What is baking?

“Baking” is the act of signing and publishing blocks to the Tezos blockchain. Bakers are a crucial component of the Proof-of-Stake consensus mechanism by ensuring that all transactions in a block are correct, that the order of transactions is agreed upon, and that no double-spending has occurred.

To bake blocks, a baker needs to participate in Proof-of-Stake, which requires a minimum of 8,000 XTZ (1 roll). The more rolls of tez that a baker owns, the higher your chances are at baking blocks and earning baking rewards.

What is delegating?

If someone does not have 8,000 XTZ or does not want to set up computing infrastructure to bake blocks, they may delegate their coins to a baker (aka "delegate"). Delegating lets coin holders (i.e. "delegators") "lend" their coins to a baker (i.e. a "delegate"), giving the baker a higher probability of being selected to bake and endorse blocks. In practice, bakers usually share the additional revenue generated from the delegated tokens with the coin holder. Importantly, this process does not actually transfer ownership of coins and hence the baker cannot spend or control the XTZ delegated to it, ensuring that bakers cannot appropriate the delegators' funds.