Everything You Need to Know About Validator Nodes: A Deep Dive

Terms of use

Terms of Use

The use of this site and the content contained therein is governed by the Terms of Use. When you use this site you acknowledge that you have read the Terms of Use and that you accept and will be bound by the terms hereof and such terms as may be modified from time to time.

All text, graphics, audio, design and other works on the site are the copyrighted works of nasscom unless otherwise indicated. All rights reserved.
Content on the site is for personal use only and may be downloaded provided the material is kept intact and there is no violation of the copyrights, trademarks, and other proprietary rights. Any alteration of the material or use of the material contained in the site for any other purpose is a violation of the copyright of nasscom and / or its affiliates or associates or of its third-party information providers. This material cannot be copied, reproduced, republished, uploaded, posted, transmitted or distributed in any way for non-personal use without obtaining the prior permission from nasscom.
The nasscom Members login is for the reference of only registered nasscom Member Companies.
nasscom reserves the right to modify the terms of use of any service without any liability. nasscom reserves the right to take all measures necessary to prevent access to any service or termination of service if the terms of use are not complied with or are contravened or there is any violation of copyright, trademark or other proprietary right.
From time to time nasscom may supplement these terms of use with additional terms pertaining to specific content (additional terms). Such additional terms are hereby incorporated by reference into these Terms of Use.

Disclaimer

The Company information provided on the nasscom web site is as per data collected by companies. nasscom is not liable on the authenticity of such data.
nasscom has exercised due diligence in checking the correctness and authenticity of the information contained in the site, but nasscom or any of its affiliates or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this site. The information from or through this site is provided "as is" and all warranties express or implied of any kind, regarding any matter pertaining to any service or channel, including without limitation the implied warranties of merchantability, fitness for a particular purpose, and non-infringement are disclaimed. nasscom and its affiliates and associates shall not be liable, at any time, for any failure of performance, error, omission, interruption, deletion, defect, delay in operation or transmission, computer virus, communications line failure, theft or destruction or unauthorised access to, alteration of, or use of information contained on the site. No representations, warranties or guarantees whatsoever are made as to the accuracy, adequacy, reliability, completeness, suitability or applicability of the information to a particular situation.
nasscom or its affiliates or associates or its employees do not provide any judgments or warranty in respect of the authenticity or correctness of the content of other services or sites to which links are provided. A link to another service or site is not an endorsement of any products or services on such site or the site.
The content provided is for information purposes alone and does not substitute for specific advice whether investment, legal, taxation or otherwise. nasscom disclaims all liability for damages caused by use of content on the site.
All responsibility and liability for any damages caused by downloading of any data is disclaimed.
nasscom reserves the right to modify, suspend / cancel, or discontinue any or all sections, or service at any time without notice.

For any grievances under the Information Technology Act 2000, please get in touch with Grievance Officer, Mr. Anirban Mandal at data-query@nasscom.in.

New

See all

No notification found.

Everything You Need to Know About Validator Nodes: A Deep Dive

Zeeve Inc

@Zeeve

June 1, 2023

Blockchain

264

In the fast-paced world of crypto investing, where risk assessment is paramount for everyone, traditional approaches like farming, lending, borrowing, or engaging with multiple DeFi platforms may not fit into institutions’ investment thesis. For those seeking a secure yet lucrative path to navigate the digital asset investment landscape, running validator nodes stands as an enticing frontier.

By delving into the intricacies of these nodes, we will explore how validator nodes work, the specific requirements to run them, and the potential rewards they offer. we will delve into how validator nodes distinguish themselves from full nodes, uncovering their unique roles in securing blockchain networks. In the end, we will see how one can get their validator nodes up and running in less than 5 minutes, skipping all the complexities.

So, without further ado, let’s get straight into it.

What is a Validator Node?

A validator node is a participant in the network that has the role of validating and relaying transactions. Validators are fundamental to the functioning and security of a blockchain network.

While the specific roles and responsibilities of validator nodes can vary depending on the specific blockchain protocol, they perform the following functions:

Transaction Validation: Validators review and verify the authenticity of transactions that are to be added to the blockchain. This includes checking the cryptographic signatures and ensuring the transactions are properly formed according to the protocol rules.

Block Creation/Proposal: In some blockchain networks, validators are responsible for creating or proposing new blocks of transactions. This involves gathering a set of valid transactions, forming them into a block, and proposing that block to the rest of the network.

Consensus Participation: After a block has been proposed, the network must agree on whether to accept it and add it to the blockchain. Validators participate in this process by following the rules of the consensus mechanism to agree or disagree with the proposed block.

Network Security: By fulfilling the above roles, validators contribute to the security of the blockchain network. They help to prevent double spending, ensure that only valid transactions are added to the blockchain, and contribute to the immutability of the ledger.

Being a validator often requires meeting certain requirements. For instance, you may need to hold and be willing to “stake” a certain amount of the blockchain’s native token. This stake is a security deposit, incentivizing honest behavior and disincentivizing malicious actions. If a validator acts dishonestly or fails to fulfill its duties properly, it may lose part or all of its stake.

How Validator Nodes Work?

Let’s understand by taking the example of Ethereum. When a user on the Ethereum Network initiates a transaction, the transaction enters a queue to be included in the next block. Validators play a key role in this process. To become a validator, a participant is required to deposit 32 ETH into a specific contract and run three types of software: an execution client, a consensus client, and a validator client. Once set up, the validator starts receiving transactions to verify and validate.

The process begins when a user creates and signs a transaction using their private keys, typically initiated via a wallet interface. This interface communicates with the network through the JSON-RPC API, specifying the base fee and tip to be paid to the validator. The transaction is then sent to the execution client, which verifies whether the initiating user has sufficient funds for the transaction. Once confirmed, the transaction is added to the mempool and broadcast to the network nodes.

A system called RANDAO, a Random Number Generation Authority, then selects validators to validate the transaction. The transactions from the mempool are bundled into an execution payload and sent to the chosen validators for verification. This block includes details about rewards, penalties, slashings, and attestations.

After the validators receive this block, they verify it, updating the state of the blockchain. This information is then passed to the consensus layer of the network, where the transactions are re-validated to ensure their sequence. If everything checks out, the validator attests that the block is valid. This process continues in cycles, with the validator nodes continuously validating and verifying new transactions and blocks.

How Do Validator Nodes Differ from Full Nodes?

In the realm of blockchain nodes, we often hear two names: validator nodes and full nodes. While both are integral to a blockchain network, their roles, functionalities, and capabilities vary.

Let’s examine these differences:

Roles in the Network:

Validator Nodes are run by a pre-set number of validators responsible for validating transactions. While Full Node can be run by any participant who meets the network’s entry requirements, verifying transactions and maintaining network synchronization.

Transaction Validation:

Validator Nodes validate transactions based on the blockchain’s rules and protocols.

And Full Nodes validate transactions through synchronization with the rest of the network, ensuring blockchain-wide consensus.

Writes and Reads:

Validator Nodes accept “writes” to the blockchain, processing and adding user transactions to the ledger. But Full Nodes primarily focus on “reads,” handling user queries and offering scalability to the validators by distributing read request loads.

State Authentication:

Validator Nodes maintain signatures that validate the current state of the blockchain.

While Full Nodes rely on the validators’ signatures to authenticate the blockchain’s state.

Running a Validator Node: The Requirements & The Rewards

When you plan to run your own validator node, there are certain hardware requirements that you should meet. Have a look at them, and you can also analyze the cost implications and the rewards to come to a conclusion about whether you wish to run the validator nodes in the first place or not.

Efficacy of Validator Nodes In the Long Run

Diversification is key to mitigating risk in your investment portfolio. Traditional means often suggest investing in bonds, which provide stable returns over a specified period. For instance, bonds from economies such as the USA, Canada, Germany, and India yield returns of 3.52%, 2.85%, 2.25%, and 7.33%, respectively. But if you’re seeking higher yields, running a validator node on certain blockchain networks can be an intriguing addition to your portfolio.

Consider AVAX, which offers an 11% reward rate – a figure that outstrips the highest returns generated by bonds in various countries. Similarly, Polkadot yields a staggering 16%, and Kusama offers 14.77%.

However, understanding the economics of running a validator node is crucial to ensure its profitability over the long run. A basic equation to compute potential returns looks like this:

ROI = Validator Rewards + Network Fees – Cost of Running a Single Validator Node

Before deciding to run a validator node; it’s essential to calculate based on this equation. Need to keep in mind the macroeconomic factors and current market conditions, too, as they can greatly affect profitability.

The economic model of validator nodes incentivizes validators to remain active, increasing their chances of receiving rewards. For instance, on Ethereum, one of the most prominent blockchains, validators have seen returns ranging from 4.6% to 10%. Since January 2022, these figures have soared to as high as 12% APY.

This might seem attractive and spark the urge to jump in and earn. But before you do, here are a few things you must consider.

About The Author

Author

Dr. Ravi Chamria is co-founder CEO of Zeeve Inc, an Enterprise Blockchain company. He has an experience of 18+ years in IT consulting spanning across Fintech, InsureTech, Supply Chain and eCommerce. He is an executive MBA from IIM, Lucknow and a prolific speaker on emerging technologies like Blockchain, IoT and AI/ML.

Passionate About: Blockchain, Supply Chain Management, Digital Lending, Digital Payments, AI/ML, IoT

Specialities: Strategic Management, Technology Innovation, Product Management

validator node

Disclaimer

That the contents of third-party articles/blogs published here on the website, and the interpretation of all information in the article/blogs such as data, maps, numbers, opinions etc. displayed in the article/blogs and views or the opinions expressed within the content are solely of the author's; and do not reflect the opinions and beliefs of NASSCOM or its affiliates in any manner. NASSCOM does not take any liability w.r.t. content in any manner and will not be liable in any manner whatsoever for any kind of liability arising out of any act, error or omission. The contents of third-party article/blogs published, are provided solely as convenience; and the presence of these articles/blogs should not, under any circumstances, be considered as an endorsement of the contents by NASSCOM in any manner; and if you chose to access these articles/blogs , you do so at your own risk.

Zeeve Inc

Zeeve is an enterprise-grade Blockchain Infrastructure Automation Platform. Join the growing list of clients that trust us with their Blockchain initiatives