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How to stake NEAR
There are several ways to earn a return on your NEAR, 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 Near Wallet and then follow these steps below:
Step 1: Download the NEAR Wallet and navigate to the staking tab in the top menu.
Step 2: Click the ‘Stake my tokens’ button and select a validator. If you’re not sure who to delegate to, you can consult our FAQ for guidance on selecting a validator.
Step 3: Click the ‘Stake with validator’ and enter the number of tokens you want to stake.
Step 4: Click ‘Submit stake’ and sign the transaction to complete the process.
Do I need to maintain my staking in any way?
Once you have delegated your NEAR, there are things you need to consider going forward:
- Firstly, you might consider redelegating if your current validator raises their commission rate or stops earning rewards because of misbehaviour on-chain. Once redelegated, you have to wait for 1 day before you are able to redelegate again.
- Secondly, staking rewards are not automatically compounded, so you may want to claim and stake your rewards more frequently to maximize the value of your tokens. Keep in mind that each transaction will incur gas fees. By using our NEAR staking calculator, you can calculate the optimal re-stake frequency for your amount of NEAR.
By delegating to a good long-term oriented validator, you can reduce most of your maintenance and only have to check back to restake your rewards.
How do I choose NEAR validators?
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 Rates: The commission rate a validator charges is the % of your reward that the validator keeps for themselves. A high commission rate means your rewards will be lower whilst a low commission rate could mean that the validator is not profitable and could cause issues for them in the future. Keep in mind that validators can adjust their commission rates up or down over time.
Number of Users: A high number of delegators could indicate positive sentiment towards a validator.
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. This metric has some limitations as Validators can choose to delegate to their own validator from another wallet, which is done to increase security of their funds.
Current Status: In the Validator Overview table, which is just above the FAQs, you can see whether the validator is currently active or not. On Near, there is not a limited ‘active’ validator set. The minimum seat price to become a block-producing validator is based on the 100th proposal. (If more than 100 proposals are submitted, the threshold will simply be the stake of the 100th proposal, provided that it’s larger than the minimum threshold) The current seat price to become a block-producing validator is updated live on the Explorer. Any validator nodes with stakes higher than the seat price can join the active set of Validators.
Network Share: You typically don’t want to choose a validator with the highest network share 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. The network share a validator holds can be viewed on the explorer.
Performance: Make sure you pick a validator with the highest possible performance. You can check the performance by hovering over the “Reward” values on the Validator Overview table on this page. Our recommendation is only to pick those with a >=99% performance and a long history of not getting slashed.
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.
How are the staking rewards generated?
The Staking Rewards on NEAR come from:
Block Rewards: Each year, a fixed amount of NEAR, approximately 5% of the total supply, is issued. 90% of this (4.5%) is distributed to validators in exchange for computing, storage, and securing the transactions on the network. In exchange for servicing the network, validators are rewarded with a target number of NEAR every epoch. If less than 100% of the tokens on the network is staked, validators stand to earn even more annual rewards.
Transaction Fees: Each transaction processed by the network comes with transaction fees. 70% of every transaction fee is burned, 30% is allocated to the contract that was used in this call (Developer incentives). This means that issuance can become negative if Total Fees > Total Issuance. Consequently, higher usage of the network will increase the incentives to run validating nodes (as they receive higher real yield).
Storage Staking: NEAR is needed to store data on the protocol. For example, if you want to store a list of addresses on the protocol, 1 NEAR needs to be stored on that contract. Depending on the dApp that is being built, the cost of storage can vary, as the price of storage is around 1 NEAR per 100kb. The NEAR tokens are effectively held in a locked state until the associated data is deleted, a characteristic that closely resembles staking, as the tokens are removed from circulation. However, these tokens do not generate any staking rewards and remain static.
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.
What are the risks to staking NEAR?
Whilst we want to ensure staking is as safe and transparent as possible, there are still things to consider regarding whether a specific staking option is right for you.
Slashing risk: Currently, there is no slashing on the NEAR network. However, there are still risks to staking during this initial phase of the network. Validators that are offline will not receive rewards for missed blocks, and stakers who delegate to an inactive validator’s pool will also not receive any rewards.
Unbonding risk: The unbonding period for NEAR is 1 day. Crypto markets are highly volatile, and investors need to be aware that they cannot sell their tokens immediately once they have staked them. They first need to wait 1 day for the tokens to unbond before they become liquid. Please take note of this lockup before you decide to stake. Consider keeping funds liquid if you do not intend to hold NEAR long-term.
Dropping out of the active set: A validator could also drop out of the active set, meaning they no longer earn any rewards. Ensure you check back frequently to ensure your validator is active and has not unreasonably raised their commission fees.
Protocol security risks: There is an inherent risk that the protocol could contain unknown bugs. This not only applies to staking but your NEAR investment in general.
Please note that this is not an exhaustive list of all the risks related to staking.
What is NEAR?
NEAR is the native token of the Near network that is used to carry out the key functions of the platform as detailed below:
- Gas token: NEAR is used for network fees. Each transaction processed by the network requires a small fee to be paid, this fee gets burnt and acts as negative inflation.
- Staking: Users can temporarily lock up NEAR to contribute to the security of the network. In return for the service, both the validators and the stakers are rewarded with epoch rewards.
What consensus algorithm does Near use?
The NEAR Protocol uses a novel consensus algorithm called Nightshade. Nightshade is based on the Proof-of-Stake (PoS) consensus mechanism, but incorporates several key innovations to improve scalability and security. Some of the key features of Nightshade include:
Sharded transaction processing: In a sharded system, the network is divided into smaller groups, or “shards,” each of which processes a portion of the transactions on the network. This allows the network to achieve high transaction throughput by parallelizing the transaction processing across multiple shards. Another key innovation in Nightshade is:
Adaptive transaction batching: In this system, transactions are grouped into “batches” and processed together. The NEAR Protocol uses a special algorithm to determine the optimal batch size for each shard, which allows the network to maximize throughput and minimize transaction fees.
Dynamic validator pool: Finally, Nightshade uses a dynamic validator pool to improve security and decentralization. In a traditional PoS system, the set of validators is fixed, which can make the network vulnerable to attacks from large stakeholders. In contrast, Nightshade uses a more flexible approach where the validator pool is constantly changing, which makes it more difficult for attackers to coordinate an attack on the network.
What are the tokenomics of NEAR?
The total and maximum token supply of NEAR tokens is 1,000,000,000. There is fixed issuance around 5% of the total supply each year, 90% of which goes to Validators in exchange for computing, storage, and securing the transactions happening on the network. All transaction fees collected by the network get burned. Therefore, the issuance of NEAR is actually ~5% minus transaction fees. This means that, as the network grows in usage, issuance can become negative, introducing negative inflation in the protocol. The initial distribution of Near Protocol (NEAR) tokens is as follows:
- 17.20% is allocated to Community Grants,Programs
- 14.00% is allocated to Core Contributors
- 12.00% is allocated to Community Sale
- 11.76% is allocated to Early Ecosystem
- 11.40% is allocated to Operations Grants
- 10.00% is allocated to Foundation Endowment
- 15.23% is allocated to Seed Round
- 8.41% is allocated to Venture Round
- $12.1M was raised in an ICO on July 10, 2019
- $21.6m was raised in an ICO on May 4, 2020
- $150m was raised in a Funding round on January 13, 2022
- $350m was raised in a Venture round on April 6, 2022
From the Staking Rewards Journal