What is DOT Staking?

What is DOT Staking

Staking is a common mechanism in the blockchain, and currency users can participate in network maintenance and obtain benefits at a low threshold.
In the Polkadot network, "nomination" is one of the ways to participate in staking (the other is the verification node that runs the network by itself). After the token holder binds his DOT token in the Staking , he needs to choose one or more validators as his nomination, so that he can continue to obtain the profits obtained by the validator when processing network transactions.

Why staking DOT?

staking is one of the key functions of DOT in the network. The larger the proportion of DOT used for staking, the higher the staking return rate.

DOT inflation system setting: when the system staking rate is lower than 50%, the annual average return rate will be higher than 20%, which can encourage more DOT tokens to participate in the staking; on the contrary, when the system staking rate is higher than 50%, The average annual rate of return will be less than 20%, encouraging some miners to withdraw.

In order to ensure network security, DOT will be inflated according to the staking rate of the entire network. According to the economic incentives set by the inflation system, the DOT token staking rate can be stabilized at 50%. Under this staking rate, the annual inflation is 10%.

If the user holding money does not use DOT as a staking, the value of DOT in the user's hands will be gradually diluted in inflation. For example, Tom and Bob both have 100 bucks. Tom stores the money in the bank and has interest every year. Bob has been holding 100 bucks in cash. After 10 years, Tom's money has become 200 yuan, and Bob still only has 100 yuan, so Bob's money has become relatively less. So for DOT coin holders, if you do not staking DOT, it means that there are fewer and fewer coins in hand.

What is a verification node?

The verification node is an entity that maintains the stable and safe operation of the Polkadot relay chain and processes transactions on the chain. They maintain network security in the following three ways:

staking DOT

Verify the information of the collector on the parallel chain

Voting on network consensus with other verification nodes

What are Stash and Controller?

"Stash" and "Controller" are new concepts in DOT staking, and they are both wallet address.

Stash

The users participating in the staking mining will manage the address of the token.

Controller

For addresses participating in stakings, governance, etc., the "Controller" requires the authorization of the "Stash".

Explanation

If this is the first time you have staking, you do not need to set up a "Stash" and "Controller" during use. Ellipal has set it to the same account;

If you have used staking in other products and have already set up an account relationship, Ellipal will retain the account relationship you set before.

In Ellipal, the stash and the controller are set to the same account by default and cannot be changed.

What is Bond?

Select a part of DOT from the wallet to staking, this action is called bond. After bonded, the verification node can be nominated. "Bonded" shows the number of DOTs this address bond.

How to Bond

If there is 100 DOT in the wallet, you want to bond 50 DOT for staking. Click the "Bond" button, set the number to 50, confirm to complete the bond operation.

What is Unbond?

Unbond is to redeem the bonded DOT. It should be noted that the unbond DOT will not be transferred to the wallet immediately. Within 0-28 days after unbond, the unbond DOT will be "Unbonding" and become "redeemable" after 28 days.

How to Unbond?

Click the "Unbond" button, set the unbond number, confirm  to complete the unbond operation.

What is Redeem?

After 28 days of unbondling, the DOT will be in the "Redeemable" state. At this time, the unbond DOT can be redeem by using the redeem function.

How to Redeem?

Click the "Redeem" button, enter the redeem quantity, confirm to complete the redeem operation.

What is Payouts?

To receive the reward from staking, click the "Payouts" button to receive it.

Explanation

When you initiate a nomination, you must wait at least for the Polkadot network to enter the next ERA before your nomination information becomes effective. This process is completed in about 1 to 24 hours. After the nomination takes effect, the reward will be settled against each ERA, approximately once every 24 hours. If the validator you nominate is selected by the network as the current transaction, then you will share the revenue with the validator.

The Polkadot network provides two ways to obtain Staking benefits:

Passive gain

Passive income acquisition means that when any nominee receives the income, the verification node will distribute all the current income to his nominee.

Proactively claim revenue

Proactive claiming revenue means that the user clicks "claiming reward" to actively initiate claiming operation.

How can I change the account for reward distribution?

At present, Ellipal Staking will award rewards to your "Stash" by default, which is the wallet address currently accessing the  .

In Ellipal, it is not supported to change the address of rewards.

The risk of DOT Staking?

When you nominate a validator, your staking income and risk are "bound" to the validator.

If the verifier runs the node stably and does not drop the line, and performs operations according to the rules of the network, then you will securely obtain the benefits of staking, otherwise if the node you nominate frequently drops or does a transaction that violates the network rules, it will be punished by the network At this time, the amount you bind will also be punished.

In summary, the reliability of the validator largely determines the amount of risk you face when participating in staking.

Be the first to comment

All comments are moderated before being published