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Learn about Celo Staking
How to stake CELO?
There are several ways to earn a return on your CELO, including lending them out to custodial providers or through decentralized lending protocols, running your own validator, or delegating/voting your tokens to validator groups 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 Celo Wallet, and then follow these steps below:
Step 1: Make sure you have installed Celo Wallet on your desktop and you have enough CELO tokens there for staking. Enter your Celo Wallet, click “More” and then “Lock” to lock the amount of tokens you would like to vote for validator groups later.
Step 2: Click “More” and then “Stake”. Now you will see a list of validator groups. Choose one you would like to vote for, and click “Vote for Group”. Check our FAQ on how to choose a validator group if you are unsure who to vote for.
Step 3: Input the amount of tokens you would like to vote for this validator group. Click “Continue” and then “Vote”.
Step 4: You’re almost done. Around 24 hours after the voting, come back to click on the “Vote for Validator” button in your transaction history, select your validator group, click “Continue” and then “Activate” to complete the staking process.
Do I need to maintain my staking in any way?
After delegating your CELO tokens, there are a few things to keep in mind:
- It is possible to switch your vote from one validator to another but you need to wait for approximately ~3 days. You simply need to revoke your votes staked with the current validator first. This may be something to consider if your current validator gets slashed for misbehavior on the chain.
- Note that a single account can vote for up to 10 Validator Groups.
- Rewards are distributed per epoch, which is approximately once a day.
- Rewards are auto-compounded as they are added directly to the locked CELO voting for that group, and re-applied as votes for that same group, so future rewards are compounded without the account holder needing to take any action.
- As a CELO staker or simply a CELO token holder, you may submit a proposal to the Governance smart contract, along with a small deposit of CELO. Submitted proposals are added to the queue of proposals. While a proposal is on this queue, voters may use their locked CELO to upvote the proposal. Learn additional information about governance participation here.
How do I choose Celo validator groups?
It is essential for users to stake their PoS tokens with a dependable and highly performant validator, which is why we have rolled out our Verified Provider Program in June 2022. Through this program, we thoroughly scrutinise potential validators, evaluating factors such as security measures, their on-chain reliability, their provider setup, and value-added services for the whole ecosystem.
You can find more information about the providers that have been verified in VPP Batch 1 and Batch 2. Validators that are part of the VPP will have a blue checkmark displayed next to their names on our website.
When choosing a validator group to vote to on Celo, there are numerous factors to take into account:
Voting Cap: Validator Groups can receive votes up to a certain voting cap. You cannot vote for groups with a balance that would put it beyond its cap. Check the balance of “Can receive votes” on the validator page to understand the remaining capacity of votes that the validator can receive.
Total Votes: A large number of total votes may signal a positive reputation for a validator group.
Current Status: You can see whether the validator is currently active or not by checking the validator list shown on this page. Validators that are active have a green dot under them.
Network Share: When selecting a validator group to vote to, it’s generally advisable to avoid choosing one with the highest or lowest network share. Delegating to the most popular validators can increase the risk of centralization within the network as they will have more influence in governance and a greater share of blocks. On the other hand, Selecting a validator group with a small network share increases the chance of the validator in the group falling out of the top 110 active sets. Finding the balance and choosing a validator with a moderate network share could be the best approach to keep the balance in decentralization and profitability.
Uptime Performance: To ensure the best results, it’s important to select a validator with high uptime performance. You can view a validator’s uptime score on the Validator Dashboard. Our suggestion is to only choose validators with an uptime score of 99% or higher.
Security: The operational security of validators is essential for everyone’s use of the Celo network. All validators that participated in the Stake Off were eligible for a security audit. You can see scores under the “Master Validator Challenge” column in the Stake Off leaderboard. Scores of 80% or greater were awarded the “Master Validator” badge, indiciating a serious proven commitment to operational security.
Value Add to the Ecosystem: Another way to assess the long-term vision of validators is to check if they offer additional services to their delegators, such as tax reporting tools, explorers, etc. This can be a useful filter when comparing different providers.
Learn about additional considerations for selecting a validator group here.
How are the rewards generated?
Since you hold CELO tokens, you can lock the tokens and use them to vote for Validator Groups. Rewards to Locked CELO are totally independent from validator and validator group rewards, and are not subject to the group share. The staking rewards for CELO are generated by:
Epoch Reward: Epoch Rewards are similar to the familiar notion of block rewards in other blockchains, minting and distributing new units of CELO as blocks are produced, to create several kinds of incentives. A total of 400 million CELO will be released for epoch rewards over time.
Holders of Locked CELO that voted in the previous epoch for a validator group that elected one or more validators and have activated their votes are eligible for rewards. The protocol has a target for the proportion of circulating CELO that is locked and used for voting. The voting reward is determined by the voting participation calculated as locked CELO for voting divided by circulating CELO supply, and the adjustment factor. If the voting participation is below the target at the end of an epoch, the on-target reward rate is increased; if the voting participation is above the target at the end of an epoch, the reward is decreased.
It’s important to keep in mind that the total annual rewards are divided among all active stakers. As the number of staked tokens increases, the reward rate decreases. Furthermore, there are governance proposals that could adjust some of the on-chain parameters, which could also change the APR if they are approved. You’re welcome to use our Staking Calculator to get a better understanding of how these factors can impact your rewards.
What are the risks of staking CELO?
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: CELO used for voting/delegating is never at risk. The actions of the Validator Groups or Validators you vote for can cause you to receive lower or higher rewards, but the CELO you locked will always be available to be unlocked in the future. Slashing in the Celo protocol applies only to Validators and Validator Groups.
Unbonding risk: There is a 24-hour warm-up period when staking CELO and an additional 3-day unbonding period when unstaking CELO. This is something to keep in mind when deciding to stake, as the crypto markets are highly volatile.Consider keeping funds liquid if you do not intend to hold CELO long-term.
Dropping out of the active set: The risk of a validator group getting slashed or dropping out of the top 110 could result in a loss of rewards. It is important to check frequently on the status of the validator to ensure it is active, not jailed and hasn’t raised the commission fees.
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 CELO.
This list is not exhaustive and other risks may apply.
What is CELO?
CELO is the native token of the Celo network and it is used to perform various important functions within the network:
- Staking: Users can temporarily lock up CELO to contribute to the security of the network by voting for Validator Groups. In return for the service, both the Validator Groups and stakers/voters are compensated with staking rewards separately.
- Gas token: Every transaction on the network incurs a small fee that is paid to the validator in the form of CELO.
- Governance: CELO is used to vote on governance proposals on the network. Celo uses a formal on-chain governance mechanism to manage and upgrade the protocol such as for upgrading smart contracts, adding new stable currencies, or modifying the reserve target asset allocation. All changes must be agreed upon by CELO holders. A quorum threshold model is used to determine the number of votes needed for a proposal to pass. See more about Celo governance here.
- Other utilities: CELO is also the reserve collateral for Celo Dollar.
What consensus algorithm does Celo use?
The Celo blockchain code has shared ancestry with Ethereum and maintains full EVM compatibility for smart contracts. However, it uses a Byzantine Fault Tolerant (BFT) consensus mechanism (Proof-of-Stake) rather than Proof-of-Work and has different block format, transaction format, client synchronization protocols, and gas payment and pricing mechanisms.
Validators gather transactions received from other nodes and execute any associated smart contracts to form new blocks, then participate in a Byzantine Fault Tolerant (BFT) consensus protocol to advance the state of the network. Since BFT protocols can scale only to a few hundred participants and can tolerate at most a third of the participants acting maliciously, a proof-of-stake mechanism admits only a limited set of nodes to this role.
Celo’s consensus protocol is performed by nodes that are selected as validators who determine which transactions get applied and producing new blocks. The Celo community choose validators by locking CELO and voting for Validator Groups, intermediaries that sit between voters and Validators. Every Validator Group has an ordered list of up to 5 candidate Validators. Some organizations may operate a group with their own Validators in it; some may operate a group to which they have added Validators run by others. Validator elections are held every epoch (approximately once per day).
There is a maximum cap on the number of active validators that can be changed by governance proposal, which is currently set at 110 validators. The active validator set is determined via the proof-of-stake process and is updated at the end of each epoch, a fixed period of approximately one day.
What are the tokenomics of CELO?
The Celo network features an ongoing issuance in the form of epoch rewards (batch of block rewards). Epoch rewards will distribute the remaining 400 million CELO of the one billion max supply as various incentives. At the end of each epoch, 75% (300 million total) of newly issued assets will go to network validators, while the Community Fund (24.5%) and a carbon offsetting fund (0.5%) receive smaller portions. All of these distribution models or how these CELO get spent is subject to on-chain governance and sufficient stability protocol reserves.
As for Celo’s inflation rate, the proposed target curve (subject to change) of epoch rewards declines linearly over 15 years to 50% of the total 400 million CELO dedicated to ongoing issuance. After this first 15 years, the inflation rate decays exponentially with a half life of h=ln(2)×15=10.3h. This model does not incorporate changes to the rewards multiplier, which is a governable adjustment factor that can account for underspending or overspending. Learn more about tokenomics and epoch rewards here.
Initial Token Distribution Breakdown
At mainnet launch, there were 600 million CELO (formerly cGLD). The remaining 400 million CELO will be distributed to network validators and the Community Fund as epoch rewards. The initial distribution of the first 600 million CELO was as follows:
- 20% (122.8 million) was set aside for pre-launch sales, but only 85 million CELO have been sold so far. The Celo Foundation may use the rest for future sales.
- 32% (193.7 million) went to protocol contributors, including the team, advisors, founders, etc.
- 16% (95 million) was allocated to Community Grants for initiatives like the Polychain Ecosystem Fund, education and adoption grants, and others with 3-10 year allocation schedules.
- 12% (73.6 million) went to cLabs and the Celo Foundation for operational grants and expenses.
- 20% (120 million) went to the “initial reserve” for maintaining the peg of cUSD, managed by the Celo Reserve Foundation.
From the Staking Rewards Journal