Each block is created by a validator and contains several signatures of the previous block. For creating and signing the blocks the validators are rewarded. They put in a five-cycle security deposit that will be taken off their balance in case blocks or signatures are duplicated.

The protocol unfolds in cycles of 4,096 blocks. At the beginning of each cycle is a random number, derived from the numbers of the previous cycle, and is revealed in the last block. Using this random number, a “follow the coin” strategy (each coin created has a serial number that allows it to be tracked and randomly selected) is used to assign rights to specific addresses for minting and signing for the next cycle.

Four cycles of PoS:

Tezos uses an LPoS consensus called Emmy+.

It is divided into 5 main parts:

Block Creation (Baking):

In the Tezos blockchain, users creating blocks are called bakers (which are validators). To become a baker (validator), a user must own at least 8,000 $XTZ (1 roll). The more rolls a user owns, the more likely they are to be selected to bake (validate) the next block. If 10 rolls are needed to create the next block and the baker (validator) owns 2/10 rolls, he has a 20% chance of being selected.

The baking (validation) rights are set in terms of priority. For example, if 10 rolls are available, the protocol may randomly select a priority list as follows:

Priority 1 = 3 roll

Priority 2 = 7 roll

Priority 3 = 3 roll

Priority 4 = 1 roll

.

.

.

Priority 10 = 4 roll

This means that the baker (validator) who owns the 3 roll will have priority when designing the block. If he does not design and post the block by a certain time, a baker (validator) with 7 rolls can take over. The more rolls a baker (validator) owns, the more chance he has of high priority. A baker (validator) can also get multiple priorities.

Endorsing:

In addition to baking (validating blocks), the participant can also approve blocks. The approval rights are set in the same way as the baking (validation) rights. For each block, 32 random rolls are selected whose owners are to validate the block. The validation serves as a vote on the block. Approvals on a block are included in the next block. Endorsing is a sign of activity – the more endorsements the blocks contain, the more secure the blockchain is.

Block Delay Rule:

The priority of a block and the number of confirmations it contains determine the minimum time within which the next block can be baked (block validation). The higher the priority and the more confirmations, the faster the next block can be baked (validated). The minimum block delay is set to 60 seconds.

Fork Choice Rule:

In case the user observes two different chains (forks), he applies the fork selection rule and decides which one is the correct one. The rule simply consists of selecting the longest blockchain and includes checking that the blocks have not been baked (validated) before it is allowed.

Incentives:

To encourage participation, baking (validation) and approval is rewarded with a protocol in the form of newly minted XTZ coins. The reward per block is a function of priority ‘P’ and number of validations ‘E’ according to Carthage. For priority 0, the reward for baking (validating) and confirming is equal to 1.25 times E $XTZ. This option prevents deflationary baking (block validation). For priority 1 and above, the bake (validation) reward for a block with E confirmations is 0.1875 times E $XTZ and the confirmation reward is 0.833333 times E $XTZ.

To avoid Nothing-at-Stake problems, it requires baking (validation) and confirmation of the backup. The security deposit is 512 $XTZ for baking (validation) and 64 $XTZ for confirmation. Backups are locked for 5 cycles (14 days).

In the event of a fraudulent duplication of baking (validation) / confirmation, the coins locked in the staking will be removed if proof of the accusation is included in a future block.

Example: baker (validator) A accuses baker (validator) B of double baking (validation) / confirmation which will be true.

Baker (validator) B will have his security deposits taken away, 50 % of which will be burned, and 50 % will be given to baker (validator) A as a reward for exposing the fraudster.

Nothing-at-Stake: a theoretical security threat in the Proof of Stake (PoS) consensus. The problem can occur at any time during a blockchain fork, either due to duplicate blocks or accidentally when two honest validators propose blocks at the same time.

Carthage: Tezos blockchain update. This update brought valuable bug fixes and minor improvements, including a formula for network rewards.

Endorsing: among the bakers (validators), a list of approvers is compiled for each block. Their task is to approve the blocks created by the baker (validator) for a reward.

To validate block N, each validator adds a signature operation that is contained in block N + 1. Once block N + 1 is baked (validated), no further validation operations are accepted for block N.

Each block has 7,000 approval slots. The baker (validator) is not obliged to fill the entire block. At a minimum, he must fill 4,667 slots, but if he fills more slots, he receives a bonus.

A validator can get multiple validation slots for a given block. He will then be rewarded for each validation slot filled.

4,667 approvals is enough to bake (validate) a new block. The maximum number of confirmations per block is set to 7,000 slots for greater network security. If the baker (validator) has more confirmation slots than 4,667, it will get a larger reward per block baked (validated) - the more filled confirmation slots, the more secure the block is.

Compared to other blockchains, it minimizes network fork or network hacking. If approvers perceive a suspected double block, they will not provide confirmation slots and the block will not be created.