What are Nominators?

A nominator is one of the two major actors who are involved in a blockchain network (the other being a validator) that uses the nominated Proof-of-Stake (NPoS) consensus algorithm. To be exact, NPoS is the process of picking validators to enable them to take place in the consensus protocol. Besides, nominated Proof-of-Stake is a type of Proof-of-Stake (PoS) and it is utilized in blockchains such as Polkadot, Kusama, or Edgeware.

In initial PoS networks, the capability of an entity that is validating or mining network transactions relies on the number of network tokens they possess. Meaning that the bigger amount of tokens of that network is kept by the miner or validator, the more mining capacity they have.

This feature is also used in other similar decision-making processes, including governance functions when validators vote on suggestions for future upgrades of the network.

However, in the majority of the ecosystems, as some integrations of decentralized autonomous organizations (DAOs) have showcased, not all validators or miners utilize their voting power in each decision-making process. This might be the case since they are unable or unwilling to commit the time or money necessary to examine, research, or grasp the frequently complex technical aspects essential for some judgments.

A proposed solution for that was NPoS, a form of PoS that involves the process of nominating validators who are permitted to participate in the consensus procedure. Substrate-based blockchains are the most well-known users of NPoS.

The most important roles in NPoS are played by validators and nominators. All validators in the active set receive the same number of rewards. The validator's commission charge is subtracted from these benefits. The remaining rewards are awarded proportionally to nominators based on their investment.

Since incentives are allocated equally to validators based on their total stake, nominators stand to receive more rewards for nominating less-established validators with lesser stakes supporting them. This encourages nominators to search for a more varied selection of validators rather than nominating the same ones for each batch.

Those who do not follow the rules, on the other hand, are disciplined, diminishing the benefits for nominators. This motivates nominators to undertake thorough research on validators in order to find those who are well-behaved.

NPoS are able to upgrade the decentralization of blockchain networks this way, by increasing the decision-making capacity, as well as maintaining equality through rationalized expression.

Likewise, validators establish and safeguard the network while also managing the services it provides through the generation of new blocks and the validation of parachain blocks. They are continually operational, employing the network's native tokens to sustain them as validators and to incentivize their continued adherence to the protocol's regulations.

Even though failure to follow the rules penalizes them with "slashing," following the rules rewards them with a share of the fees collected by using the network's services.

Nonetheless, in NPoS, validators have to be chosen to take part in every active set, which is a particular period of time that usually becomes lengthy at latter block heights. So, nominators can also be considered token owners but they are not actively taking part in consensus. Rather than that, they utilize their economic support to nominate the validators that they selected to be assigned for active slots.