The CasperLabs blockchain implements the first Proof-of-Stake network based on the CBC Casper family of protocols. The network is permissionless, such that anybody is allowed to become a validator, once they fulfill certain requirements. The blockchain hosts its own native token, designated by the symbol CLX, which serves many functions for the network’s participants. It is used as deposit when becoming a validator. Users use CLX to fund their transactions, and validators receive rewards in CLX. New CLX is minted to incentivize validators, whereas bonded CLX is burned to punish faults.

Staking allows validators to receive rewards and share transaction fees. Validators are required to participate in the network by processing transactions; and proposing, validating, and storing blocks. The network’s continuation and maintenance requires that validators adhere to the protocol, which is ensured by the network’s incentive mechanism. This works by rewarding adherence to the protocol and punishing deviation from the protocol.

In order to stake in the network, prospective validators participate in bonding auctions for a limited number of validator positions, with winning bids becoming bonded as stakes. This approach strikes a balance between security and performance, since increasing the number of validators must weakly decrease network throughput with the present mainnet architecture, due to increased communication complexity.

Rewards are provided through a process called seigniorage. New tokens are minted at a constant rate and distributed to participating validators, similar to the block reward mechanism in Bitcoin. Unlike Bitcoin, validators don’t have to wait until they mine a block in order to realize their rewards. In each block, seigniorage is paid to all participating validators. This ensures stable, continuous payments for honest validators, and eliminates the need to create pools.

A malicious validator, on the other hand, is punished through disincentives for various types of undesirable activities such as attacks on consensus, censorship and freeloading. The protocol is designed to penalize validators that engage in such activities by burning a part of their stake, referred to as slashing.

In addition to seigniorage payments, validators receive transaction fees paid by the users. Similar to Ethereum, computation is metered by gas, where each operation is assigned a cost in gas. However, unlike Ethereum, gas price is fixed in fiat terms, meaning the expenses of using or hosting a dapp is stable and predictable. Users do not have to choose a gas price when submitting their transactions, which greatly simplifies the user experience. Once a transaction is executed, used gas is calculated with the fixed gas price to calculate the transaction fee. Unlike seigniorage, transaction fees are collected by the block proposer, instead of being distributed to all participating validators.