Corporate Baking

Baking is the process of validating and adding new blocks to the Tezos blockchain.

Baking in Tezos is similar to “mining” in Bitcoin or “validating” in other Proof-of-Stake blockchains, in that bakers receive rewards for securing the state of the blockchain and the health of the network.

Currently, bakers both produce and endorse new blocks on the Tezos blockchain every minute; though the time between blocks is subject to change via the Tezos governance process. Bakers are randomly selected to produce new blocks according to the number of “tez” (Tezos tokens) that they own plus that which is delegated to them from other stakeholders.

In Tezos, stakeholders (holders of tez) may either bake on their own computers or, more commonly, delegate the right to bake their  tez to a baker running the Tezos baking software on a computer connected to the Tezos network. Bakers with delegation from other stakeholders typically share a portion of their baking rewards with those who delegate to them.

Critical in Tezos, baking also allows stakeholders to participate in Tezos governance. Tezos governance is the decision-making process that stakeholders participate in to implement upgrades to Tezos. Stakeholders who delegate their tez to a baker empower that baker with their governance rights. Voting power in Tezos governance is determined by the number of tez a baker owns, plus that which isdelegated to it.
Thus, the more a baker bakes, the more influence it may have when voting on upgrades to Tezos. For stakeholders, the Tezos governance process is a powerful mechanism for broad alignment and consensus of the Tezos protocol itself, disincentivizing forks, and enabling seamless upgrades over time.