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.
In addition to securing the Tezos blockchain, community bakers play a vital role in the ecosystem by enabling broad participation in the governance process for Tezos upgrades.
Not only do bakers ensure their tez will not be diluted from inflation, but Community bakers also enable non-baking stakeholders to indirectly participate in the governance process by allowing them to delegate tez to bakers. If a baker has 8,000 tez (8,000 tez = 1 “roll”), they can accept up to ~80,000 tez in delegation from other stakeholders.
Bakers have first transactional advantages
- Earning rewards from baking
- Zero-fee transactions inside their blocks
- Predictable baking to meet compliance requirements (AML)
- Ability to avoid dilution from inflation by collecting baking rewards
- Participate in the chain’s governance
Nicolas Pouard, Blockchain Initiative Director at Ubisoft
« We’re happy to be joining the Tezos ecosystem as a corporate baker. Ubisoft believes that blockchain has the potential to bring new possibilities to players and developers alike, and this new collaboration will allow us to pursue our innovation efforts with an ecosystem that aligns with our environmental-friendly approach thanks to its proof-of-stake consensus algorithm. »
Olivier Jaillon, Chief Executive & Enablement Officer of Wakam
« We are deeply convinced that smart-contracts and blockchain, which are based on decentralized automated management tools and result in reasonable transaction costs while guaranteeing consumers complete transparency and immutability of their contracts, is the future of insurance. The Intrinsic qualities of the Tezos protocol, which is based on Liquid Proof-of-Stake, make it more secure and sustainable than most other blockchains. As Wakam is in the process of becoming a “Mission-driven Company”, Tezos aligns perfectly with our CSR commitments. As a French digital insurer, we are also more than happy to work with a project with strong French roots. »
Fatih Balyeli, Exaion CEO and co-founder
« Our choice to use the Tezos blockchain came naturally. Baking on Tezos allows us to significantly reduce our energy consumption and is in line with our sustainable development policy while keeping a high-quality digital offering. »