WHAT IS BAKING?

To understand what Tezos "Baking" is, first we have to know how a blockchain works. Generally speaking, a blockchain is a distributed ledger, that needs users around the world to participate in what is called "network security". Blockchain assumes a descentralized environment with no certification entity to validate transactions. Conversely, this task is done by network participants, that uses a specific blockchain software to validate operations. Initially this work was done using a method called "Proof of Work" (POW), which consists in the use of intense computer hash power to solve a mathematical equation. Whoever finds the answer first, gets the right to sign blocks and is rewarded accordingly. Since the advent of Bitcoin, lots of similar blockchains were created. Most of them being copies of it. But the excessive waste of electric power occasioned by Proof of Work, brought better alternatives to mind, as "Proof of Stake".

This innovative method utilizes "monetary reserves" as security, to make network participants follow the rules. There are sanctions for misbehaving that causes loss of stake which was previously provisioned as collateral. This approach makes being ethical more profitable than trying to have advantages by breaking the rules, what would have a high cost.

In Bitcoin, Ethereum and many other networks, "Proof of Work" is commonly used, and participation on the security of these networks is known as "Mining" - as if the network nodes were digging to find their next coin.

On Tezos blockchain there is no mining, because it is a "Proof of Stake" based network. The practice of network security in Tezos is called "Baking", as if new, fresh XTZ were being created over time in the oven. The term was chosen by Tezos creators that (some say) are very fond of gastronomy and cuisine.

To become a Baker (a Tezos network participant), one must have at least one "bond", that is equivalent to 10,000 XTZ. To avoid concentration of capital and thus few with too much power, it's possible for those without a full bond, to delegate their stake to others, with the purpose of Baking for them. This way, if ten people have 1,000 XTZ each, they can group together and participate in the Baking process.

The delegation operation is as simple as copying a tezos address, informing it in the Tezos wallet and pressing a button to confirm. What is really interesting is that those resources will never leave the user's wallet. And he is still with full control of his XTZ, being able to spend, add, etc. Of course, if he withdraws before it matures on the network, he will not be able to earn proportional rewards.

READ MORE ABOUT OUR BAKER

We offer baking service for customers interested in participating on Tezos blockchain network security.