Shardeum’s Random Validator Selection Explained

Consensus Mechanism of Shardeum

Permissionless Layer 1 blockchains depend on consensus mechanisms to enable trustless validation and approval of transactions among public participants who operate nodes, ensuring security and integrity. For instance, Bitcoin uses Proof of Work (PoW), where nodes compete to crunch computational puzzles. The first to solve the puzzle earns the right to validate transactions and receive BTC as a reward, while the rest of the network must reach consensus before the transaction is finalized.

Shardeum employs Proof of Quorum as its consensus mechanism, where nodes order and validate transactions on a FCFS basis to enable parallel transaction processing. A subset of related nodes within a consensus group then votes to achieve consensus on each transaction, ensuring immediate finality. To deter Sybil attacks, Shardeum also utilizes Proof of Stake (PoS), requiring validators to stake a minimum amount of the network’s tokens. This staking mechanism discourages malicious behavior while incentivizing validators as they have a vested interest in the network’s health.

Leader-Led vs Leaderless Consensus Mechanisms

As we have noted in our whitepaper, consensus algorithms can be categorized as either leaderless or leader-led. All consensus algorithms in which a block is produced by a single lucky or designated node are leader-led. A key problem with leader-led consensus algorithms is that the node producing the block can determine which transactions to place in the block. Thus, it is not possible to ensure that transactions will be processed based on the order in which they were submitted to the network. For some applications like exchanges or games, it is critical that transactions be processed in the order they arrived. Additionally, leader-led systems depend heavily on a single validator to propose blocks, which increases the risk of centralization and exposes the network to potential attack vectors, regardless of whether the lead validator is randomly chosen or designated.

In Shardeum, the set of nodes responsible for processing a transaction vote on the final state and result of the transaction. In simpler words, unlike traditional PoS networks that select a leader validator to propose and verify transactions (therefore earning a good chunk of the rewards), Shardeum’s consensus mechanism allows public participants to validate and earn rewards impartially.

What Role Do Validator Nodes Play in Shardeum?

Active Nodes

Shardeum’s validator nodes function similarly to Lightweight/SPV nodes on other blockchains but with enhanced capabilities, including validating transactions and participating in consensus. Shardeum’s unique approach to horizontal scalability offloads transaction history maintenance to the network’s archive nodes. This significantly reduces hardware requirements for validators, offering a low-cost entry point with the potential for attractive returns. You also have flexible hosting options, including self-hosting, VPS (cloud hosting), and one-click node setups, enabling anyone—even those without technical expertise—to contribute to the network. Hence the saying “anyone can run a node on Shardeum” among its community members. Validators must stake SHM to participate. Non-compliance with network protocols results in slashing penalties, while honest and compliant validators earn SHM rewards.

Standby Nodes

Now, what role do standby nodes play besides validator and archive Nodes on Shardeum? Standby nodes are essentially validator nodes within the network that are not actively participating in consensus. These nodes enable the network to scale quickly when transaction volume increases. Beyond scaling, standby nodes enhance network security where they periodically replace the longest-serving active validators at the end of each cycle. Rotating nodes is crucial in sharded networks. This rotation also ensures broader participation and opportunity across the network. Standby nodes must have SHM staked to become active and are eligible for rewards only after successfully completing their active validator period.

Note: When a node joins the Shardeum network, it initially enters the standby list before being randomly selected to validate transactions.

Selection Process

1. Deterministic Selection

In this leaderless network, a deterministic algorithm selects nodes from the standby list. This selection method prevents manipulation and maintains a smooth transition from standby to active states. Active validators create consensus on the list’s integrity by hashing it each cycle. This consensus prevents any single node from manipulating its chance of selection and subsequently landing on the same shard by generating new public-private key pairs in bulk. This setup creates virtually impossible conditions for any node to exploit a system and prevents potential attacks where one might control 51% of the consensus, thereby harming targeted accounts.

2. Random Selection

Shardeum employs a sharded architecture to achieve scalability and high throughput. In a sharded blockchain, the network is divided into smaller partitions, or shards, where each shard processes transactions independently. However, shards, acting as mini blockchains with a limited number of consensus nodes—also introduces potential security risks—if malicious actors can predict or manipulate which nodes validate transactions on a particular shard, they could compromise its security. To counter this, Shardeum uses a random and rotating node selection process. By ensuring that nodes are randomly assigned and frequently rotated across shards, Shardeum enhances security, decentralization, and fairness. This dynamic approach prevents any single entity from gaining control over a shard, maintaining the integrity and resilience of the network.

The deterministic algorithm selection not only pick the nodes but also assigns it an ID, which determines the address space it will cover and who its neighbors will be. The random selection process employs ‘future numbers,’ which means that the actual random numbers determining which nodes are selected and their placement are not generated until later in the selection phase.

What Should Validators Know?

Impact on Active and Standby Nodes

As a network, we observed numerous benefits from rotating and randomizing the selection of active nodes from the standby list. Active nodes are responsible for processing transactions, securing the network, and maintaining the ledger’s integrity – tasks that require a certain amount of computational resources. By focusing rewards on active nodes, Shardeum incentivizes direct contributions to the network’s core functionalities, ensuring that any node that expends resources and upholds network operations actively will be fairly compensated.

Standby nodes do not earn rewards on Shardeum. Standby nodes, while unique and crucial for network resilience and scalability, do not directly participate in the consensus process or transaction validation in the same way active nodes do. Rewarding standby nodes without active involvement in network operations could inadvertently create vulnerabilities in the reward system. This approach might further lead to imbalances and reduce the overall efficiency and fairness of the system. Remember, standby nodes are selected randomly by the network, and not in a FCFS manner. Therefore, how often a node transitions to the active set depends on the network demand, a degree of randomness, node performance, reputation, among other factors.

Fair Compensation for Validators on Shardeum

Here’s why running a node on Shardeum can be highly rewarding:

• Standby nodes are used not only to handle surges in network throughput, but also as part of the regular node rotation process to enhance security and decentralization. As a result, standby nodes consistently joining the network have opportunities to transition into the active node set consistently and earn rewards when auto-selected by the network.
• Since Shardeum scales horizontally, maintaining a sufficient number of nodes at all times is crucial for network stability and security. To ensure this, Shardeum’s tokenomics and issuance model are designed to provide validators with a fair compensation as long as they follow best practices and network protocols, which will be detailed closer to the mainnet launch.
• Additionally, transaction fees paid by end users are burned, promoting the scarcity and deflationary potential of SHM over time. This approach not only incentivizes node participation but also helps the value of SHM over time.
• Validators can also earn staking rewards with an anticipated Annual Percentage Yield (APY), which will be disclosed closer to the mainnet launch. This creates an additional revenue stream for validators who actively participate in Shardeum’s consensus mechanism.
• By actively participating in the validation and consensus process with integrity, your node can build a strong reputation based on performance and reliablity. In Shardeum’s permissionless environment, reputation is earned through actions, not paperwork, enabling validators to gain trust and credibility within the community.
• Validators on Shardeum will gradually gain governance rights as the network evolves toward full decentralization.
• The Reward Formula for active nodes is: Node Reward Allocated per Hour × Number of Hours Spent as an Active Node.
  • To estimate your potential earnings under different scenarios, visit the simulations section on our tokenomics page. You can experiment with various settings to see how they might impact your returns.

Conclusion

Today, even traditional Web2 systems face hurdles in autoscaling massive databases. Imagine a public blockchain that can autoscale and seamlessly handle the throughput demanded by AAA gaming, enterprise applications, and even government-level deployments—all while preserving security and decentralization. Shardeum’s leaderless, rotational and random consensus mechanism fosters a more robust and censorship-resistant environment, ensuring the applications and integrations deployed by developers run seamlessly on the network.

For validators, Shardeum’s deterministic and random selection ensures a level playing field, where participation isn’t dictated by wealth or influence but by fair, unbiased selection, without compromising on security. This encourages more community members to become validators, as evidenced by 100,000+ validators who have run on Shardeum testnets over the last two years. By embracing this inclusive model, Shardeum empowers users to contribute to and benefit from a more equitable blockchain ecosystem.

Useful Resources

1. How to Become a Shardeum Validator
2. Benefits of Running a Shardeum Validator Node on Mainnet
3. Other Node Resources