Baking

3 min read

Pronunciation

[bey-king]

Analogy

Think of baking as running a specialized bakery in a city-wide bread production system. Instead of every household needing to maintain their own baking equipment and expertise (like ), citizens can either become certified bakers by purchasing professional equipment and posting a security deposit (staking directly), or they can provide their ingredients to established bakeries while keeping ownership (delegation). The city randomly selects which bakeries produce each day's bread based on the size of their operations, with larger bakeries being selected more frequently. Selected bakeries must follow precise recipes (protocol rules) and have their products verified by other bakeries (endorsements) before distribution. Just as baking bread transforms raw ingredients into a structured, useful product, baking transforms raw transactions into ordered, validated blocks that extend the .

Definition

The process of creating, validating, and adding new blocks to the through its mechanism. Baking involves participants (called bakers) who have staked or been delegated a sufficient amount of XTZ tokens being selected to propose and endorse blocks according to their proportional , securing the network while earning rewards and .

Key Points Intro

baking operates on four key mechanisms that implement its system.

Key Points

Roll-Based Selection: Bakers are selected to propose or endorse blocks with probability proportional to their stake measured in rolls (currently 8,000 XTZ per roll).

Endorsement System: Each block requires validation through endorsements from multiple other bakers, creating additional security through attestation.

Delegation Framework: Allows XTZ holders to participate in baking returns without running node infrastructure by delegating to active bakers.

Slashing Conditions: Implements economic penalties for bakers who violate protocol rules, protecting against equivocation and other malicious behaviors.

Example

Michael decides to participate in the network as a baker, 40,000 XTZ (equivalent to 5 rolls) which represents approximately 0.01% of the active . He configures a secure baker with appropriate hardware security modules to protect his private keys. For each cycle of 4,096 blocks (approximately 2.8 days), the randomly assigns him rights to propose and endorse blocks in proportion to his . In a typical cycle, he might receive rights to bake 1-2 blocks and 30-40 endorsement slots. When selected to bake a , his collects transactions, constructs a valid , and broadcasts it to the network. Other assigned endorsers verify and endorse his , confirming its validity. For successfully baking a , Michael receives both the standard and included . Meanwhile, 200 other holders have delegated an additional 160,000 XTZ to Michael's bakery, increasing his total power and proportional rewards, which he distributes to his delegators after deducting his 5% service fee.

Technical Deep Dive

baking implements a sophisticated mechanism operating in fixed cycles of 4,096 blocks, with each cycle divided into 16 epochs of 256 blocks. The baker selection process uses a seed derived from random data included in previous blocks, combined with a baker's and snapshots taken 5 cycles earlier (creating a 2-week delay between changes and corresponding baking rights). This pseudo-random process assigns baking rights for each to specific baker public keys. The mechanism requires both proposal (baking) and (endorsing), with multiple endorsers assigned to each . Endorsements function as votes for a , with favoring the chain containing the most endorsements. The requires a security deposit (frozen funds) of 640 XTZ per baked and 2.5 XTZ per endorsement slot, which remains locked for 5 cycles and can be partially or fully forfeited if the baker engages in malicious behavior like double-baking or double-endorsing. implements delegation through an account-based model where delegation operations change account metadata without transferring custody of funds, allowing delegators to maintain full control of their XTZ while participating in baking returns. The baker software stack includes components for selection, formation, endorsement management, and delegate reward distribution, typically secured through HSMs (Hardware Security Modules) that protect the baker's private keys while allowing necessary signing operations.

Security Warning

When operating a baker, implement proper with hardware security modules. Unlike some systems, baking keys can potentially authorize transactions from your staked funds, making security breaches particularly damaging.

Caveat

While baking offers a relatively accessible system, it requires significant technical expertise to operate securely and reliably. The upfront costs for proper security infrastructure, particularly hardware security modules, can be substantial compared to the returns for smaller bakers. Additionally, the economics of baking have led to some centralization as economies of scale favor larger operations that can amortize fixed costs across more delegated . The time delay between changes and corresponding baking rights (5 cycles or approximately 14 days) creates a significant for new bakers to become fully operational or for adjustments to affect baking participation, which may impact dynamic participation during volatile market conditions.

Blockchain & Cryptocurrency Glossary

Baking - Related Articles