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How to stake DOT
To earn a yield on your DOT, you can either lend them out to custodial providers or via a Defi lending protocol, run your own validator or nominate your tokens to a pool of your choice.
We recommend using a Ledger Hardware Wallet to keep full control over your funds. To nominate your tokens, you should ensure you have your DOT on Talisman wallet or SubWallet and follow the steps below:
Step 1: Go to the Polkadot Staking Dashboard and ensure you have your DOT on your Talisman or SubWallet.
Step 2: On the left side of the dashboard, select ‘Pools’ and then click ‘Join’.
Step 3: Select a pool then click ‘Join’. Check our FAQ on how to choose a pool if you are unsure who to nominate to.
Step 4: Choose the amount of DOT to bond then click Submit.
If you are looking for more Polkadot Verified Staking Providers, you can find them on Subscan.
Do I need to maintain my staking in any way?
Once you have nominated your DOT, there are things you need to consider going forward:
- Firstly, you might consider nominating to a different pool if your current one does not perform well or gets slashed. It is good practice to check in every now and then to make sure the pool is still performing well and that commissions haven’t been raised unreasonably.
- Secondly, rewards are not auto-compounded, so if you want to get the most out of your tokens, you should consider claiming and staking your rewards more frequently, but consider that each transaction will cost you some gas. Hence, please optimise your strategy for that. By using our DOT staking calculator, you can calculate the optimal re-stake frequency for your amount of DOT.
- There is a deadline to claim staking rewards, nominators will not miss out on rewards if they claim the pending rewards for a validator within 28 days.
- View Verified Staking Providers on Subscan.
- Please note that a pool member cannot vote (e.g. in Referenda or for Council members) with their nominated funds. This may be changed in the future once accounts are afforded the ability to split votes. In addition, if you want to switch pools, all funds from the account must be unbonded. This process takes 28 eras (28 days).
How do I choose a Polkadot pool?
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.
There are many metrics to consider when selecting a pool to nominate to:
Low commission: The commission rate a pool charges is the % of your reward that the pool of validators keep for themselves. A high commission rate means your rewards will be lower whilst a low commission rate could cause profitability issues for validators in the future. A Staking Pool can be made up of one or more validators, which can each charge their OWN commission rate. The active set on Polkadot changes every era, if just one of your validators gets into the active set, you will support it with your entire stake. If several of the validators supporting your staking pool gets elected, a special algorithm will decide which of them you support with your entire stake. This means that the effective commission rate you pay will vary every era, so make sure that the underlying validators in a Staking Pool each have commission rate that you agree with (< 5% is considered fair on Polkadot). Keep in mind that validators can adjust their commission rates up or down over time.
Number of pool members: A high number of nominators could indicate positive sentiment towards a pool.
Validators Self-Staked balance: A provider that has 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.
Pools should be actively nominating: Look for pools that have a green “Active / Bonded” tag.
Network Share: You typically don’t want to choose a pool with the highest network share or a pool with a low network share. Nominating to the most popular pools increases centralisation risks within the network as the validators that support that pool will have more say in governance and a larger share of the blocks. A pool with a low network share, might not be profitable and hence increases the risk of them discontinuing their services.
Performance: Make sure you pick a pool that has validators with the highest possible uptime performance by viewing the validator information on the Validator Dashboard. Our recommendation is to only pick those with a >=99% performance and a long history of not getting slashed.
Era points are above average: Validators will get more rewards for being active.
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.
How are the staking rewards generated?
The Staking Rewards on DOT come from:
- Inflation on the Polkadot Network (Block Rewards): DOT is an inflationary token with inflation set to be 10% annually. Validator rewards are a function of the amount staked and the remainder goes to the Polkadot treasury. This implies that DOT 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 are welcome to play around with our Polkadot Staking Calculator to get a better feel of how these metrics can influence your rewards
What are the risks to staking DOT?
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: DOT nominated to a pool can be partially slashed if the validator misbehaves. The exact percentage of tokens that will be slashed can vary depending on the specific circumstances of the offence.
Unbonding risk: The unbonding period for DOT is 28 days. 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 28 days 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 DOT long-term.
Chilling: If a validator was unresponsive for an entire session, the validator bond would be chilled in a process known as involuntary chilling. When a validator has been involuntarily chilled, it may restrict the validator from being selected in the next election depending on the session in which it was chilled. While a validator is chilled, they will not earn rewards for their participation in the network.
Protocol security risks: There is an inherent risk that the protocol could contain unknown bugs. This not only applies to staking but your DOT investment in general.
Please note that this is not an exhaustive list of all the risks related to staking.
What is DOT?
DOT is the native token of the Polkadot network that is used to carry out the key functions of the platform as detailed below:
Staking: Users can temporarily lock DOT up to contribute to the security of the Polkadot Network.
Gas token: DOT is used for transaction fees. Each transaction processed by the network requires a small fee to be paid.
Governance: DOT is used to vote on governance proposals on the network. Only staked tokens are eligible to be used for governance voting. The amount of voting power is measured in terms of stake. Polkadot token holders have complete control over the protocol. All privileges, which on other platforms are exclusive to miners, are given to the Relay Chain participants (DOT holders), including managing exceptional events such as protocol upgrades and fixes. If you are staking through a nomination pool, you cannot vote (e.g. in Referenda or for Council members) with your nominated funds. This may be changed in the future once accounts are afforded the ability to split votes.
Parachain auctions: You can use your DOT to participate in a parachain auction to help a new project secure a slot on the Polkadot Network. Community members temporarily lock their tokens in support of a particular project. In return for committing your DOT to this auction process, you will be rewarded with tokens of the project that is bidding wins the auction.
What consensus algorithm does Polkadot network use?
Polkadot uses a consensus mechanism called “NPoS” (Nominated Proof of Stake) to select the validators who are allowed to participate in its consensus protocol. In NPoS, “nominators” can choose to nominate their stake to specific validators. The validators are chosen based on their reputation and the amount of stake they hold, and they are rewarded for their contributions to the network with block rewards. NPoS allows for virtually all DOT holders to continuously participate, thus maintaining high levels of security by putting more value at stake and allowing more people to earn a yield based on their holdings.
What are the tokenomics of DOT?
The supply of DOT is uncapped, it is an inflationary token with 10% inflation per year. The 10% inflation on the network is reserved for the distribution of staking rewards.
Initial Distribution Breakdown
The Initial token distribution of DOT is as follows:
- 3.42% is allocated to Private Sale Investors
- 5.00% is allocated to SAFT Investors
- 50.00% is allocated to Auction Investors
- 11.58% is allocated to Future Sales
- 30.00% is allocated to Web 3 Foundation
- $79,488,000 was raised in the Private Sale 1 on 14/10/2017 with an average price of $0.288
- $64,512,000 was raised in the Public Sale 1 on 15/10/2017 with an average price of $0.288
- $60,000,000 was raised in the Private Sale 2 on 27/06/2020 with an average price of $1.2
- $42,500,000 was raised in the Private Sale 3 on 24/07/2020 with an average price of $1.25
From the Staking Rewards Journal