Switcheo TradeHub adopts the delegated Proof-of-Stake (dPOS) system built into Tendermint Core as its underlying consensus mechanism.
Developed as an alternative to the Proof-of-Work (POW) mechanism, dPOS is more highly efficient, ensuring network security remains uncompromised while reducing network latency (faster transactions).
Users of the network (i.e. delegators) delegate tokens to a validator of their choice, entrusting them with authority to validate new blocks.
Staked tokens will earn SWTH from trading fees, transaction fees and block rewards as compensation for acting as the transaction validation collateral.
Each validator node hosts a copy of Switcheo’s order matching engine, so that they can ensure that all other nodes also process trade transactions correctly.
Validators are chosen randomly by the network to validate transactions and propose new blocks. The amount staked with each validator determines the likelihood they will be chosen to propose a new block.
Block rewards are awarded to validators when they have validated transactions and proposed a new block on the blockchain. Validators may choose to set a commission where a portion of the rewards for stakers goes to them instead.
Staking rewards are distributed proportionally to the amount of SWTH staked.
Staked tokens may be slashed (burnt) if they have been delegated to a validator that commits a Byzantine fault. This can happen if a validator violates one of the agreed upon rules.