Proof of Stake on OMG Network
OMG is specifically purposed for staking on the OMG Network’s PoS (Proof of Stake) consensus. OMG is “staked” (i.e. locked up in a smart contract) by validator, who run nodes perform consensus to determine the next block to be added to the blockchain. Staked tokens will be locked for a certain period, and can be re-staked after each period. There will be an unbonding period when a staker decides to withdraw to help preserve stability in the validator set.
Honest behavior is incentivized by transaction fee rewards, which are awarded to stakers who behave in line with network consensus. Rewards are distributed in proportion to the amount staked. Misbehaviour is penalized by “slashing” (i.e. burning staked tokens) to ensure that faulty behaviour costs more than it’s worth. Advantages of PoS include security by way of redundancy; removal of single points of failure; reduced risk of centralization; and energy efficiency compared to Proof of Work in which massive expenditure of computing power to solve arbitrary problems is an integral part of the consensus mechanism.
In later phases of the OMG Network (as liquidity and interoperability allow) we intend for validators to be able to accept fees in any token, including but not limited to OMG or ETH. A validator node will be designed to be light enough to run on modern computer, virtual private server, or cloud server. While OmiseGO validators will not need to stake ETH or act as Ethereum validators, you will need to run a full Ethereum node for root chain security reasons.
Validator Fees for Stakers
Fees on the OMG Network will be dynamically determined by supply and demand on the network. Transaction fees will be distributed to validators in proportion to amount staked through the smart contract which governs the staking mechanism.