Zama Network Staking Protocol: 18 Operators and Square Root Reward Distribution

In early February, Zama disclosed comprehensive details about its staking mechanism, revealing an innovative approach to network validation and participant incentivization. The protocol employs a Delegated Proof of Stake (DPoS) framework, enabling token holders to delegate their ZAMA holdings to infrastructure operators in exchange for staking rewards. At the protocol’s current stage, 18 distinct operators form the backbone of the network, each playing a critical role in maintaining system integrity.

Understanding the DPoS Architecture

The Zama DPoS system allows participants to maintain agency over their assets while contributing to network security. Rather than running validators themselves, token holders can delegate to trusted operators who handle the technical requirements. This approach balances accessibility with efficiency, lowering barriers for casual participants while ensuring professional-grade infrastructure operation. The delegation model transforms staking from a high-barrier activity into something accessible to broader ecosystem participants.

Operator Composition: The 18-Node Framework

The current operator landscape consists of 18 active participants split into two specialized categories. The first group includes 13 Key Management Service (KMS) nodes, responsible for secure key management and protocol operations. The second comprises 5 Fully Homomorphic Encryption (FHE) coprocessors, handling advanced cryptographic computations. This architectural division ensures separation of concerns, with each operator type fulfilling distinct technological requirements. The diversity of the 18-operator network creates resilience while preventing single points of failure.

Square Root Distribution: Incentivizing Decentralization

The reward distribution mechanism employs a mathematical approach using the square root of each operator’s total staked amount. This elegant design creates powerful incentives for network decentralization. Instead of wealth concentration, the square root formula means smaller operators attract proportionally higher returns relative to their stake size, encouraging distributed participation across the network.

The protocol’s inflation is set at 5% annually on total ZAMA supply, with these rewards allocated strategically. KMS operators and their delegates receive 60% of annual rewards, while FHE coprocessor operators and their delegates capture the remaining 40%. Before distributing to delegates, operators apply commissions capped at 20% maximum, allowing them to sustain operations while ensuring delegates receive meaningful returns. The square root weighting ensures no single actor dominates the infrastructure.

Flexibility and Unstaking Mechanisms

Token holders retain liquidity despite staking commitments. While converting staked tokens to liquid form requires a 7-day unbinding period, Zama enables users to transfer or trade their liquid staking certificates before the period concludes. This hybrid approach provides both security through lock-up periods and flexibility through tradeable receipts, accommodating diverse participant preferences.

ZAMA currently trades at $0.02, reflecting market conditions as participants evaluate the staking opportunity and long-term protocol economics.