Tangle Network Incentives

Tangle Network is built on, Substrate, a powerful framework developed by Parity Technologies for creating blockchains. It comes with many built-in functionalities, allowing developers to customize their blockchain with an array of features. Among these features, staking and slashing play crucial roles in ensuring the security and robustness of Substrate-based networks.

Staking

Staking is a system used by proof-of-stake (PoS) blockchains to secure the network, incentivize behavior, and distribute rewards. In Substrate, a number of nodes, known as validators, are selected to produce blocks and confirm transactions. Users can participate as:

• Validators: Validators are responsible for proposing new blocks and validating proposed blocks. They need to be highly secure and continuously online. Validators stake their own tokens and can receive tokens from nominators.

• Nominators: Nominators support validators by staking tokens on them. They share in the rewards and risks of validators, without needing to run a node themselves.

Validators and nominators are rewarded with new tokens generated by the network, proportional to the amount of tokens they have staked.

Slashing

To ensure validators behave properly, Substrate uses a mechanism known as slashing. If a validator misbehaves, a portion (or all) of their staked tokens are confiscated ("slashed") by the network. There are several types of misbehavior that can lead to slashing:

• Equivocation: Equivocation occurs when a validator signs two or more conflicting blocks at the same height in the chain. It is considered a severe misbehavior as it could cause a fork in the network.

• Offline Validators: Validators are expected to be online and participating in consensus. Validators who are offline for an extended period can be slashed.

• Malicious Behavior: Any malicious actions against the network, like trying to manipulate consensus or carry out an attack, can result in slashing.

Misbehavior Reporting

Substrate also includes mechanisms for reporting misbehavior. Any network participant can submit proof of validator misbehavior to the chain. If the proof is valid, the validator is slashed, and the reporter is usually rewarded with a portion of the slashed amount.

Malicious Signing

A validator signing arbitrary or malicious messages is another significant misbehavior. This can include signing a message that would lead to equivocation or attempting to manipulate consensus. The penalty for malicious signing is typically severe, often resulting in the slashing of the validator's entire stake.