Baking and Delegating

Baking is how staking is known on the Tezos network, which alludes to the project's origins. The founders of the blockchain are French and, according to the stereotype, bake baguettes.

Bakers keep the Tezos blockchain running: they confirm transactions, sign blocks, and protect the network. They receive two types of remuneration: for mining blocks (baking) and for confirming blocks mined by other bakers (endorsement). Users can delegate their funds to bakers and receive a portion of their rewards.

All users have to deposit at least 6000 XTZ into their node to start baking. The baker can only own a part of the stake and receive the rest from the delegates.

A baker's profit is based on the amount of XTZ on their address. To increase it, the baker can raise additional funds by delegating.

The delegated coins remain on the users' addresses. The network takes them into account when calculating the chances of baking or endorsing a block, but the baker cannot dispose of these XTZ.

The Tezos network freezes Security Deposits from the baker's own funds: 10% of stake in the beginning of each cycle (68 hours). If a baker tries to sign a block twice and receive a reward, the protocol will take away the Security Deposits. That said, there are no penalties for inactivity in Tezos. The network unfreezes the security deposit after 5 cycles (14 days).

If a baker does not have enough funds to make the security deposit for the next cycle, they and their delegates miss their turn and lose profits.

A baker's job is to prevent over-delegation when their own funds are below 10% of the node's total balance.