Within the Tezos ecosystem. Proof of Stake is completed by nodes called bakers. You need a certain number of XTZ (8000) to complete a roll and start a node. Individuals who do not have 8000 XTZ and want to stake delegate their xtz to an existing baker. (delegate_
Tezos relies on these nodes for voting on protocol upgrades. The delegators offload their voting rights to a baker, creating a quazi republic form of governance within Tezos.
What if we changed this, and started a decentralized baker using cloud computing. a smart contract would be the holder of the XTZ in an external wallet. Users of the smart contract would receive a Governance token 1 to 1 for their xtz within the contract. Cloud services would complete all the functions of the node and rewards would be paid into the smart contract wallet. Those who add into the smart contract would be paid in a Governance Token, 1 to 1 for their rewards. This governance token would be used to vote for the decentralized baker when it comes to protocol upgrades enabling individual holders to vote, instead of delegate their vote.
Holders of the governance token could withdraw their xtz at anytime by swapping the governance token for their xtz, when the governance token is received by the wallet. It would be burned. This creates some issue with gas fees and how to account for gas fees when transferring tokens and distributing rewards.
Decentralizing bakers would open a new avenue to decentralization within tezos giving more power to individual holders of XTZ by enabling them to participate in on chain governance easier. I suspect, if run well, a decentralized baker could quickly become one of the largest bakers within the ecosystem, providing steady rewards while maintain decentralization and participation.
