What is Nominated Proof of Stake (NPoS)?

Nominated Proof of Stake (NPoS) is a sophisticated consensus mechanism developed by the Polkadot network that builds upon traditional Proof of Stake with an advanced nomination system. In NPoS, there are two key roles: validators, who are responsible for producing blocks and validating transactions, and nominators, who back validators with their own staked tokens. Nominators select up to 16 trusted validators and share in both the rewards and the slashing penalties of those validators. The protocol uses an optimization algorithm to distribute stake as evenly as possible across the elected validator set.

NPoS is designed to maximize network security through fair stake distribution. The election algorithm ensures that the minimum stake backing any active validator is as high as possible, making it expensive to attack even the least-supported validator. This approach promotes decentralization by preventing stake concentration on a few popular validators. The nomination system also lowers the barrier to participation, allowing token holders who cannot run validator infrastructure to still contribute to network security and earn staking rewards. The trade-off is a more complex protocol design and the need for nominators to carefully evaluate validator performance and trustworthiness.

Polkadot is the primary blockchain utilizing NPoS, currently running with around 300 active validators selected from a larger candidate pool. Kusama, Polkadot's canary network, also uses NPoS with a similar structure. The mechanism supports Polkadot's multi-chain architecture, where validators secure both the relay chain and connected parachains. NPoS has been recognized in academic research for its game-theoretic properties and has influenced the design of other staking systems in the broader blockchain ecosystem.