more specific servers, but is distributed on all computers that connect to the network. Registered records cannot be hacked or deleted due to the use of encryption and registration on all network computers.

• Terra Blockchain

Terra is a blockchain network that supports a variety of payment methods and provides the infrastructure for financial program development. This platform is supported by a portfolio of stablecoins; The price of each of these stablecoins remains constant using special algorithms and also with the help of the local cryptocurrency of this LUNA network. One of the reasons Terra's network is so valuable is that it eliminates payment chain complexities such as credit card networks, banks, and payment gateways with a single blockchain.

• Consensus Algorithms

Consensus Algorithms is the way in which everyone on the blockchain network comes to a common agreement. Thus, consensus algorithms create reliability in the blockchain and trust between nodes or anonymous counterparts in the distributed computing environment. Essentially, the consensus protocol ensures that each new block added to the blockchain is only a true version and is approved by all nodes. The blockchain consensus mechanism has specific goals, such as equal rights for each node, cooperation, agreement, and the mandatory presence of each node in the consensus process. Thus, the consensus algorithm seeks to reach a common agreement that is approved by all members of the network.

Applications of the consensus algorithm are:

1. Integration of information
2. Network management by electing some members as leaders
3. Check and decide on the correctness of a transaction and save it

There are different types of consensus algorithms. But the two types that are most commonly used in blockchain are:

1. Proof of Work(PoW) Algorithm
2. Proof of Stake(PoS) Algorithm

• Proof of Work(PoW) Algorithm

In a proof-of-work algorithm, the process of adding blocks to a blockchain is called mining, and the person doing this is called a miner. The computer used for extraction is also called a node. Each block in the blockchain network has a unique identifier called a hash. A hash is a set of random numbers. If the block information changes, the block hash also changes. The hash of each block contains a part of the previous block hash. In order for miners to be able to add a block to the blockchain, they must find the hash of that block. To do this, they must solve the mathematical problems and puzzles posed by Blockchain to achieve the correct hash. This mechanism is called proof of work algorithm. Decentralization and reward mechanism are among the benefits of this algorithm. But this method also has disadvantages, including:

1. Energy loss
2. 51% attack*
3. Low speed of adding blocks to blockchain
4. Low scalability
5. Formation of mining pools

The most important and most criticism of the PoW algorithm is its energy consumption. Because the amount of energy consumed in the PoW algorithm is very high. According to a report from the BBC site, Bitcoin consumes about seven gigawatts, equivalent to 0.21% of the world's electricity. This electricity power is equal to the power generated by seven Dungeness nuclear power plants simultaneously.

A report released by the Cointelegraph estimates that Bitcoin's electricity consumption is equal to 10 million American households electricity consumption. The waste of energy and environmental problems associated with the PoW algorithm paved the way for the construction of another algorithm called the Proof of Stake algorithm.

• Proof of Stake(PoS) Algorithm

In the Proof of Stake algorithm, individuals do not perform the mining operation. There is no miner, and instead the "validator" performs the process of adding the block to the blockchain. In PoS, there is no equation to be solved and no expensive mining equipment is needed. For this reason, PoS is much cheaper than PoW. In the PoS algorithm, there is no mining reward and members are received a reward based on the amount of currency they have staked.

Some of the benefits of PoS include:

1. Faster transactions
2. Receiving rewards using the staking process
3. Very low probability of 51% attacks
4. Environmentally friendly and low electricity consumption
5. High scalability

But this algorithm also has disadvantages, which include:

1. Increasing the power of the rich and major shareholders
2. Need currency for staking

Appendix

• 51% attack

A 51% attack, also known as a majority attack, occurs when a single person or group of people gains control of over 50% of a blockchain's hashing power.

In the following, we want to deal with concepts such as validator, delegator and staking.

• Validators & Delegators & Staking

Validators run full nodes. A full node is a program that approves blockchain transactions and blocks. Full execution of a node means that the validator is running an updated version of Terra Core software.

If users want to run full node but do not appear in the role of validator, they can appear in the role of delegator. Users who appear in the role of delegator can give their LUNA to the validator and receive a reward in return.

In fact, delegators are LUNA holders who receive rewards without the responsibility of validators. Validators sign new blocks. Validators participate in governance. On the other hand, validators vote on behalf of delegates. A validator can be in three positions. These situations are shown in the figure below.

Voting power of each validator is measured based on the total number of LUNAs staked. The amount of the staked LUNA by each volitor is obtained from the following equation:

Validators with more LUNA staked have more weight and also more voting power. On the other hand, the weight of a validator determines whether they are active or not. Validators with more weight offer more blocks and therefore more revenue. The set of active validators consists of 130 validators. These validators have staked the most LUNA. If a user wants to be one of the active validators, he must increase the amount of his staked LUNA. The image below shows a list of validators.

One of the questions that arises for users is whether there is monitoring of validators? Yes, if the validator wants to sign a transaction twice (double sign) or is offline in many cases, then the protocol will penalize these validators for negligence.

if a validator is successful, its delegators will consistently share in the rewards structure. if a validator is slashed, the delegators stake will also be slashed.

The chart below shows a list of the top 10 validators. In terms of voting power, the Orion.Money project is in first place.

Therefore, delegators should be more careful in choosing a validator. Note that delegators can also select multiple validators for staking. Delegators must monitor the performance of the validators and can change them whenever they feel that the validator is not performing well.

• But what criteria should delegates consider in choosing the right validator?

1) amount of self -bonded LUNA

Self-bond refers to the LUNA amount that the validator delegates to itself. Obviously, validators who have more self-bonds have more responsibility for their responsibilities.

2) amount of delegated LUNA

The total amount of delegated LUNA is the next criterion (sum of delegator and validator LUNAs). The higher the value, the more users will trust that validator. but note that, a validator with more staked LUNA, is an attractive target for hackers.

3) commission rate

Validators receive commissions to take on the responsibility of delegators. This commission should not be too high or too low. Choosing a validator with Appropriate commission is a good option. The chart below shows the commission rate for two different validators.

4) track record

Users can look at the past performance of the validators and select the appropriate validator. These records can include the following:

1. seniority
2. past votes on proposals
3. historical average uptime

Note that validators do not necessarily need to be publicly known.

Based on the above criteria, delegators can choose their ideal validator. Validators themselves must be constantly up-to-date to be able to adapt to network changes if needed. Validator servers should always be online and their private keys should be in a safe place.

The chart below shows the list of validators in terms of their voting power. Note that validators with more voting power have staked more LUNAs.

According to the chart above, the best validator in terms of voting power is the Orion.Money project. This project has staked the most LUNA.

According to the image below, the NOD Games validator has delegated 6,992,244 Luna. But the self-bond of this project is only equal to 10 LUNA. On the other hand, Bridge Tower Validator has delegated 3,014,592 LUNA, while its self-bond is 2116 LUNA.