Your crypto-assets earn while you sleep!
Staking is an umbrella term used to denote the act of pledging your crypto-assets to a cryptocurrency protocol to earn rewards in exchange. Staking allows users to participate in securing the network by locking up tokens. Consequently, users are rewarded for securing the network in the form of native tokens.
The higher the amount of crypto-assets you pledge, the higher the rewards you receive. The rewards are distributed on-chain, which means the process of earning these rewards is completely automatic. All you have to do is to stake them. This means your crypto-assets earn while you sleep!
Every time a block is validated new tokens of that currency are minted and distributed as staking rewards
Proof-of-stake (PoS) assets like Solana, Tezos, etc let you earn rewards on your staked assets. There are two types of rewards that get distributed
Note: I use the terms protocol, network, and cryptocurrency interchangeably. They mean slightly different things but convey the same logical concept
Staking rewards — You stake your crypto-assets with a PoS node (a server running the protocol stack) to validate a block of transactions. If the node you have delegated to successfully signs or attests to blocks, you receive staking rewards — thereby increasing your net crypto-assets. In case your node is unresponsive or malign (double-signing), a portion of the node’s assets, and hence your assets, can get slashed or destroyed.
The staking rewards are, thus, an incentive for these nodes to perform the process of ordering the transactions, verifying them, collecting them in a block, and subsequently validating the block. When these rewards are freshly minted they get the name inflationary rewards.
Every time a block is validated new tokens of that currency are minted and distributed as staking rewards!
Transaction Fee — In addition to the staking rewards, each transaction carries with itself a small fee making it easier for the node to prioritize the selection of transactions to be entered into the block. The accumulated fees from the underlying transactions also go to the node.
Transactions are what make up a cryptocurrency. For different protocols, these transactions could mean different things. They vary from token transfers to smart contract executions. Despite the dissimilarity in transaction types, the common thread is that these transactions always get ordered and clubbed into a new block so that all nodes in a network can agree on the state of the network.
In a centralized institution like a bank, every transaction can be verified by the central authority (bank’s central server). However, the lack of centralized authority in the crypto world requires the verification and subsequent validating of these blocks by the decentralized nodes of the network. These nodes are known by a variety of names — validators, bakers, etc. Their counterparts in the proof-of-work networks are called miners!
If PoS were a democracy, your stake would be your vote!
Staking does seem like a fairly useful investment instrument for anyone whose assets are lying idle in a digital wallet or a ledger. One can perform two roles when participating in staking.
Delegation is the method by which an individual can reap the rewards of staking. However, to understand delegation we will have to get into the details of how proof of stake (PoS) works!
If you already know how PoS works you can skip over to the delegation section.
Proof of stake, just like Bitcoin’s proof of work, is a type of Sybil resistance mechanism used to ascertain participation in blockchain consensus by utilizing assets as collateral. In simpler terms, to become a validator node in such a network crypto-asset holders are required to stake their tokens as collateral, instead of spending electricity as is the case with Bitcoin nodes.
Additionally, validators are selected randomly to create the block. The probability of a validator’s selection is directly proportional to the volume of crypto-assets staked.
This means that PoS is a system where the value at stake is the main determinant of which blocks are added to the blockchain. If PoS were a democracy, your stake is your vote! Participants in a Proof-of-Stake network essentially vote with their assets on blocks of transactions that they deem valid. They get rewarded if the majority of the network agrees and risks losing their stake (deposited tokens) if they try to cheat, e.g. by voting on two different blocks of transactions at the same time. The former encourages a rise in the number of nodes and the latter discourages malicious behavior.
Does this mean that anybody who holds even 1 token can become a validator? The answer is an obvious NO! Generally, the requirements to become a validator are much more stringent and difficult to achieve practically. Let’s take a look at a few of them.
To become a validator some of the hurdles one can possibly face.
These are just a few of the hurdles to become a validator. Not all of them apply to every network but most networks demand steep requirements that an individual may find difficult to fulfill.
Owning a huge number of tokens of a single currency or operating validation infrastructure may not seem worthwhile to a lot of people. Fortunately, most PoS protocols foresee this problem and incorporate ways to enable asset holders to stake their tokens with a validator that they do not run themselves.
The process of staking your assets with a validator without actually sending them your tokens is commonly called delegation.
Delegating your assets means letting them count towards the stake of a validator in return for a share of the reward received. In practice, a delegator deposits tokens in a smart contract specifying the validator whose influence in the network she wants to increase. As a result, the rewards earned in the validation process increase, but instead of only the validator receiving compensation, the rewards are automatically split between the validator and the delegator, usually by applying a simple commission rate as pictured below.
When delegating your assets it is extremely important to put special emphasis on choosing the validator. A more reliable validator will keep your funds secure as well as grow them reliably. Some of the factors for deciding your validator are as follows.
Keeping crypto-assets liquid is a good strategy for the short-term investor but is not wise for those who are in it for the long haul.
The traditional method of crypto-investing was a rather straightforward experience — you obtain the desired crypto asset, store it (or leave it on an exchange), and wait.
Simply holding a PoS token is no longer an optimal strategy now! Many networks reward participation by inflating tokens and handing them out to participants resulting in a dilution of the assets of non-participating token hodlers.
But is staking the best alternative out there for the Hodlers? Let’s take a look at some of the investment strategies.
Keeping tokens liquid is a good strategy for the short-term investor but is not wise or recommended for those who are in it for the long haul.
When staking, an investor has one of the 2 options
Staking is the more reasonable investment for the long-term investor but liquid staking is emerging to be a clear winner among all the strategies. It provides the benefits of reward accrual through staking while hedging the liquidity risk. Liquidity risk mitigation is a huge need that gets addressed through liquid staking and might become the reason for its success.
Chorus One published a comprehensive report last year that turned out to be foreshadowing in many ways. It is worth a read and goes into great detail about what this strategy entails.
Ethereum is moving towards fully migrating to Proof-of-Stake and Lido Finance is providing a liquid staking solution for it. This article by Paradigm covers how a decentralized eth2 stake pool provides liquidity to staked assets:.
Chorus One is also building a liquid staking solution for Solana on behalf of Lido:
medium.com
The benefits of staking come bundled with some risks as well. Let’s take a quick look at that.
From an economic perspective, a rational investor should choose the option with the highest risk-adjusted return. In practice, this means that a token holder should figure out
Let’s analyze risks associated with staking.
The following table compares the risk-reward scenarios for the various strategies available to a crypto investor. Clearly, liquid staking wins across the board.
We are growing quickly and have been entrusted with $1.4 Billion worth of assets!
Chorus One is a provider of staking services and validation infrastructure with a focus on providing the highest degree of security and quality possible. Our goal is to help token holders earn interest on their crypto assets securely and consistently.
We support close to 20 networks and one of the top validators on networks like Solana, Cosmos, SKALE, and many others.
We have been reliably operating for the last 3 years and have been around for longer than most of our competitors. We are growing quickly and have been entrusted with $1.4 Billion worth of assets! We are also venturing into the space of liquid staking with the proposal for Lido for Solana already approved by the Lido DAO.
For more information follow our social media channels.
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Newsletter: https://substack.chorusone.com
Thanks to the editors
On March 1st 2021, we announced that we would be acquiring and operating Cryptium’s Tezos baker and their validator nodes on NEAR, Polkadot, and Kusama. This deal enabled the former Cryptium Labs team to focus on their new project Anoma, a private, asset-agnostic bartering network, while allowing their delegators to keep earning staking rewards with a reputable staking provider. Shortly after, we also agreed to take over Figment’s baker to help them focus on their DataHub and Learn projects on Tezos and to allow Figment’s former delegators to continue earning XTZ staking rewards. The acquisition of the Cryptium and Figment bakers mark our first entry into the Tezos ecosystem.
Tezos needs no introduction, it is a self-amending blockchain that launched as one of the world’s first Proof-of-Stake networks in 2018, establishing one of the first ecosystems of node operators. Tezos differentiates itself from other chains through a sophisticated on-chain governance mechanism and formal verification of smart contracts.
Amongst other things, Tezos was the first blockchain that introduced ‘Liquid Staking’. Somewhat ahead of its time, before Decentralised Finance (DeFi) had garnered adoption, delegators on Tezos were and are still now able to earn rewards whilst having the option to undelegate at any time and transfer their assets elsewhere (in comparison to most networks where an ‘unbonding’ period is necessary to undelegate assets). This also allows tokens in smart contracts (e.g. collateral in Kolibri, a Maker-esque stablecoin system on Tezos) to be delegated and earn staking rewards simultaneously! Tezos is no foreigner to introducing blockchain concepts ahead of its time, on-chain governance and an automated upgrade schedule were also foreign concepts until Tezos introduced these. Tezos has established itself time and time again as a secure network with the potential to be one of the most resilient and adaptable Proof-of-Stake networks. Given its reliability, it is no wonder that Tezos is chosen continuously by financial institutions for it’s fork-averseness, staking economics and finance-friendly smart contracts. We see great potential for the future of Tezos and we are glad to finally have the opportunity to run a validating node on this vibrant network.
There are 1,419,320 accounts using Tezos. The 1D transaction average over the past 30D is ~100,000 transactions per day (which is ~365,000,000 transactions per year annualised) and contract calls on Tezos are growing ~120% MoM (since May 2020).
Network activity on Tezos is impressive to say the least. We are glad to be supporting a thriving network that has seen sustained growth since its inception. We are looking forward to actively participating in Tezos governance to foster ecosystem development in the future.
Tezos has had two upgrades in the past three months, namingly Edo 2.0 and Florence. Edo 2.0 targeted the application layer of Tezos by introducing privacy-preserving smart contracts, more composable smart contracts using ‘tickets’ that represent values in relation to addresses (similar to derivatives) and an ‘adoption’ period to create a longer time-buffer between when voting ends for an upgrade and when it is executed on-chain. The Florence upgrade doubled the maximum operation size of smart contracts), optimised gas and changed intra-contract calling to a depth first execution model, all of which enable developers to develop more complex smart contracts with higher certainty the smart contracts will behave as expected.
Tezos Staking FAQ: https://chorus.one/networks/tezos
Staking Guide: Tezos Staking Guide for Beginners by Baking Bad, Ledger Guide to Staking Tezos (Ledger Only)
Wallets: Kukai, Ledger Live
Block Explorers: TzStats, TzKt
Staking Reward Calculator: Staking Rewards
In this article, we’ll walk you through how to stake your CELO tokens using Anthem with a Ledger. We will need the following things:
The first step you will need to take is to install the Celo Ledger application on your Ledger device via Ledger Live. To do so, you will need to enable “Developer mode”, which can be found in the Settings under “Experimental features”. Once you have done that, you should be able to find and install the Celo Ledger application.
Now that you have the Celo application on your Ledger, you are able to store your CELO on it. You will be able to do so by signing into Anthem with your Ledger. Go to https://anthem.chorus.one and click on “Connect” next to Celo or by pressing “Sign In” at the bottom. Then choose “Sign in to Celo Network”. There should be a prompt that Anthem wants to connect to your Ledger device from your browser. Unlock your Ledger device, allow the connection through your browser by clicking on the device and then “Connect”, and open the Celo application on your Ledger.
Now, you will need to verify the address on your Ledger. A popup on your Ledger with your Celo address should appear that you can confirm using the Ledger buttons. Once you do this, your device will be connected to Anthem.
You should now see the Anthem dashboard for Celo. To send tokens to your Ledger device, copy the address from the bottom left, or by clicking on “Send/Receive” and then “Receive”. This address (or QR code) represents your Celo mainnet account. You can withdraw CELO from an exchange to this account by pasting in this address.
Once you send CELO to your Ledger, they should appear as “Available” on the Anthem dashboard. You will now be able to stake your tokens. Before you do so, a few words on staking in Celo:
Celo’s staking model is unique in that your tokens are never at risk and because you will choose to stake with a validator group, instead of a single node, as common in other networks. Furthermore, staking rewards for those staking CELO tokens and validator nodes operating the network are separated — there is no commission rate going to validators, as typical in other Proof-of-stake networks. Instead, validator nodes are elected based on their stake backing and then receive fixed cUSD stablecoin payments from the network. For these reasons, Celo is referring to staking as “Voting”, we will stick to this terminology from now on.
To choose a validator group to vote for, switch to the “Voting” tab in Anthem. You will see a list of available validator groups.
Anthem displays some pertinent information about validator groups, most importantly their “Capacity” and “Group Score”. Celo limits how many votes a validator group can receive based on how much CELO the group and its nodes are staking themselves. Anthem indicates how much capacity a validator group has left for votes by using color coding — a green dot signals enough room for delegations, yellow means there is little capacity left, and red means this validator is out of capacity. The “Group Score” indicates the percentage of staking rewards this validator group currently earns its delegators. It can be temporarily lowered, e.g. if validator nodes within that group go offline for prolonged periods of time. As an example, if the CELO staking reward rate is 6% (see here for current values) and your group has a score of 90%, your current APR would be 6%*90% = 5.4%. Though, one should keep in mind that group scores, and with them the APR, recover over time ( TheCelo provides visualization of validator group scores over time). Find out more details about Celo’s staking model here, or feel free to reach out to us if you have questions.
Celo is an EVM network with a smart contract-based staking design. You will need to go through multiple steps to earn staking rewards. We did our best to make this flow as straightforward as possible in Anthem:
First you need to create a contract address associated with your account to interact with the staking smart contracts. Anthem will prompt you to do this when you try to vote for a validator group for the first time. Confirm and send this transaction from your Ledger.
Now you need to lock your CELO tokens. Locked CELO can be used to vote in governance and to vote for validator groups. You will only receive staking rewards when your CELO is actively voting for a validator group. Make sure to follow through with this tutorial until you have “Active Votes”, otherwise you won’t receive rewards! Pick an amount to lock, make sure to leave some CELO available for transaction fees and confirm the transaction on your Ledger. After a few moments the CELO you locked should appear as “Non-Voting” on Anthem.
Once you have locked some CELO, you are able to cast votes for validator groups. Pick the validator group you want to vote for, e.g. Chorus One ;), and select the amount to vote with. You are also able to choose a validator group to vote for from a drop down list when clicking on “Vote” next to your “Non-Voting” balance. Follow the steps to confirm your vote.
A final step before votes start earning staking rewards is to activate votes. Note that this is only possible beginning from the epoch after you sent your voting transaction. This will mean you will need to return after one day (the length of a Celo epoch) to cast this transaction (learn more here). If you do not activate your votes, you will not receive staking rewards! This final transaction should move the votes you just cast from the “Pending” to the “Active” state. Congratulations, your CELO tokens are now actively participating in consensus and you will be compounding your CELO holdings.
Once you decide to stop staking, e.g. to sell CELO tokens, you will need to first revoke your active votes and then unlock the CELO tokens you want to have available. You are only able to unlock “Non-Voting” CELO tokens, so make sure to first revoke active votes before unlocking. Revoked votes must exist in a pending withdrawal state for 3 days before they become available to withdraw. This is enforced to protect the protocol against attacks. Anthem will display tokens that are in the process of unlocking as “Pending”. To stop voting and transfer $CELO tokens, the following steps need to be taken:
1. Revoke active votes
You first need to revoke your active votes from the validator group you are staking with.
2. Unlock non-voting, locked tokens
Once you revoked votes, you can instruct Celo that you want to unlock your tokens. This takes 3 days from the time you withdrew votes during which tokens will remain in a pending state.
3. Wait 3 days for pending withdrawals to become available
4. Withdraw pending tokens
Once the 3 days have passed, you are able to withdraw your pending tokens back to your available balance.
5. Send tokens
From your available balance, you are free to do whatever with your CELO tokens!
We hope this guide helped you understand CELO staking. For feedback on Anthem or questions, feel free to reach out to us via Intercom on the website or through any other channels.
Anthem is a multi-network staking platform designed to help you with your staking needs. Anthem is developed by Chorus One, a provider of staking services on decentralized networks including Celo, Cosmos, Polkadot, Solana, NEAR, and many others.
Anthem: https://anthem.chorus.one
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Telegram: https://t.me/chorusone
Celo is an open platform that makes financial tools accessible to anyone with a mobile phone.
Website: https://celo.org/
Twitter: https://twitter.com/CeloOrg
Discord: https://discord.gg/6yWMkgM
The following post will cover the mechanics of staking LOOM. It will explain the current implementation and cover the risks and expected returns including a basic reward calculator. The results provided by the calculator serve as a projection only, Chorus One doesn’t guarantee their accuracy.
Delegating on Loom’s PlasmaChain only went live last week and almost 10% of the circulating LOOM supply is already participating in staking. To many, this is the first time they actually use their tokens in some other way then simply holding them in a wallet. The concept of staking can be hard to grasp and Loom has a unique implementation that requires some digging into to understand the rewards and risks associated.
Staking means you are depositing your tokens and participate in securing and maintaining Loom’s PlasmaChain, for which you are rewarded in the network’s native tokens ($LOOM). You can delegate your tokens to a validator that will run the required node infrastructure for you in exchange for a cut of the rewards. This post specifically focuses on delegating, if you want to learn about the difference between validating and delegating check out our explanation of these concepts here.
Staking on Loom is unique because rewards increase with the duration you commit to lock your tokens up for. In exchange for being unable to withdraw your staked tokens during this timelock period, you will receive a larger share of the rewards paid out by the system.
At the same time, there is only a limited amount of LOOM tokens available to be paid out as rewards. Loom’s implementation limits staking rewards to a yearly maximum of 20% of the token balance set aside for staking rewards. In total there are 300mn LOOM tokens in the pool set aside for block rewards, meaning that no more than 60mn LOOM (20%*300mn) will be paid out to those staking in the first year.
The more LOOM holders participate in staking with long lock-up periods, the faster this cap will be reached, resulting in lower rewards for everyone. Additionally, there is an expectation of revenues from transaction fees and other sources, but these are currently unpredictable. We will monitor network conditions to accurately predict staking returns for delegators. Our investment thesis on the Loom Network features an analysis of how returns might evolve over the first four years based on reasonable staking participation assumptions. This post and the reward calculator will focus on the first year and assume a setting where the cap is not reached and where there are no rewards from transactions fees or other sources.
Loom’s current implementation distributes rewards once per election cycle (these are planned to last 2 weeks, but currently a new cycle begins every 10 minutes). Rewards from staking accrue in a separate reward pool (“Unclaimed Rewards” in the UI) and need to be claimed by the user, who can then decide to either stake those rewards or to withdraw them. There is at the time of writing no option to let rewards automatically compound and re-staking rewards resets the timelock (meaning you won’t be able to withdraw your total delegated stake with that validator for another timelock period when you re-stake). The only way to circumvent this limitation currently is to either re-stake with a different validator or to create multiple accounts.
The Loom team is working on both having an automatic compounding option and having different timelocks for portions of the staking balance. This article will be updated accordingly once these options are available. It is also important to note that once a timelock runs out, your staking balance converts into continuing with the shortest timelock possible (one election cycle, i.e. 2 week periods). This means that if you want to continue receiving bonus rewards from longer lock-ups, you will need to re-stake with your desired period once the timelock runs out.
Aside from the risk that the reward cap is reached lowering interest from block reward, there is currently no other risk involved when delegating LOOM tokens. The process is non-custodial, a validator can never access delegator tokens, they can only adjust the commission rate they set. Additionally, there is currently no slashing in Loom. At a later point in time, delegators will be penalized for their validator not following the protocol. We will cover this aspect in the future, as it is currently not implemented and thus irrelevant for the time being.
Staking returns in the first year will likely only depend on the chosen lock-up period, the commission rates set by validators, and whether delegators decide to re-stake the reward they receive. Type in the inputs in the fields provided at the top and choose whether you want to re-stake to compound your rewards. Keep in mind that re-staking currently requires you to claim and delegate your rewards after every election cycle (the calculator assumes an election cycle duration of 2 weeks) and also that this will reset your timelock.
The reward calculator will show your expected returns after a year of staking using the assumptions mentioned above. You can also experiment with different LOOM prices to see what that could mean in fiat terms.
form.jotform.co
If you feel ready and plan to delegate after reading this primer, check out our delegation tutorial that walks you through the official Loom Delegation Dashboard UI.
We will update this article to account for changes and provide other resources to our community of delegators to help them evaluate their staking investment. Please feel free to share this post and to ask questions on our Telegram or on any other channel.
Originally published at blog.chorus.one on February 22, 2019.
The following tutorial explains how to navigate the PlasmaChain Dashboard that LOOM holders can use to participate in staking by delegating their tokens to a Loom Network validator. This tutorial is also available in video form:
Chorus One is operating a validator on the Loom Network. Read our announcement post to learn why and how we plan to support Loom.
To find out more about staking and our operations visit our website at https://chorus.one (our Loom page will go online soon).
To be able to stake your LOOM tokens you need to have MetaMask installed. MetaMask is a browser plugin used for communicating with the Ethereum blockchain (watch this introduction to learn more about MetaMask and how to set it up). You will need to have the LOOM tokens you plan to stake and some ETH to pay for fees on your MetaMask account. The Loom team is working on Ledger integration, so you will soon also be able to delegate from your Ledger hardware wallet.
To start staking your LOOM tokens you need to go to the official website: https://dashboard.dappchains.com/. Always make sure you are on the right page to avoid phishing attempts by checking the URL and the TLS certificate (the highlighted lock symbol).
The delegation process starts by clicking the New User button, after which your seed phrase will pop up. This is the information that is required to access your delegations and to recover your tokens, make sure you follow the instructions. Copy the 12 words and store them safely!
After doing that and clicking Next, you will be directed to the My Account view once Loomy is done preparing everything for you. You are now logged into the PlasmaChain Dashboard. This is the interface through which you will control your delegations.
To be able to delegate your LOOM tokens, you will need to connect the address where you are storing them and allow the dashboard to access them. Make sure you are logged in to MetaMask and connected to the Ethereum Mainnet. Then press the Map Accounts button, and sign the MetaMask signature request.
Then you need to deposit your LOOM tokens to stake on the PlasmaChain. Enter the LOOM amount you want to stake with and press Deposit. Another MetaMask Notification will pop up asking you to grant access to the Loom’s delegation contract on Ethereum. Once this transaction is confirmed you will receive another prompt to confirm the deposit.
We will soon publish another article that explains Loom staking in-depth, so watch out for that if you are interested in knowing what exactly is happening and what kind of returns and risks are involved when staking LOOM, for now make sure to check out the Loom’s official guide on the staking economics.
When approved, your LOOM tokens available for staking will show up in the Account Details tab, and also at the top right corner of the UI.
Once your LOOM tokens are deposited, you need to decide on which validator(s) you want to stake your tokens with. To do that go to the Validators tab, which shows you a list of validators and information about them. Choose your validator(s) carefully, as they are the ones responsible for securing the network that you are invested in. The UI shows the validator’s name, their status, their total stake, and the fee cut (commission rate) a validator takes on staking rewards.
Finally, you are ready for the final step, which is to click Delegate and choose your desired amount and your desired lock-up period. If you are willing to lock-up your LOOM tokens for longer periods of time, you will be eligible for higher rewards. E.g. committing to stake for 1 year will yield four times more reward than if you would stake for a year with 2 week lock-up periods. Our next blog post will cover staking mechanics in detail. For now, you can learn the basics in this article from the Loom team.
Once you confirmed the delegation, the amount you delegated should show up under Updated Account. Once the next election cycle starts (the blue bar on the left), the delegation will move to Amount Delegated and the Timelock will be displayed. This is the time that is left until you are able to unlock your delegated LOOM tokens.
Congratulations, you are now participating in securing the Loom PlasmaChain! You can check your active delegations and the remaining timelock with a validator by going to that validator’s page in the UI and also in the My Delegations tab.
Furthermore, you can stop delegating (un-delegate), claim rewards, and withdraw your tokens through the delegation dashboard. Remember that your chosen lock-up period influences when you will be able to withdraw your staked LOOM tokens!
We will publish further step-by-step tutorials, explainers, and other updates around the Loom Network on our blog, so make sure to follow us on our social channels or subscribe to our mailing list below.
Website: https://chorus.one
Twitter: https://twitter.com/chorusone
Medium: https://medium.com/chorus-one
Slack: https://chorus.one/slack
Telegram: https://chorus.one/telegram
Originally published at blog.chorus.one on February 15, 2019.
