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Learn about Internet Computer Staking
How to stake ICP?
There are several ways to earn a return on your ICP, including lending them out to custodial providers or through decentralized lending protocols, or staking your tokens to earn voting rewards by voting on your own or following other neurons.
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 NNS dApp, and then follow these steps:
Step 1: Go to the Network Nervous System and add your Ledger device or other applicable wallets under Anchor Management.
Step 2: Click on “Neurons” and “Stake Neuron”, choose your source account,
Step 3: Enter the amount of tokens you would like to stake to and set the dissolve delay (i.e. stake period). Click on “Confirm and Set Delay”.
Step 4 (optional): Choose which neurons to follow (i.e. stake to). Check our FAQ on how to choose a validator (i.e. Neuron) if you are unsure whom to follow.
Do I need to maintain my staking in any way?
Once you have delegated your ICP, there are things you need to consider going forward:
- To earn rewards, your “dissolve delay” must be 6 months or longer and you must vote on NNS proposals.
- To claim rewards, you must have greater than 1 ICP in rewards, which is calculated by multiplying the maturity by the total staked ICP.
- Rewards are not auto-compounded, so it is recommended to claim and stake your rewards more frequently or even daily to get the most out of your tokens. But consider that each transaction will cost you some gas. Hence, please optimise your strategy for that. By using our staking calculator, you can calculate the optimal re-stake frequency for the amount of ICP you stake.
- As a participant in the ICP Ecosystem, once you have staked your tokens to a Neuron, you can vote on Governance Proposals and contribute to the ecosystem. Voting rewards increase with more votes, and to guarantee that you vote on all proposals, you can follow a trusted Neuron or organization like the Dfinity Foundation or Internet Computer Association.
How do I choose ICP Validators (Neurons)?
When choosing a neuron to vote to, there are numerous factors to take into account:
Voting Power: The higer the average voting power a neuron has, the higher rewards the voter can get. It represents the strength of your neuron’s vote and the reward earned per vote. A proposal on the NNS passes if enough voting power votes to approve it. It is determined by the number of ICP utility tokens locked in the neuron, the neuron’s dissolve delay, and the neuron’s age. The rewards depend on the ratio between your voting power and the voting power of all other neurons.
Maturity: The network allocates rewards to voting neurons based on its voting power and the number of proposals voted on. The higher maturity a neuron has, the higher rewards it can get. It represents the accumulated voting rewards in a neuron.
Actual Dissolve Delay: This represents the actual staking period left on a neuron. Choose one with your preferred staking period. It can be lengthened, but not reduced manually.
Staked ICP: It is the number of ICP utility tokens staked in the neuron, which can indicate positive sentiment towards a neuron.
Current Status: You can see whether the neuron is currently Not Dissolving, Dissolving, or Dissolved here. You want to stake to neurons that are Not Dissolving.
Network Share: It is typically not good idea to choose a neuron with the highest Voting Power as it increases centralization risk within the network. Avoiding the most popular neurons can make the network more distributed, but it also has some limitations as a neuron can choose to delegate to its own neuron from another wallet.
How are the rewards generated?
The staking rewards for ICP are generated from:
Voting Rewards: Daily voting rewards are based on your chosen dissolve delay, the age of your neuron, the number of ICP you staked, the percentage of proposals you voted on for the day, the total number of ICP staked in the network, and the total voting reward token allocation dedicated to governance. To maximize your rewards, you should make your dissolve delay as high as possible, assuming all other variables staying constant. The formula is a bit complex, but you can learn more here.
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 are welcome to play around with our Staking Calculator to get a better feel of how these metrics can influence your rewards.
What are the risks of staking ICP?
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 currently no slashing risk of staking ICP. At worst, stakers simply will not get voting rewards.
Unbonding risk: When staking ICP, the lock-up period ranges from 6 months to 8 years. Investors should be aware that due to the volatility of crypto markets, they may not be able to sell their tokens immediately after staking them.
Additionally, when claiming rewards, there is a 7-day unbonding period where a new neuron containing the ICP rewards must be spawned. To remove the rewards from this new neuron, you must unlock the neuron and wait an additional 7 days. It’s important to keep this potential risk in mind before deciding to stake and consider keeping funds liquid if you do not plan to hold ICP 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 ICP.
This list is not exhaustive and other risks may apply.
What is ICP?
ICP is the native token of the Internet Computer network and it is used to perform various important functions within the platform.
- Staking & Governance: Anyone can stake ICP tokens in the Network Nervous System (which governs the Internet Computer) to earn new ICP in the form of voting rewards. To earn rewards, they must participate in the governance proposal voting.
- Gas Token: From sending crypto to trading NFTs, the set transaction fee of 0.0001 ICP makes ICP a very attractive option in a world of expensive gas fees. Further, ICP tokens can be burned and converted into cycles, which are used by developers to pay for computation and storage costs for their decentralized applications running on the network via canister smart contracts.
What consensus algorithm does Internet Computer use?
Internet Computer (IC)’s consensus protocol is designed to meet the following requirements: low latency (almost instant finality); high throughput; robustness (graceful degradation of latency and throughput in the presence of node or network failures). The IC consensus protocol achieves these goals by leveraging chain-key cryptography.
Nodes can only be run by independent data centers that receive Data Center ID (DCID) issued by the Network Nervous System (NNS), and the open algorithmic governance system that controls the Internet Computer network. In order to be eligible for a DCID, potential node providers must submit an application to the NNS and meet minimum requirements, as well as procure specialized node machines.
There is no limit to the number of neurons that can exist on Internet Computer. The number of neurons depends on the amount of ICP tokens staked on them and the amount of resources they are using.
What are the tokenomics of ICP?
The total supply of ICP is variable, with both minting and burning mechanisms in place. Minting of ICP occurs as rewards for node providers and governance participants, while deflation occurs when ICP is used for computation or as transaction/proposal submission fees. The circulating supply of ICP is also variable and is affected by minting, burning, and the unlocking schedule of early contributors’ neurons, such as those of seed round donors.
ICP’s inflation occurs as rewards for node providers and governance participants, whereas deflation occurs through the burning of ICP for computation or transaction/proposal submission fees. An example of this is when ICP holders pay a small fee for submitting new proposals to the NNS, these fees are burnt as part of the transaction, causing the deflation of ICP supply. Any tokens that have been minted are free to be used and staked.
Initial Distribution Breakdown
Early contributors: 9.50%
Seed donations: 24.72%
Strategic partnerships: 3.79%
Community airdrop: 0.80%
Initial community and developer grants: 0.48%
Node operators: 0.22%
Internet Computer Association: 4.26%
Team members: 18.00%
Advisors and other third-party token holders: 2.40%
DFINITY Foundation: 23.86%
What is the Dfinity Foundation?
The Internet Computer was incubated and launched by the DFINITY Foundation, a not-for profit scientific research organization based in Zurich, Switzerland, comprised of the world’s top cryptographers and distributed systems and programming language experts, with nearly 100,000 academic citations and 200 patents collectively. Notable technologists at DFINITY include:
- Jan Camenisch, PhD (CTO) – world-renowned cryptographer & privacy researcher, led IBM’s Cryptography / Research department for 19 years
- Andreas Rossberg, PhD (Principal Engineer and Researcher) – the co-creator of WebAssembly and former team lead for the Google Chrome V8 engine
- Ben Lynn, PhD (Sr Staff Engineer and Researcher) – world-renowned cryptographer and Google Engineer, the “L” in BLS cryptography, the key signature system being used in Ethereum 2.0
- Jens Groth, PhD (Director of Research) – world-renowned cryptographer, known for pioneering non-interactive zero knowledge proofs
- Timo Hanke, PhD (Principal Researcher) – creator of AsicBoost, one of the few proven algorithmic optimizations for Bitcoin mining
- Paul Liu, PhD (Staff Engineer) – architected Intel’s Haskell compiler and received his PhD under Paul Hudak, a key designer of Haskell
- Johan Georg Granström, PhD (Director of Engineering) – former Sr Staff Software Engineer at Google responsible for scaling YouTube system infrastructure
From the Staking Rewards Journal