Baking, refers to the process of validating and securing transactions on blockchain networks that utilize a proof-of-stake (PoS) consensus mechanism. This term is primarily associated with Tezos, a blockchain platform known for its unique PoS algorithm. Bakers are the network participants responsible for creating new blocks, validating transactions, and maintaining the blockchain’s integrity.

The Significance of Baking

Baking holds significant importance in the world of cryptocurrencies. Instead of traditional mining, where computational power is the primary resource, PoS-based networks rely on bakers to participate actively in the validation process. This process not only secures the network but also determines who gets the right to create new blocks and earn rewards.

• Decentralization and Security: One of the key advantages of baking is its contribution to the decentralization and security of blockchain networks. Bakers are required to lock up a certain amount of the network’s native cryptocurrency as collateral, which acts as an incentive to maintain the network’s integrity. This economic stake aligns their interests with the overall health and security of the blockchain.

• Reward Distribution: Bakers earn rewards in the form of additional cryptocurrency for their participation in securing the network. These rewards are typically distributed among bakers and their delegators, providing a financial incentive for individuals to participate in the baking process and further enhancing network security.

• Community Involvement: Baking is not limited to a select few with high-powered mining equipment. It encourages a broader and more diverse community to participate in the network’s governance and operation. This inclusive approach is a fundamental aspect of many PoS-based cryptocurrencies, making them more accessible and democratic compared to their proof-of-work counterparts.