Staking and Delegation
By delegating to a validator, a user delegates staking power. The more staking power a validator has, the more weight it has in the consensus and governance processes. This does not mean that the validator has custody of its delegators’ Atoms. By no means can a validator run away with its delegator’s funds.
Even though delegated funds cannot be stolen by their validators, delegators are still liable if their validators misbehave. In such case, each delegators’ stake will be partially slashed in proportion to their relative stake.
Staking Atoms can be thought of as a safety deposit on validation activities. When a validator or a delegator wants to retrieve part or all of their deposit, they send an unbonding transaction. Then, Atoms undergo a three weeks unbonding period during which they are liable to being slashed for potential misbehaviors committed by the validator before the unbonding process started.
Validators, and by association delegators, receive block provisions, block rewards, fee rewards, and the right to participate in governance. If a validator misbehaves, a certain portion of its total stake is slashed (the severity of the penalty depends on the type of misbehavior). This means that every user that bonded Atoms to this validator gets penalized in proportion to its stake. Delegators are therefore incentivized to delegate to validators that they anticipate will function safely.
Delegators are token holders who cannot, or do not want to run a validator themselves. Coin holders can delegate them to a validator and obtain a part of their revenue in exchange (for more detail on how revenue is distributed, see What is the incentive to stake? and What are validators commission? sections below).
Because they share revenue with their validators, delegators also share risks. Should a validator misbehave, each of their delegators will be partially slashed in proportion to their delegated stake. This is why delegators should perform due diligence on validators before delegating, as well as spreading their stake over multiple validators.
A full-node is a program that fully validates transactions and blocks of a blockchain. It is distinct from a light-node that only processes block headers and a small subset of transactions. Running a full-node requires more resources than a light-node but is necessary in order to be a validator. It is possible and encouraged for users to run full-nodes even if they do not plan to be validators.