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Learn about Aleph Zero Staking
There are several ways to earn a return on your AZERO, including lending them out to custodial providers or through decentralized lending protocols, running your own validator, or delegating your tokens to validators of your choosing.
For the best security and control over your funds, we recommend using a Ledger Hardware Wallet. To delegate your tokens, you should ensure they are stored on your Ledger or SubWallet, and then follow these steps below:
Step 1: Open the SubWallet extension and select ‘Staking’ on the menu bar at the bottom. Search for ‘Aleph Zero’ if it does not show up immediately and then click on it.
Step 2: Choose a validator from the table. If you are uncertain about how to choose a validator, refer to our FAQ for guidance on selecting a validator.
Step 3: Enter the amount you would like to stake and hit ‘Next’. After double-checking all the information, key in your password and press Confirm. Your transaction is complete.
- Direct nomination: also called solo nomination. You need a significant minimum stake (2000 AZERO at the time of writing this article, although keep in mind that this bound will increase in the future). Yet you have full control of who you nominate and are free to change your nominations without going through the unbonding period (14 days).
- Pooled nomination: you join an existing “staking pool” that unites a group of stakers. The good things are that you can stake as little as 10 AZERO this way, and (to some users) it’s convenient that you don’t have to pick a validator by yourself (the pool operator makes the choice for you). However, the downsides are that currently, you cannot easily switch between pools (you need to go through the unbonding period), and the only way to auto-compound is to claim rewards manually and add to the pool from time to time (this will be improved in a future iteration of nomination pools).
It is important to remember that both staking methods are equally safe, and you are never losing custody of your tokens, only “delegating” them to the selected validators (but they cannot just claim them). However, to secure optimal rewards, it is crucial that you pick a validator, or a pool operator, that you trust and that offers high performance.
Once you have delegated your AZERO, there are things you need to consider going forward.
- Firstly, keep in mind that rewards are not auto-compounded, so to maximize your returns, you may want to claim and stake your rewards more frequently. However, it’s important to consider that each transaction will incur gas fees, so you may want to use our Aleph Zero Staking Calculator to determine the optimal re-staking frequency for your amount of AZERO.
- It is important to periodically check on the performance of the validator you have selected to ensure they are still performing well and have not fallen out of the active set.
It is essential for users to stake their PoS tokens with dependable and highly performant validators, which is why we have rolled out our Staking Rewards Verified Staking Provider (VSP) Program in June 2022. Through this program, we thoroughly scrutinize potential validators, evaluating factors such as security measures, their on-chain reliability, their provider setup, and value-added services for the whole ecosystem.
When choosing a validator to delegate to, there are numerous factors to take into account:
Commission Rate: When staking your tokens with a validator, the commission rate represents the percentage of your rewards that the validator will retain for themselves. A high commission rate can result in lower returns for you, while a low commission rate may lead to financial difficulties for the validator in the future. It’s important to note that validators may change their commission rates at any time.
Number of Users: A validator may be more popular or trusted if it has a higher number of delegators than others.
Validators Self-Staked balance: A provider with a high amount of staked tokens likely has more incentive to continue operating their services as they have more to lose than those with low self-staked balances.
Current Status: You can see whether the validator is currently active or not by checking the validator list shown on the Aleph Zero Block Explorer.
Network Share: You typically don’t want to choose a validator with the highest network share (Total Staked) or a validator with a low network share. Delegating to the most popular validators increases centralisation risks within the network as those validators will have more say in governance and a larger share of the blocks. A validator with a low network share, might not be profitable and hence increases the risk of them discontinuing their services.
Era points are above average: Validators will get more rewards for being active.
Performance: The total downtime of a specific validator can be seen on the Aleph Zero Block Explorer. Make sure you pick a validator with the highest possible performance (Least downtime).
Value Add to the Ecosystem: Some providers offer extra services to their delegators, such as tax reporting tools, explorers, etc. This can be another great way to filter for validators that are thinking long-term. You can view the value-added services of staking providers by clicking on their name on the provider page.
The Staking Rewards on AZERO consist of both network rewards and fees:
- Inflation on the Aleph Zero Network (Block Rewards): Aleph Zero employs uniform inflation, meaning that each year 30M new AZERO tokens are minted, out of which 90% goes to nominators and validators as rewards, 10% goes to the Ecosystem Fund. In each era (lasting roughly 24h), both validators and nominators are rewarded a constant amount of tokens, which is approximately 73922 AZERO. Out of this pool of 73922 AZERO, each validator receives a reward proportional to their stake increased by the commission it takes from their nominators’ stake. Similarly, nominators get rewards proportional to their stake decreased by the validator’s commission. This implies that AZERO holders who choose not to stake will get diluted over time.
Please note that the total annual rewards are divided by all active stakers; hence, as the amount of staked tokens goes up, the reward rate goes down. You’re welcome to use our Aleph Zero Staking Calculator to get a better understanding of how these factors can impact your rewards.
We strive to make staking as safe and transparent as possible, however, it’s important to consider factors that may influence whether a particular staking option is appropriate for you.
Slashing risk: There is no automatic slashing on Aleph Zero, every instance of slashing needs to be explicitly approved by the team (to be replaced by decentralized governance as soon as possible).
Unbonding risk: When staking AZERO tokens, there is a lockup period of 14 days. This means that investors will not be able to sell their tokens immediately, but instead need to wait 14 days after initiating unbonding before they can be traded again. This is something to keep in mind when deciding to stake, as crypto markets are highly volatile. Consider keeping funds liquid if you do not intend to hold AZERO long-term.
Protocol security risks: There is an inherent risk that the protocol could contain unknown bugs, this risk applies not only to staking but also the investment in AZERO.
Please note that this is not an exhaustive list of all the risks related to staking.
AZERO is the native token of the Aleph Zero network that is used to carry out the key functions of the platform as detailed below:
- Staking: Users can temporarily lock up AZERO to contribute to the security of the network. In return for the service, both the validators and the stakers are rewarded with epoch rewards.
- Network Fees: AZERO is used for network fees, such as transaction fees and fees to deploy smart contracts.
Aleph Zero uses a Directed Acyclic Graph (DAG) architecture. Here, the transactions in blocks aren’t connected to others linearly, rather they are flowing in one direction but with multiple branches. This allows Aleph Zero to reach speeds that are beyond the reach of traditional blockchains.
In addition, Aleph Zero boasts a current state-of-the-art aBFT, meaning that their consensus protocol is Byzantine Fault Tolerant (malicious nodes don’t affect the network) but apart from other BFT protocols, it is asynchronous. Thanks to that, it ensures seamless work and data correctness even if some parts of the network are down. Introducing asynchronicity to BFT protocol is a big step forward as it provides maximum theoretical security for both open source and enterprise users. In fact, most replication of other databases is done asynchronously.
Aleph Zero is also a permissionless DAG. Anyone can use it, join the network or leave without permission, and request changes to the underlying ledger, provided the transactions are validated by a randomly chosen and ever-changing committee. This novel algorithm is based on the modified Proof of Stake models mentioned above. Another innovative approach to that is making Aleph Zero leaderless, so no entity (or group of entities) has more power than other participants.
The total supply of AZERO is pegged at 300 million coins, the Initial Circulating Supply was set at 160 million AZERO tokens. AZERO is an inflationary token with an annual 30 million AZERO released as staking rewards and an infinite supply predicted. As of writing, there is no mechanism in place to burn AZERO coins, however, a future burning mechanism is not disregarded, especially as the ecosystem evolves.
Initial token distribution
The Initial token distribution of AZERO is as follows:
- 67% is allocated to public, presale, seed, pre-seed rounds.
- 22% is allocated to the foundation.
- 11% is allocated to to the team.
- $2.0M was raised in a Pre-Seed Round on 02/01/2018
- $1.5M was raised in a Seed Round on 14/02/2018
- $2.9M was raised in a Seed Round on 01/08/2020
- $9.9M was raised in a the Public Sale on 01/09/2021