As a Tezos holder, it can be daunting to choose the right baker since the market is now flooded with many attractive options. In fact, the number of live active bakers producing blocks on the Tezos network has organically grown to the mid hundreds as of the time of writing this article. This has now lead Tezos to become one of the most decentralized cryptocurrency networks in the space.
Consequently, someone looking to delegate his stake is now faced with numerous options that may seem identical on the surface. The competitive free market that emerged from this proof of stake implementation emphasized the importance of doing your own due diligence when choosing a baker, as the incentives of the participants on the network become more coordinated.
An excellent first step is, therefore, to head to websites such as MyTezosBaker.com one of the most well-known directories in the community before making any decision in regards to baking. In addition to offering an exhaustive directory of the vast majority of bakers on the network, it also gives useful information to make a well-informed choice.
The main aspects someone should take a look at are listed next to each baker’s colorful logo. Those are: the fees charged, the amount of time the baker was active, the expected return on investment from delegating, the efficiency, the capacity and the country of origin. An interesting and useful feature of MyTezosBaker.com is the possibility to rank bakers according to each of the aforementioned features. At last, one can also find an amusingly titled ‘’graveyard’’ list which includes the bakers that are no longer active on the network and a ‘’blacklist’’ of non-recommended bakers.
Let’s go through each aspect presented on the website to have a clearer idea of what should one pay attention to when choosing a baker.
This is the most straight-forward feature and probably the one most people are interested in. As part of the Tezos proof of stake algorithm, it is possible to avoid getting your stake diluted even if you do not possess a whole roll consisting of 10 000 XTZ (as of the time of writing).
The baker you select to delegate to will charge you a fee out of the reward generated from baking with your stake. Some bakers choose to charge higher or lower fees depending on various reasons such as their operational costs or by promising to reinvest part of the rewards toward the Tezos community and ecosystem. It is therefore up to you to read the value proposition offered by each one.
The Tezos network time is measured in cycles which consists of approximately 2.8 days. This metric tracks the longevity of each baker from the genesis block up to now. It can be useful information to assess the trustworthiness and efficiency of a baker.
The expected return on investment measures the annual return someone can expect from delegating to a particular baker. It is calculated using the average efficiency of the 10 previous cycles.
The efficiency of a baker is related to how efficiently it manages to bake the blocks it is given the right to by the protocol. An efficiency of 100% means that for every baking or endorsement rights given, the baker is able to participate in the validation of the block.
A lower or higher percentage means that either the baker is missing rights or validating blocks for which he was not awarded the highest priority.
Since a baker has to post a bond ranging from 8% to 15% of the amount of XTZ delegated to his address it is really important to look at this metric because it is sometimes the case that the bond is not high enough which leads to a situation called over-delegation. This means that delegating to the baker will not lead to any reward. It is therefore mandatory for someone who expects rewards upon delegation to check if the capacity is not over 100%.
This is pretty self-explanatory and indicates where the baker is geographically located.
MyTezosBaker.com offers useful insight for someone who is looking to delegate his stake and do proper research beforehand. Doing your own due diligence will lead to a better understanding of the ecosystem and protocol and align the incentives of the different agents of the network.