Consensus Layer
The Permissionless Consensus layer forms the base of the Acurast protocol and is based on a variant of the Nominated Proof-of-Stake (NPoS) algorithm [1]. Unlike traditional Proof-of-Stake (PoS) networks, there are validators and nominators in NPoS. Block validators verify transactions to be included in the next block, similar to traditional PoS block validators. The key difference is that instead of being randomly chosen, the validator nodes are nominated by another node.
In Acurast's NPoS, an unlimited amount of token holders can participate as nominators, backing a limited set of validators with their stake. Having a limited set of validators assures the long-term scalability of the consensus, allowing the increase of the maximum threshold through governance decisions. An unlimited set of nominators assure that higher value is at stake, assuring a high level of security. Due to its upgradable runtimes, consensus parameters are configurable by governance decisions, e.g., The maximum number of validators, and the minimum amount of stake for validators.
The Acurast NPoS system heavily leverages nominators to ensure network integrity. Nominators and validators have multiple aligned incentives. Nominators hold a financial stake in the system, which means that they could suffer a loss if a validator acts maliciously. In addition, nominators are financially rewarded for selecting a reliable and high-performance validator. Both nominators and validators have reputational stakes, with the credibility of nominators affected by their validator choices. Finally, the limited number of validator slots in NPoS structures creates a competitive environment, pushing nominators to select the most efficient validators, but also democratizes the process, making voting power essential.
NPoS has proven to be an efficient way to achieve high levels of security, scalability, and decentralization over time. Congruent to [1], nominators share the rewards, or eventual slashings, with the validators they nominated on a per-staked-ACU basis.
References
[1] J. Burdges, A. Cevallos, P. Czaban, R. Habermeier, S. Hosseini, F. Lama, H. K. Alper, X. Luo, F. Shirazi, A. Stewart, and G. Wood, Overview of Polkadot and its Design Considerations, 2020.