Breaking Down Aleo PoS: A First-Time Stakers’ Guide

Starting on Jan 15, Aleo has been under a rigorous pressure test which is also the last one before mainnet. Among the focal points of their current testing phase is the coinbase puzzle, a cornerstone in the realm of proof systems. This is not just any routine update; we’re talking about the implementation of what may become the latest proving algorithm — set to be unveiled on February 1st.

Aleo, while incorporating staking, is not solely based on a Proof-of-Stake system. It employs a unique hybrid model called Proof-of-Succinct Work (PoSW), which blends mining and staking. The core consensus mechanism in Aleo is termed AleoBFT, deriving its staking elements from DiemBFT, originally developed by the Diem blockchain team at Meta. DiemBFT operates in rounds, beginning with a leader proposing a block. Validators then cast their votes to determine the leader for the subsequent round. A vote quorum triggers the creation of a quorum certificate by the new round’s leader, which is then integrated into their block proposal.

In Aleo’s system, stakers play a role in consensus and block production, but are not directly involved in generating Zero-Knowledge (ZK) proofs. Aleo’s strategy of offloading the proof computation off-chain is intended to maintain a swift and efficient blockchain.

In this blog, we’ll briefly break down the Aleo PoS, covering what you need to know to be prepared for staking on Aleo or being enrolled as a validator.

How to Become a Validator?

To become a validator in the Aleo network, an individual or entity must stake a minimum of 1,000,000 credits. This process is enforced through a precision check in the system, ensuring that the staked amount meets or exceeds this threshold. The relevant code snippet, **gte r10 1_000_000_000_000u64 intro r11**, checks that the stake is at least one million credits, considering the precision of the unit.

Becoming a validator is not only about staking the required amount; it also involves setting up a secure and reliable node that can participate in the network’s consensus mechanism. This setup includes running the Aleo software, maintaining a stable internet connection, and ensuring hardware and software security.

Earnings as a Validator

Validators on the Aleo network earn rewards from multiple sources:

· Proof of Stake (PoS) Annual Yield: Validators earn a percentage of the staked amount annually through PoS rewards. This incentivizes the maintenance and operation of the network.

· Transaction Priority Fees: Validators earn fees from users who opt to pay extra for prioritized transaction processing.

· Half of the Coinbase Reward: Validators receive a portion of the block’s Coinbase reward, which is a set amount of credits distributed with each new block.

These earnings are shared among all validators, providing a balanced reward system.

Do Earnings Directly Enter the Wallet Balance?

The earnings from PoS do not immediately reflect in a validator’s wallet balance. Instead, they accrue in the PoS staking balance. This approach differs from Proof of Work (PoW), where rewards are directly deposited into the public account balance of the wallet.

This mechanism underscores the difference between PoS and PoW in terms of reward distribution and accounting. In PoS, the earnings are added to the staked amount, potentially increasing the validator’s weight in the consensus process and future earnings.

How to Enjoy PoS Earnings if Unable to Stake 1 Million?

For those unable to stake 1 million credits, Aleo’s contract allows for delegated staking. This means individuals can stake their credits with an existing validator node, provided the validator has enabled this feature. The **committee_state** struct keeps track of the total stake of each validator and indicates whether they are open to receiving stakes from delegators.

Delegated staking is a way to participate in the network’s staking process without meeting the high threshold for becoming a validator. It democratizes the earning potential, allowing more participants to contribute to and benefit from the network’s security.

How to Cancel Staking?

Aleo’s contract provides an interface for unstaking. Stakeholders can initiate an unstake request at any time. However, there is a lock-up period of 360 blocks before the staked amount can be transferred back to the wallet’s public balance. The **unbound_state**struct tracks the unbonding microcredits and the block height at which they will be available to claim.

As one of the first privacy-preserving Layer 1 chains, Aleo stands out for its innovative approach to staking and governance, offering a unique blend of security, privacy, and user participation. This exploration underscores Aleo’s significant role in shaping the future of blockchain, where privacy is not just an option, but a fundamental feature.

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