SUI Staking Unpacked

Staking is a widely used method for earning yield on cryptocurrencies and plays a vital role in securing Proof of Stake (PoS) blockchains.

Introduction

Staking is a widely used method for earning yield on cryptocurrencies and plays a vital role in securing Proof of Stake (PoS) blockchains. In the PoS model, validators are incentivised to help maintain the blockchain’s integrity and ensure its continuous operation through staking rewards. These validators are responsible for processing transactions, maintaining consensus, and upholding both the security and decentralisation of the network.

The PoS consensus mechanism relies on the assumption that validators are economically motivated to behave honestly and follow the network’s protocol. This motivation comes from two main factors: the opportunity to earn a staking yield and the requirement to stake a substantial amount of cryptocurrency as collateral. Validators who act maliciously face penalties or risk losing their staked assets. Conversely, those who act in good faith are rewarded with staking yields, which serve as an ongoing incentive for honest participation.