As announced last week, Dock’s mainnet will be transitioning from Proof of Authority to Proof of Stake on July 7th, 2021 at 1pm GMT. To help prepare our community for this exciting step, in this post we will expand upon our earlier article and explain how Dock token holders will be able to earn passive income by participating in the new network as nominators.
Nominators are an integral part of the new Proof of Stake mainnet, as they help secure the network by electing validators and extend the utility of the Dock token by using it as a tool for nomination. After candidate validators begin accepting nominations, nominators can review their details - e.g., identity, commission rate, and their current level of stake - and decide on which validators to support (a nominator can back up to 16 validators at a time). Nominators can then make a transaction on the Dock chain to stake (lock up) Dock tokens for the selected validator(s). When the nomination period is over, the Proof of Stake algorithm automatically selects the candidates with the highest stakes to become validators. Token holders can review validator information and stake tokens using our network frontend application once the mainnet launches on July 7th, 2021 at 1pm GMT. Step-by-step instructions on nominating using this platform can be found here.
Once a validator is selected and begins to successfully produce blocks on the Dock mainnet, the validator and their nominators start earning rewards in the form of Dock tokens. The rewards consist of emission rewards released by the Dock network and the transaction fees paid by network users, and how they are split among the validator and the nominators depends on the validator’s commission rate and how many tokens each party has staked. It takes 7 days for the locked tokens to be unlocked (or unbonded) further to the processing of an unbond transaction.
For example, let’s say that a validator generates 100 tokens as rewards, where their own stake is 10% of the total stake behind the validator, their commission is 5%, and they have 3 nominators with 35%, 30%, and 20% stake each. In this case, the network would distribute 15 tokens (10 for staking + 5 for commission) to the validator, and provide 35, 30, and 20 tokens to the nominators. Here’s a table that summarizes this scenario:
We strongly recommend that nominators perform their due diligence on the candidate validators before locking up tokens on their behalf, as backing validators that misbehave on the network may result in having some or all of the staked tokens slashed. In addition, nominators should be strategic when deciding which validator(s) to support and how much tokens to stake, because backing a validator who already has a large number of nominators or staking only a small amount could prevent a nominator from earning rewards. More information on these considerations can be found in this article from our docs.
We are currently working with various partners to make it possible for DOCK holders to stake and nominate through exchanges, staking platforms, and hardware wallets. We will provide updates as soon as these methods become available. In the meantime, please feel free to review our docs, read other articles on our blog, and reach out to us via Twitter or Discord.