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Tezos (XTZ) baking

What is Tezos (XTZ)

Tezos is a cryptocurrency built on the proof-of-stake algorithm and allows making a profit for the baking of new blocks, which is quite like minting with the proof-of-stake protocol. Cryptocurrency staking means that you can earn passive income through owning a stake in the issuance of a coin. Staking differs from baking in what your reward is given for.

When your stake a coin you get rewarded simply for storing it for a certain period of time. In this case, the larger stake you have, the larger your passive income will be. When you receive a reward for baking like with Tezos you receive it for the baking of new blocks.

What is Tezos (XTZ) baking

In order to bake new blocks, you must have at least one roll, which is 10,000 Tezos (XTZ). If you do not have such amount in possession you can delegate your share to a baker who will be randomly selected from several bakers by protocol. The more rolls the baker has the better are his or her odds for baking a new block, which is the principle of proof-of-stake consensus.

The baker receives a reward of 16 XTZ for a baked block. Tezos blocks are baked every 60 seconds. Besides bakers, in the baking process, also take part in endorsers who validate new blocks. This allows to avoid double baking and double endorsing. There are 32 endorsers for every new block and they get a reward of 2 XTZ for endorsement.

In order to bake a Tezos block, you need to delegate your Tezos share to a baker. Your and the baker’s stakes will be summed together, however, delegating your share you do not delegate the coins themselves and the baker cannot spend them. Therefore, you do not have to worry about your money when you delegate your XTZ.

This way, you can delegate your share to the bakers and let them use it for baking and receive a corresponding reward for providing your share for the baking and receive a passive income for that.

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