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June 12, 2024

Understanding Validators in Blockchain

Blockchain Validators Explained: The Guardians of Security and Decentralization



Cryptocurrencies lack physical form and centralized control unlike regular currencies. This situation requires a supervisor to ensure proper adherence to transaction rules. In the world of cryptocurrencies, validators act as guardians of security. They verify transactions and enforce network rules. Validators that are backbone of blockchain security and decentralization, guarantee accurate record-keeping, prevent fraud like double-spending (an attack on blockchain networks and systems where a token or cryptocurrency can be spent more than once) by checking if transactions adhere to protocols and have sufficient funds. Unlike a centralized authority, validators are distributed across the network, enhancing its resistance to manipulation.

Different blockchain networks employ distinct consensus mechanisms, which in turn determine the types of validators involved and the mechanisms they utilize for validation.  Three types of common validators can be mentioned:

  1. Proof of Work (PoW) Validators
  2. Proof of Stake (PoS) Validators
  3. Delegate Proof of Stake (DPoS) Validators

In this topic, Validators in blockchain network will be examined and be presented with a slight understanding of their core functionalities, consensus mechanisms and work principles.

What is a Blockchain Validator?

Validators in Blockchain have significant roles to verify and confirm transactions. Despite different kinds of validators can act differently in need, they have some core functions:

Transaction Validation

Validators meticulously examine each transaction to confirm its validity, including verifying sufficient funds, adherence to protocol guidelines, and proper signing with the sender's private key. For instance, they check if the sender has sufficient funds to complete the transaction and if the transaction format is valid. This, also, prevents someone from trying to use the same digital asset twice.


Block Validation:
In addition to individual transactions, validators also scrutinize entire blocks. They ensure that each block adheres to the predetermined size constraints and cryptographic rules of the blockchain. This safeguards the integrity of the entire blockchain by preventing the inclusion of invalid or malicious blocks.


Consensus Mechanism Participation:
Validators actively engage in the consensus mechanism, which is the process by which the network reaches agreement on the current state of the blockchain. In a collaborative effort, blockchain validators achieve consensus on transactions, safeguarding the integrity and functionality of the blockchain. Validators play a vital role in upholding the chosen consensus mechanism and ensuring that only valid blocks are added to the blockchain.


Block Addition:
Each validator adds the validated block to their own local copy of the blockchain, ensuring that all participants have an identical and up-to-date ledger.


Network Security:
Blockchain technology relies heavily on cryptography. Validators use cryptographic techniques to verify the authenticity of transactions and blocks, preventing unauthorized modifications to the blockchain ledger.

How Do Validators Operate?

Two steps are necessary on decentralized blockchain to avoid malicious operations, double-spending, and evaluate new block addition. Miners and validators provide these steps and play crucial roles in securing blockchain networks, but they achieve this security in fundamentally different ways.  


In PoW-based blockchains like Bitcoin and Ethereum, validators are often referred to as miners. Miners (in Proof-of-Work / PoW networks). They compete to solve complex mathematical problems, and the miner who successfully solves a problem gets to add the next block to the blockchain. The first miner to solve the puzzle gets to propose the next block, which is then validated by other miners. This competition requires significant computing power, making it an energy-intensive process. This raises environmental concerns. However, in terms of security, attacking the PoW network would require an attacker to control more than half of the mining power, which becomes increasingly expensive and unrealistic as the network grows. This situation makes PoW network reliable.


Proof-of-stake / PoS networks were created as alternative of PoW validators. Validators (in Proof-of-stake / PoS networks), are chosen based on the amount of cryptocurrency they have staked. The more coins a validator has staked, the higher the chance of being selected to validate transactions and add new blocks. PoS validators reduce the amount of computational work needed to verify blocks and transactions. This mechanism is considered more energy-efficient than PoW. This eliminates the need for energy-guzzling computations. Furthermore, Validators lose their staked coins (and potential rewards) if they behave dishonestly. Validators simply need to keep their systems online to participate because they don’t solve complex puzzles, so that they require significantly less energy compared to miners. In example, The Ethereum network's transition to PoS results in a staggering 99.99% decrease in energy usage. The network was consuming 23 million megawatts of energy per year. With proof-of-stake, this falls to just 2,600. Other examples of PoS blockchains include Cardano and Solana.





Proof of Work (PoW)

Proof of Stake (PoS)

Validation Method

Miners solve puzzles

Validators selected based on stake

Energy Consumption

High

Low

Barrier to Entry

High (requires expensive hardware)

Lower (depends on staking amount)

Security

High  

Lower

Differences between PoW and PoS

Apart from Proof of Work networks and Proof of Stake networks, there are several different types of consensus mechanisms in blockchain validators.

Common Types:

  1. Delegated Proof of Stake (DPoS) Validators: DPoS networks, variant of PoS, introduce a layer of delegation, where token holders elect a set of validators to perform validation tasks. DPoS aims to improve scalability and efficiency. These elected validators are responsible for verifying transactions and maintaining the network's consensus. The most known cryptocurrency that uses DPoS is EOS.
  2. Byzantine Fault Tolerance (BFT) Validators: BFT consensus algorithms are employed in blockchains like Hyperledger Fabric. Validators in BFT networks operate in rounds, proposing blocks and voting on their validity. The mechanism ensures that even if a small number of validators act maliciously, the network can still reach consensus on the correct state of the blockchain. Currencies like Ripple use BFT validators.


The Other Types to Mention

  1. Proof of Authority (PoA) Validators): A reputation-based consensus algorithm that offers a practical and efficient solution to blockchain networks. The term was coined by Ethereum co-founder and former Chief Technology Officer Gavin Wood in 2017. Unlike PoW or PoS, PoA networks have a predefined set of validators. These validators are typically known entities with a proven track record and established reputation.
  2. Proof of History (PoH) Validators: It is relatively new consensus mechanism introduced by Solana Labs in 2018. It tackles some of the scalability and performance limitations of traditional mechanisms like Proof of Work (PoW) and Proof of Stake (PoS). PoH focuses on creating a verifiable record of the passage of time within the blockchain itself. This eliminates the need for complex computations (PoW) or relying on stake (PoS) to establish transaction order.
  3. Proof of Delegated Authority (PoDA) Validators: A less common consensus mechanism compared to PoW, PoS, or PoA. It shares some characteristics with both PoA and Proof of Stake (PoS) but with a key distinction in validator selection.
  4. Proof of Elapsed Time (PoET) Validators: Poet validators are unique consensus mechanisms designed for permissioned blockchain networks. Unlike Proof of Work (PoW) and Proof of Stake (PoS) that rely on computational power or token holdings, PoET introduces a fair lottery system to determine who gets to create the next block.
  5. Proof of Burn (PoB) Validators: In PoB, miners validate transactions and secure the network by "burning" their own cryptocurrency tokens. Burning essentially means sending them to an unspendable address, effectively removing them from circulation.
  6. Proof of Capacity (PoC) Validators: It is sometimes referred to as Proof of Space (PoSpace). PoC validator is a consensus mechanism used in blockchain networks that offers an alternative to the energy-intensive Proof of Work (PoW) and the potential centralization concerns of Proof of Stake (PoS).
  7. Proof of Contribution (PoCo) Validators: It is a consensus mechanism designed specifically for decentralized applications (dApps) and computation marketplaces.


Importance of Blockchain Validators

Because validators are such as guardians of blockchain networks in terms of security, trust and reliability, they are one of the most important parts of the cryptocurrency world. Here is a breakdown of their critical roles:

Security:

  • Fraud Prevention: Validators meticulously examine transactions to prevent fraud, ensuring adherence to network rules and sufficient sender funds.
  • 51% Attack Protection: A 51% attack is a person or group that owns the majority of the hash rate in the blockchain system. It is a type of cyber-attack that aims to take control of the network and causes disruptions in the blockchain system. By distributing validation power among multiple validators, a blockchain becomes significantly more resistant to 51% attacks. In such attacks, a malicious entity tries to control a majority of the computing power to manipulate the network. With validators, a successful attack would require compromising a large number of validators, making it much more difficult and expensive.

Decentralization:

  • Distributed Power: Validators ensure that no single entity holds undue control over the network. The power to validate transactions is spread across a distributed network of validators, preventing censorship or manipulation by any one group.
  • Censorship Resistance: Since validators are spread geographically and come from different backgrounds, they collectively prevent censorship of transactions. Transactions that adhere to the network's rules cannot be arbitrarily blocked by a single entity.

Trust and Reliability:

  • Confidence in the System: Through rigorous transaction validation, validators build trust in the blockchain's ability to function as intended. Users can be confident that transactions are legitimate and the recorded data is accurate.
  • Reliable Transaction System: Validators play a crucial role in creating a reliable system for recording and verifying transactions. By meticulously examining each transaction, they ensure the accuracy and integrity of the blockchain ledger.

How Do Validators Work?

Validators are critical components of a blockchain network, ensuring its security and smooth operation. Validators in Proof of Stake (PoS) blockchain network meticulously verify transactions within proposed blocks, ensuring their legitimacy. Once approved, they weave these blocks into the ever-growing chain, safeguarding the permanent record. As a reward for their dedication, validators are compensated in the network's native cryptocurrency. Here are steps of PoS operations.

Selection Process:

  • Staking: To become a validator, users must first stake a certain amount of the network's cryptocurrency. This stake acts as collateral, incentivizing validators to behave honestly. The more cryptocurrency a user stakes, the higher the chance of being selected as a validator.
  • Selection Mechanism: The specific selection process can vary depending on the blockchain, but generally, validators are chosen based on a combination of factors like the amount staked, the validator's uptime (availability), and sometimes even randomness. Validators are chosen probabilistically, with a higher stake increasing the likelihood of selection. In another possibility is that validators who have staked their coins for a longer duration might be given preference. Moreover, some blockchains might use a combination of factors like stake amount and staking duration

Block Validation:

  • Transaction Verification: Once selected, validators receive new transactions and meticulously examine them. They check if the sender has sufficient funds, if the transaction format is valid, and if it adheres to the network's rules.
  • Block Scrutiny: Validators also scrutinize entire blocks containing multiple transactions. They ensure the block adheres to the predetermined size constraints and cryptographic rules of the blockchain. This safeguards the integrity of the entire blockchain by preventing the inclusion of invalid or malicious blocks.


Consensus Mechanism:

  • Voting or Agreement: Once validators have validated the transactions and the block itself, they participate in the consensus mechanism. This mechanism allows validators to reach an agreement on the validity of the block and whether it should be added to the blockchain. The specific voting or agreement process can differ based on the chosen consensus protocol.
  • Block Addition: If enough validators agree on the block's validity, it gets added to the blockchain. Each validator adds a copy of the validated block to their local ledger, ensuring all participants have an identical and up-to-date record of transactions.

Rewards and Penalties:

  • Rewards: Validators who participate honestly and contribute to the network's security are typically rewarded with cryptocurrency. These rewards can come from transaction fees or newly minted coins depending on the blockchain's design.
  • Penalties: Dishonest validators who attempt to manipulate the system or act maliciously can face penalties. These penalties can involve losing a portion of their stake or even being temporarily or permanently banned from being a validator.


How Bright the Future of Validators?

The world of blockchain technology is constantly evolving, and the role of validators is no exception. As the technology matures, we can expect exciting developments in consensus mechanisms and validator participation.


Evolving Consensus Mechanisms:

  • Sharding: While Proof-of-Stake is gaining traction, new consensus mechanisms are emerging. Sharding is a database partitioning, or simply a shard, is a horizontal division of data in a database or search engine. Sharding essentially breaks down the blockchain into smaller partitions, allowing more validators to participate in parallel, potentially increasing transaction throughput. Some data in a database remains available in all shards, but some appears only in a single shard. Layer 2 scaling solutions also offer innovative ways to handle increased network traffic, potentially impacting validator workloads.
  • Layer 2: The concept of Layer 2 came into our lives in the crypto and blockchain world with the failure of Layer 1 blockchains to scale. Layer 2 works like a new layer built on top of the core blockchains. These advancements could lead to more specialized validator roles. For example, sharding might require validators to specialize in validating transactions within specific shards. Layer 2 solutions might introduce additional validator roles focused on specific functionalities.


When it comes the future of Validators, it seems that some industries will get advantages. Here's a glimpse into how different sectors might be impacted:

  • Financial Services: Imagine a world where financial transactions seamlessly flow between different blockchains. This increased interoperability could significantly reduce costs and streamline processes. Transactions that currently involve multiple intermediaries could be completed directly, saving time and money.
  • Supply Chain Management: The shift from energy-intensive PoW to more sustainable PoS validation can pave the way for greater transparency and security in tracking goods from origin to destination. PoS validation boasts increased efficiency and lower energy consumption. This translates to enhanced transparency across the supply chain, allowing all stakeholders to track goods with greater ease and confidence. Additionally, the inherent security of blockchain technology can bolster transaction security, minimizing the risk of fraud.
  • Healthcare: With enhanced security and performance of blockchain networks, patient data can be more effectively protected and can have more user-controlled healthcare applications. This fertile ground can foster the creation of secure, decentralized healthcare applications, empowering patients and improving care delivery.
  • Gaming: Interoperability across blockchain networks can be a game-changer for the gaming industry. Imagine seamlessly transferring in-game assets between different platforms. This advancement, fueled by robust validation methods, can not only reduce costs but also enhance the overall player experience.

These are just a few examples of how the future of blockchain validation holds the potential to transform industries. As validation mechanisms continue to evolve, we can expect even more innovative applications to emerge, shaping a future where blockchain technology is seamlessly integrated into various aspects of our lives.


Importance of Validator Diversity:

  • Decentralization & Security: A diverse group of validators, geographically distributed and with varying stake sizes, strengthens the network's decentralization and security. A single, concentrated validator pool is more vulnerable to manipulation.  
  • Challenges & Opportunities: Encouraging wider validator participation is crucial. Increasing validator participation can be challenging. However, there are challenges like the potential barrier to entry for smaller stakers and the need for robust validator selection mechanisms to prevent centralization. On the other hand, a wider validator base fosters a more robust and resilient network. New technologies like blockchain identity solutions could help ensure responsible validator participation.


These can be solutions:

  • The adoption of innovative consensus mechanisms like sharding and layer 2 solutions.
  • A continued emphasis on maintaining a diverse and geographically distributed validator pool.
  • Efforts to make validator participation more accessible and user-friendly.


Conclusion

To sum up, Validators are the unsung heroes of blockchain networks, safeguarding security and decentralization.  Validators meticulously examine every transaction, ensuring only legitimate ones are added to the blockchain. This prevents fraud and maintains the integrity of the network. Moreover, validators scrutinize entire blocks, upholding the blockchain's cryptographic rules and size constraints, further protecting against malicious tampering. Validators actively participate in the network's consensus mechanism, ensuring agreement on the current state of the blockchain and preventing manipulation.

Furthermore, Validators play a vital role in maintaining decentralization, a core principle of blockchain technology. By distributing validation power among a diverse group, they prevent any single entity from controlling the network. This fosters trust and transparency within the blockchain ecosystem.

The blockchain landscape is constantly evolving, and the role of validators is no exception. Emerging consensus mechanisms like sharding and layer 2 solutions could lead to specialization among validators and a focus on core security tasks. Additionally, maintaining a geographically diverse validator pool will be crucial to ensure a truly decentralized future for blockchain technology.

In essence, validators are the backbone of secure and reliable blockchain networks. As the technology matures, their role will undoubtedly continue to adapt and evolve, paving the way for a more secure, efficient, and decentralized future.

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