1.What is Tezos?
Tezos is a decentralized Delegated Proof-of-Stake ledger and smart contract platform with an in-built governance system. In addition to reaching consensus on the state of the ledger, Tezos aims to reach consensus on updates and improvements to the protocols and consensus mechanism itself. It facilitates formal verification, a technique which mathematically proves the correctness of the code governing transactions and boosts the security of the most sensitive or financially weighted smart contracts. In this way, Tezos is designed to avoid the forks which cause disruption on other ledger and blockchain platforms like Bitcoin and Ethereum.
Since Tezos uses "Delegated Proof of Stake" as a method of creating new tokens. "Baker and Baking" is starting to become the standard Tezos terminology, like validator and validating.
2.What is Delegated Proof of Stake (DPoS)?
Delegated Proof of Stake (DPoS) is a hybrid consensus mechanism designed to tackle the scalability problems faced by other ledger systems without compromising the goal of being decentralized. It is an alternative consensus mechanism that requires coin holders to vote for “delegates”, who are then responsible for validating transactions and maintaining the blockchain. DPoS is an alternative to the more commonly known, Proof-of-Stake (PoS) model, which requires miners to put up a stake in the required cryptocurrency before they are able to process transactions and add them to the blockchain.
3.What is baking?
“Baking” is the act of signing and publishing blocks to the Tezos blockchain. Bakers are a crucial component of the PoS consensus mechanism by ensuring that all transactions in a block are correct, that the order of transactions is agreed upon, and that no double-spending has occurred.
Bakers who successfully produce blocks are rewarded with XTZ. Unlike traditional Proof of Stake, bakers must put up a bond which can be lost if the block is completed fraudulently or incorrectly. Users who give their stake to delegates do not have to put up a bond, eliminating their risk.
4.Why should I delegate? Can I do it on my own?
You don’t have to bake or delegate, but then you won’t receive a share of the new XTZ create by the DPoS system. This will deflate the value of your tokens compared to users who do participate.
Yes, it is possible to be your own delegate. However, building a “baking” node requires tech knowledge, specific hardware and security measures. To "bake" your own Tezos based on your own stake, you would need to set up and host your own server node running both the node and baking software 24/7/365. It is highly advised that this server node have its own dedicated, unlimited internet bandwidth connection. You will also likely be required to own a secure hardware wallet and have it hooked up to the server node system at all times for added security. You will then be required to sponsor a 10% Tezos security bond to assure that you follow the Tezos "baking" rules. This 10% of your Tezos ownership could be lost permanently if baking violations or problems are detected.
By delegating your XTZ to SparkPool you free yourself from the need of running the node on your own while having full control of your XTZ’s.
5.What is delegation, and how is it different from baking?
Tezos is a delegated proof of stake blockchain. That means that stakeholders (XTZ holders) are responsible for running the network and keeping consensus. For consensus to happen, the stakeholders have to either bake their XTZs or delegate them to someone else to bake.
Delegates are nodes voted by other users to participate in network consensus, block generation, and endorsement signing. Delegates work in conjunction with master nodes, which have a full copy of the Tezos blockchain. Users can revoke their delegation preferences at any time, ensuring that delegates remain trustworthy.
6.What is a security deposit (bond)?
To ensure each baker signs blocks and endorsements correctly, they must put up a temporary security deposit. This is currently held, along with the rewards, for an additional five complete cycles (approx. 15 days) after the cycle where the deposit was made.
If you want to "Bake" new Tezos yourself, you are required to host 8-15% of all the Tezos you are staking as a bond. This bond encourages people to "bake" Tezos ethically. If anyone does something wrong or tries to hack the system and create extra Tezos they run the risk of losing all of their Tezos bond ownership. This helps make the Tezos platform very secure. As your Delegate, we host this bond with our own Tezos that we hold in reserve thereby reducing your risk.
7.Who pays the security deposit?
If you delegate with us, we’ll pay your security deposit. If you decide to solo bake and not use a delegate service, you’ll need to post a security deposit for each block and endorsement you make. You risk losing this deposit if you don't configure everything correctly.
8.Does my XTZ get locked when I delegate?
No, your tokens never leave your wallet. You’re just giving us permission to bake for you. You can always transfer or spend your funds, and you can change your delegate at any time.
9. What happens when you are over delegated?
If we are over delegated, we will honour our delegators on a “first come first serve” basis. That means we will stop accepting new delegations until someone leaves our bakery. In that case you will be able to check on this site whether you qualify for a payout during a given cycle. You can of course change your delegate anytime you want.
That being said once our capacity to place bonds is reaching a certain threshold we might allocate more capital to our baking node. We have set aside liquid capital to stay flexible. Furthermore, security bonds will be very small in the beginning and ramp up over the course of six months.
10. What is the difference between static and dynamic patouts?
Some bakers give static payouts. It’s almost like a static interest on your capital. Baking returns can be quite high in the first months since only a relatively small amount of XTZ is actively engaging in the PoS algorithm. So while the baker is making enormous ROI with your capital, you get a low and static payout. We think that the fairest way is a dynamic fee which is saying “you get whatever we make with your delegation minus our fee”.
11.Is there a minimum payment threshold?
The minimum payment threshold is currently set at 10 XTZ. In case you have less than this amount for a specific period, it will roll-over and will be paid along with the next period’s rewards.
12.Are SparkPool anonymous? What login information will you require?
We understand the need for privacy. We do not ask for any of your personal information, name, age, location...etc. Our login is ANONYMOUS & private and will only require that you use an email to log in. Account validation will happen within the blockchain itself. (Our system will NOT need your PRIVATE key. Please keep your PRIVATE key 100% secure, offline, and secret.)
13.How can I delegate my tokens to SparkPool?
Using a wallet (Recommended):
Some of the wallets have us listed in their software (eg. Tezbox), in these wallets all you need to do is to select SparkPool from the dropdown list.
In case we’re not listed in a wallet, simply enter our delegation address manually:
Using the Tezos command line (Only for advanced users):
./tezos-client set delegate for <your KT1 address> to tz1LesY3S4wfe15SNm1W3qJmQzWxLqVjTruH
14. Are my XTZs safe?
Yes. As delegator, you are simply assigning your baking rights to SparkPool. You are not giving us your XTZs and are not providing your private keys. Also, unlike in other protocols, delegators can't be slashed. All the risk is with us.
NEVER PROVIDE YOUR PRIVATE KEY TO ANYONE
We automatically send you your rewards every 7 baking cycles - back to the wallet that you delegated from. If your stake is very small, we will hold onto them until you have accumulated 10 XTZ and then we will forward the rewards minus gas costs to your wallet.
15. How much will I make? What is the fee?
Our current fee is 5%.
During the Betanet, there will be lots of variability around fees and baking returns. However, SparkPool is committed to providing a fair return and showing how that return was determined in a transparent fashion.
Your rewards depends on:
- The number of XTZs you are delegating
- When you delegated in the cycle
- When you stopped delegating
- What percentage of all XTZs are staking
- What bond coverage your delegate has compared to the number XTZs delegated to it.
To add to this complexity, the early cycles of the Tezos betanet will be highly irregular. We will all be learning how the system works over the first few months together.
It is essential for us to provide fair and transparent returns to our customers. That’s why we agreed on a 5 % fee for our service. Your earnings will look like this:
(Block Rewards + Endorsement Rewards + Block Fees)
* (100% - fee) * (Your Delegated Balance / Total Staking Balance)
We will soon offer a tool which allows every delegator to monitor his rewards.
Please note that SparkPool Delegation Service will have a 10% fee starting from 1st of August. The 5% fee will be in place for all our current members and new members that joined before the 1st of August.
16. When do I get my staking rewards?
SparkPool initial schedule is to pay out delegation awards every 7 cycles.
With the current economic constants of the Tezos protocol, baking power calculated in the snapshot of cycle N is used for baking in cycle N+7. In cycle N+12, the bonds and baking rewards are unlocked and returned to the baker. At this point, the rewards become pending and will be initially paid every cycle, where the outstanding balance is greater than 20 XTZ, or else accumulated until they exceed 20 XTZ. So we anticipate a schedule like the following:
Cycle 0 - you delegate to SparkPool
Cycle 7 - The Tezos Blockchain assigns your delegation rights to us and we can start baking for you.
Cycle 14 - Rewards for Cycle 7 and start accumulating in your account.
Cycle 21 – SparkPool provides the rewards for cycles 7-13.
Our process is designed to mirror the exact structure of the Tezos protocol. This means that calculations of delegated baking power are based on the actual roll snapshots used and the balance at that time. The snapshot used is randomly selected by the protocol to be one of any of the 16 throughout the cycle. Changing delegates in the middle of a cycle means you cannot be sure who your delegate for that cycle is until later, but it will always be set. Changing within the first 256 blocks of a cycle will always result in a change of delegate for that cycle.
17. What is your delegation capacity
The delegation capacity of a baker in the early period of the Tezos network is dynamic, and depends on the proportion of the total XTZ that are active (contributing to rolls by being delegated to an active baker), as well as the fixed schedule of required bonds ramping over the first 64 cycles (~180 days).
We project our delegation capacity over the first cycles of the network, with certain assumptions about the delegation rate that will be updated with new information as it is revealed on the network.
18. What else do I need to know?
We are all pioneers and this has literally never been done before. So there are bound to be issues with the beta net in its early days, so stay positive and helpful. There is significant risk inherent with new, unproven technology. But since you are one of the earliest adopters, its likely that you understand the risks and opportunities.