Original title: The mechanisms of staking TON
Original author: None
Original source: Blog
Compiled by: Mars Finance, Daisy
In Part 2 of our TON series, we’ll take a deep dive into the staking mechanics of TON. We’ll cover the what, why, and how of staking TON, as well as how to easily get started with Chorus One.
Introduction to TON Staking
TON utilizes a Proof of Stake (PoS) consensus algorithm, a system in which validators are responsible for proposing and validating new blocks of transactions. In TON's PoS model, validators are selected through a competitive election process to ensure the highest level of security and performance.
Election and Verification Process
The election process is at the heart of TON staking. At each consensus round, potential validators submit their applications along with their stake and other parameters, which determine the level of maintenance they are willing to perform. The electorate governance contract evaluates these applications and selects validators based on their stake and parameters, aiming to maximize the overall stake of the network.
Once selected, a validator will enter a validation cycle as shown in the timeline diagram below:
Source: https://docs.ton.org/develop/howto/blockchain-configs#examples
Key stages of the validation cycle:
Election (6-7 hours): Candidates apply to become validators.
Delay (2-3 hours): A short waiting period before verification begins.
Validation (18 hours): Validators approve transactions and propose new blocks.
Hold (9 hours): Validators prepare for the next epoch.
To ensure the continuous operation of the network, TON employs two types of pools (odd pools and even pools) that operate in alternating cycles, providing uninterrupted and seamless verification.
Minimum Shares
To be eligible to participate in the validator election process, a validator needs to stake at least
300,000 TON. Validators stake Toncoin for a fixed period of time, and after the validation round is over, the staked amount is returned along with interest.
Validator Rewards
Every transaction on TON requires a computational fee (called gas) to be paid for network storage and on-chain transaction processing. On TON, as on most blockchain networks, these fees are accumulated in the voter contract in the reward pool. 50% of the fees paid by users are destroyed and 50% are distributed to validators.
The network also subsidizes block creation by adding a subsidy to the reward pool, with each block in the main chain (called the master chain) receiving a reward equivalent to 1.7 TON. TON's architecture allows for the creation of parallel chains (called work chains). For work chain blocks, the reward is set at 1 TON per block. The network has an inflation rate of approximately 0.3-0.6% per year.
How does TON staking work?
TON offers a variety of staking mechanisms to suit different needs and preferences. Let’s explore these options:
Nominee pool
The Nominator Pool is the core of the TON staking ecosystem, providing a collaborative staking method that allows multiple users to pool their Toncoin (TON) tokens and jointly participate in the network's validation process. This pooling mechanism is designed to democratize staking, allowing a wider range of participants to participate, even if they may not have enough tokens to meet the minimum staking requirements individually.
Nominator pools allow up to 40 nominators (stakers) to combine their staking power and delegate it to validators such as Chorus One. This collective staking method not only helps meet high minimum staking thresholds, but also ensures that the network remains secure and robust by leveraging the combined resources of multiple stakeholders.
Source: https://github.com/orbs-network/single-nominator
How the nominee pool works:
Nominators join the pool by staking at least 10,000 TON tokens.
Mining pools collectively stake combined tokens through validators. Operators who manage validators must stake at least 1,000 TON tokens to prevent bad behavior.
The election process begins: The election phase lasts 6 to 7 hours, and the pool’s validators submit their validation applications, along with the combined stake of all nominees.
Delay period: After the election, there will be a 2-3 hour delay before the verification phase begins.
Validation Cycle: Validators then participate in an 18-hour validation cycle during which they propose and validate new blocks of transactions.
Reward Distribution: At the end of each validation cycle, the rewards earned will be distributed among the nominators based on their proportion of stake in the pool.
To receive rewards, nominators need to send a transaction of 1 TON to the pool with a specific comment, which will trigger the return of their entire stake and earned rewards.
Withdrawal: Nominators can withdraw their entire stake and rewards in a single transaction. This mechanism does not support partial withdrawals, so funds must be fully withdrawn when receiving rewards.
To get an intuitive understanding of how the nominee pool works, consider the following diagram:
This workflow ensures continuous network validation, with odd and even pools alternating validation cycles to maintain the seamless operation and security of the TON Blockchain.
Pros and Cons of Nominee Pools
advantage:
Relatively easy to set up and supported by validators like Chorus One
Allowing multiple nominators to pool their resources makes it easier to meet staking thresholds.
Proportional reward distribution is automatically processed.
shortcoming:
Minimum staking requirements may exclude investors with less than 10,000 TON staked.
Only full withdrawals are permitted, which may be limiting for nominees who require partial access to funds.
Using hot wallets to pay operating expenses poses potential security risks.
2. Single nominee pool
The Single Nominator Pool is a streamlined and secure staking mechanism in the TON ecosystem, designed for validators (aka solo stakers) who have enough TON to stake independently. This approach reduces complexity and enhances security by focusing on a single nominator, making it ideal for those who prefer a more straightforward staking process.
A single nominator pool allows a single entity to manage the staking process, providing a streamlined and secure framework for validators. By eliminating the need for multiple nominators, this mechanism significantly reduces the attack surface, making it easier to protect staked assets.
Source: https://github.com/orbs-network/single-nominator
How the Single Nominator Pool Works
Single-nominator pools are deployed by validators such as Chorus One.
Only one nominator (who is also the pool owner) stakes their TON tokens. A single nominator can stake any amount of TON as long as the protocol minimum requirement is met (currently 300,000 TON tokens).
Nominators submit their interests to apply for verification during the election period (6-7 hours).
After the election, there will be a 2-3 hour delay before the verification phase begins.
Validators participate in an 18-hour validation cycle to verify transactions and propose new blocks.
All rewards generated during a validation cycle will be sent directly to a single nominator.
Flexible withdrawals: Nominators can withdraw any amount of shares and rewards, providing greater flexibility compared to multi-nominee pools.
The mining pool uses cold wallets to store principal pledged funds, which greatly reduces the risk of theft.
Hot wallet operations: Validators use hot wallets to manage operating fees and ensure the security of cold wallets.
To illustrate the workflow of a single nominator pool, consider the following diagram:
This streamlined workflow emphasizes a continuous cycle of election, delay, validation, and holding phases, ensuring the seamless operation and security of the TON Blockchain.
Pros and Cons of a Single Nominee Pool
advantage:
Easy to deploy and manage a single pool of nominees.
Reduce the attack surface by using cold wallets to store principal.
Partial withdrawals are permitted, providing greater flexibility to nominators.
shortcoming:
Not applicable to groups holding fewer TON tokens or multiple nominees.
Rewards distribution between validators and nominators is not supported, and technical expertise of nominators is required to operate pools or off-chain payments.
All operations rely on a single nominator, which may limit shared or community-based benefits.
The single nominator pool provides a secure and efficient staking solution for individual validators, combining simplicity with enhanced security measures. By focusing on a single participant, this mechanism ensures that the staking process is simple and easy to manage, making it an attractive option for those who wish to stake TON independently.
3. Liquidity Staking
The Liquidity Staking Protocol enables TON holders to participate in staking pools to lend funds to validators at a predetermined interest rate. In return, stakers receive liquidity staking receipt tokens (called Pool Jettons) that represent their share of the pool. These tokens can be redeemed back to TON at any time, allowing stakers to maintain liquidity while earning rewards.
The protocol is user-agnostic and can accommodate users of all capital sizes without any minimum or maximum equity requirements.
Source: https://ton-ls-protocol.gitbook.io/ton-liquid-staking-protocol
How TON Liquid Staking Works
Users stake their TON in a pool managed by the Liquid Staking Contract.
After staking, users will receive Pool Jettons, which are liquid staking receipt tokens representing their share in the pool. These tokens ensure that users can maintain liquidity and withdraw their staked assets when needed.
The staked funds are loaned to validators, who use them to participate in the network validation process. Validators are selected based on the stake and maintenance parameters during the election phase, followed by the validation cycle.
During each 36-hour validation cycle, validators receive rewards, which are distributed proportionally among all participants in the pool.
Rewards come from interest paid by validators who borrow staked funds. As rewards are distributed, the value of Pool Jettons increases, reflecting the increase in stake in the pool.
Users can deposit and withdraw assets at any time without any predefined restrictions, managed through specialized smart contracts that ensure accurate accounting and security.
Pros and Cons of TON Liquid Staking
advantage:
The user-agnostic design makes it suitable for all users, regardless of their stake size or technical expertise.
Allowing partial or full withdrawals at any time, providing liquidity to stakeholders.
shortcoming:
Deployment and management require greater effort due to the use of multiple smart contracts and DAOs.
Reliance on various smart contracts may increase the risk of vulnerabilities, thus requiring strict auditing and security measures.
Liquid staking contracts provide a versatile and powerful staking solution on the TON blockchain, combining the advantages of liquidity, decentralization, and accessibility. By understanding and utilizing this mechanism, users can participate in network validation more flexibly and safely, thereby contributing to the overall stability and development of the TON ecosystem.
Staking TON through Chorus One
Chorus One provides white label TON validator services for institutional clients, as well as deployment and management of nominee pools. We can create nominee pools for clients, requiring a minimum delegation of 300,000 TON tokens (TONcoin).
As the operator, Chorus One takes full responsibility for the operating expenses, maintenance and performance of the validators, ensuring a seamless and efficient service.
