Polkadot Nominators: Understanding the Risks and Rewards

Polkadot's Nominated Proof-of-Stake (NPoS) system lets token holders back validators with locked DOT. This guide explains the process, rewards, and risks involved.

The NPoS system relies on nominators to supply the stake that helps validators get elected. Validators run nodes, while nominators provide the necessary funds. A Polkadot nominator never runs a node, so there's no server or uptime to worry about. The work is research, plus regular checks on chosen validators.

Nominators share in the rewards earned by validators, but there's a catch: slashing. If a validator breaks network rules, the nominators backing it can lose part of their stake. This makes validator choice the most important skill for nominators.

The NPoS system uses an election algorithm to decide where stake goes. Each nominator can pick up to 16 validators, but the network doesn't split the stake evenly across them. Elections run every 24 hours, and nominators can choose from active or backup validators.

For direct nominating, a minimum of 250 DOT is required, while pools start at 1 DOT. Nominators must also consider the risks, including slashing and loss of capital.