As described in the overview, integrating privacy with proof-of-stake poses significant challenges. Penumbra sidesteps these challenges using a novel mechanism that eliminates staking rewards entirely, treating unbonded and bonded stake as separate assets, with an epoch-varying exchange rate that prices in what would be a staking reward in other systems. This mechanism ensures that all delegations to a particular validator are fungible, and can be represented by a single token representing a share of that validator’s delegation pool, in effect a first-class staking derivative.
This section describes the staking and delegation mechanism in detail:
- Staking Tokens describes the different staking tokens;
- Validator Rewards and Fees describes mechanics around validator commissions and transaction fees;
- Voting Power describes how validators’ voting power is calculated;
- Delegation describes how users bond stake to validators;
- Undelegation describes how users unbond stake from validators;
- Example Staking Dynamics contains a worked example illustrating the mechanism design.