Introduction

During the staking process, you might come across different staking terms on Polymesh.
This article explains the staking terms used on the Polymesh Portal and the Polymesh App.

Staking terms on Polymesh

General staking terms

Nominated proof-of-stake (NPoS): Used on Polymesh, nominated proof-of-stake is a class of PoS which defines how node operators are allowed to participate in the chain’s consensus protocol and validate new blocks. It consists of two main actors: stakers (users who stake on node operators) and node operators (entities permissioned to run validator nodes). NPoS keeps the chain highly secure since it only permits node operators with the highest amounts of stake to validate blocks. This makes it harder for a single adversary to attack the chain since it takes considerable reputation to build up stake. It also makes attacking the system costly since such behavior results in stake being slashed. Learn more about NPoS here.

Staking: Staking is the process of securing the network by aligning the economic incentives to the correct operation of the chain through a system of rewards and penalties. It’s an important aspect of the nominated proof-of-stake consensus mechanism, which defines which blocks get written to the chain as well as the roles, rules, and incentives of the network.

Validator/Node operator: Node operators essentially run the chain’s software, certifying transactions as they are entered into the chain by validating new blocks and broadcasting them to the network. Node operators gain rewards for validating new blocks written to the chain. On Polymesh, only a set number of node operators are allowed to validate transactions, determined by how much POLYX is staked to them. Those who do not make it into the winning group miss out on rewards until the next election window (the next era). The idea is that node operators who contribute most and prove most reliable will ultimately win more often, providing incentives for good behavior while decreasing the chances of an adversarial attack.

Learn more about the node operators on Polymesh here.

Stakers/Nominators: Users who back node operators of their choice with the blockchain’s native protocol token. The incentive for stakers is that they can receive rewards based on the node operator’s performance. On Polymesh, stakers bond POLYX to node operators to increase their chance of winning in the hopes of receiving a cut of the reward. Should the node operator receive rewards for validating blocks, they will take a commission and the rest will be dispersed among stakers, proportional to how much they’ve staked. Staking puts the users’ tokens in a specific wallet and locks them until they choose to unbond them. A staker can be any POLYX holder whose identity has been verified through a customer due diligence process.

Staking rewards: For each block created on Polymesh, the authoring node operator and its stakers are rewarded in POLYX. Staking rewards per era are evenly split between node operators based on performance, who take a certain percentage in commission before the remaining block rewards are dispersed to stakers (including the node operator’s stake).

Terms related to the staking process

Era: An era is a period during which an active set of validators is producing blocks and performing other actions on the chain. This means that not all validators are in the active set and such set changes between eras. On Polymesh Mainnet, the duration of an era is 24 hours (6 sessions). At the beginning of every era, a new election will take place, and you may be assigned a different active nomination from the validators you selected. Staking rewards and fines are calculated and enacted per era (every 24 hours).

Session: A session is a period that has a constant set of validators. Validators can only join or exit the validator set at a session change. On Polymesh, the duration of a session is 4 hours.

Election: This is the event of distribution of stake across validators. Elections take place at the beginning of every era. Staking operations are not permitted during this time.

Terms related to staking actions

Bonding: This is the act of locking tokens. During this period, your POLYX remains locked or bonded status and cannot be transferred.

Nominating: This is the act of selecting validators to stake with. On Polymesh, a nominator can select up to 16 node operators).

Chill: This is the act of stepping back from any nominating. This means that you are not nominating any validator and not receiving any staking rewards. This action is not will not unlock your POLYX or start the unbonding process. Your POLYX remains bonded until you unbond it.

Unbonding: This is the act of unlocking tokens from staking. On Polymesh Mainnet, the unbonding period takes 28 eras (roughly 28 days). During this time, you won't receive any rewards, and your POLYX remains locked.

Terms related to staking accounts

Stash key: This is where you keep all the POLYX you want to stake. This key can set the controller key.

Controller key: This is used to control actions related to your staking, and other things. Think of the stash as your cold wallet and the controller as your hot wallet. Funding operations are controlled by the stash and any other non-funding actions by the controller itself. To ensure optimal fund security using the same stash/controller is strongly discouraged, but not forbidden.

Locked funds: When tokens are used to serve their utility purpose on the chain, they are locked. The account holder still controls locked tokens. They cannot be transferred, but they can be used for multiple operations on the chain. For example, the same locked tokens can be used to nominate validators and vote in democracy.

Bonded funds: This is the total number of tokens you have allocated to staking including active, unbonded, and available to withdraw tokens.

Staking: This is the amount of tokens you are actively staking in the current era.

APY (Average Annual Percentage Yield): This is the annual rate of return, shown in percentages before operator commission is subtracted.

APR (Average Annual Percentage Rate): This is the annual compounded return, shown in percentages before operator commission is subtracted.