This article is the second part to our list of staking coins. It might help to read the first few paragraphs of that post to understand the function of staking and whats involved.
ROIs change according to a variety of factors. Due diligence is recommended before choosing a coin to stake.
Ontology is a project aiming to create an interoperable multi-chain ecosystem. It was created by the same core foundation that started the NEO project. NEO is more focused on community effort and Ontology is directed more towards corporations.
Ontology has some similarities to its competitors but there are also some differences. Ontology uses the Verifiable Byzantine Fault Tolerance (VBFT) consensus algorithm. VBFT combines PoS, VRF (Verifiable Random Function), and BFT.
Like NEO, Ontology is a dual token system. Holding ONT in your wallet will automatically generate Ontology Gas (ONG)
To stake ONT and earn ONG, you vote for a node by locking your ONT into a smart contract. Nodes share revenue with their voters.
Each staking round lasts 120,000 blocks. Staked coins will remain staked automatically for the next round. When you unstake ONT, it will remain locked until the end of the round. The fastest a round can take is 33 hours and the longest a round can take is 42 days. This time variation exists since block time can range from 1 to 30 seconds.
Staking is done in multiples of 500 ONT. Thus, the minimum to stake is 500 ONT. You can use the Ledger Nano S in conjunction with OWallet to stake. You are not required to keep your wallet connected.
Leaving unstaked ONT in an eligible wallet will still generate ONG, but staking will give you bonuses.
Rewards are currently coming from three sources: Inflationary block rewards, transaction fees, and the ONT foundation bonus. The foundation bonus is only set to run for three years. After this, staking rewards will just come from the block reward and transaction fees. Ontology staking round 1 started in mid-October 2018. Round 55 is currently underway.
The foundation bonus sends an equal amount to each node responsible for validating transactions. So if a node has fewer stakers, it will be more profitable to stake there. You need to have your ONT staked for an entire month before you are eligible for the foundation bonus.
The price ratio between ONT and ONG will also affect your yield. It’s a good idea to double check current numbers before staking.
Check out this guide to walk you through the staking process.
The node you choose will affect your earnings but the average ROI is currently about 2.6% (in USD).
Cosmos aims to achieve an “ecosystem of connected blockchains” and token economy ecosystem.
They have an easy to use SDK, making the process for creating a public or private blockchain relatively straightforward. Interoperability between blockchains is also a key selling point for the Cosmos Network.
On the Cosmos Hub, Atoms are used for staking and governance. Cosmos uses the Tendermint consensus algorithm, a variation of PoS.
Tokens were distributed during the token sale in April 2017. 75% were sold, and the rest were allocated to Lead Donors, the IFC, and a company.
Inflationary block rewards are given as a reward to users who stake ATOM. The annual inflation rate changes, depending on the percentage of ATOM staked. It can range from 7% to 20%. This is done to incentivize staking. Inflation rises to 20% until the total atom staked is 66%.
Transaction fees are also given as rewards but they are currently insignificant. That is expected to change after Inter-Blockchain Communication (IBC) is live.
Validators and Delegators
There are two ways to “stake” ATOM on the Cosmos Network. You can be a Validator or a Delegator.
Running a Validator Node is not viable for most users. It requires a bit of technical know-how and requires a large amount of ATOM delegated to your node before you can become “active”. Only the top 100 validating nodes, in terms of delegated coins, will be active. The number will rise to 125 with the next chain upgrade.
You can delegate from a Ledger Nano S or another form of cold storage (cold staking). Your wallet doesn’t need to stay connected.
Delegating is non-custodial. Validators do not have access to delegated funds. Delegators simply grant voting power. Delegators may vote for themselves, but delegators who fail to vote will inherit the vote of their validator.
A validating node must remain online at all times. Downtime will incur penalties. As explained in the Validator FAQ, “If a validator misses more than 95% of the last 10.000 blocks, they will get slashed by 0.01%.” Validators are also required to vote on every proposal.
Retrieving your bonded ATOM from an active validator will incur a 21-day unbonding period. Your ATOM is still subject to slashing during this time. Unbonding from an inactive validator is immediate.
The minimum amount you need to delegate is 1 ATOM ($4.20).
The minimum amount of delegated ATOM to become a validator is currently 40,255.561 Atoms ($169,073.36). This amount doesn’t have to come from your own pocket. When coins are delegated to your node, this counts as well.
Choosing a validator
If a validator gets slashed for misbehaving, having downtime or double signing a block, the percentage comes from their pool of bonded coins. This is important to know, even if you are just a delegator. This will cause delegators to have their “staked” coins slashed proportionally.
This is why it’s important to use due diligence before choosing a validator to delegate to. Double signing currently has a 5% slashing penalty. You can check out a list of Validators on block explorers like Mintscan.
Validators set different commission rates. They typically range from 0% to 25%. This will affect your earnings.
It is recommended that you choose a Validator with a relatively high degree of self-delegation. This is when Validators delegate coins to themselves. Self-delegation means they have skin in the game. Misbehavior will cause them to lose funds too, not just their delegators coins. It is seen as safer.
Keep in mind that a large amount of voting power incurs centralization concerns. Some prefer to delegate to smaller validators to prevent over-centralization.
The frequency of a validator “proposing” a new block is based on their bonded stake in proportion to the total bonded stake on the network.
For example, if the total bonded stake across all validators is 100 Atoms and a validator’s total stake is 10 Atoms, then a validator will propose 10% of the blocks. It is then distributed to delegates proportionally (as the commission is taken out). Validators who don’t propose a block still get a reward
The yields for staking ATOM is shown below:
- 9.54% (in ATOM) yearly yield for running validator node
- 8.77% (in ATOM) yearly yield for delegation
The NEM (New Economy Movement) mainnet was launched on March 31st, 2015.
NEM is described as a “dual-layer blockchain written in Java”. NEM uses the unique Proof-of-Importance (POI) hashing algorithm.
The entire XEM supply was issued in the initial distribution, taking place in 2014.
The NEM Nano Wallet allows users to trade assets created on the NEM platform and interact with NEM smart contracts.
Supernodes & Harvesting
There are two options for investors looking to earn passive income on the NEM network.
Users can operate a supernode or “harvest” blocks. The process of setting up and running a supernode is a bit complicated for most people but the rewards are much higher. The collateral requirement is also 3 million XEM, currently worth $119,298 USD. Running a supernode isn’t a viable option for most users, so we will focus on harvesting.
There are two approaches to harvest XEM. You can delegate to a remote node or run a node yourself.
Running your own node would require you to stay connected 24/7, to reap maximum rewards. Delegating to a remote node doesn’t require you to keep your wallet online. Delegating to a node is very easy to do, even for users who aren’t very tech-savvy.
One setback associated with using a remote node is that when the node reboots, you have to restart your harvesting. If you don’t notice that the node rebooted and don’t reconnect, you will not be harvesting. Thus, it’s important to keep an eye on the node your delegate to. The Catapult update, expected to go live in Q1 2020, will make it so delegated harvesters automatically reconnect when the node comes back online. In other words, you will no longer have to manually reconnect to nodes to continue harvesting.
Delegating does not transfer custody or compromise your private keys.
The minimum amount to harvest for both methods is 10,000 XEM, currently worth $397.66 USD. You will also need less than one XEM to pay the Importance fee.
If you harvest a block, you get all the fees within that block. Several factors affect your earning potential.
- The Total amount of XEM vested on the network.
- Daily network rewards
- Your Importance Score
Your Importance score affects your likelihood of harvesting a block. The importance score is decided by things like the number of coins you have vested, your recent transactions, and your transaction partners. Calculating Importance is a bit more complicated than that, but these are the basic factors.
Delegating to a remote node lends your Importance score.
You have to wait for your XEM to be vested before you can begin harvesting. 10% of your unvested amount vests each day. Since the minimum is 10,000 XEM, you would have to wait 88 days before harvesting if your account only had 10,001 XEM. If you have 15,000 XEM, it will be 11 days before you have enough vested for harvesting. The harvesting calculator is a useful tool for figuring this out.
There is a lot of luck involved when it comes to your ROI. It can depend on how much fees on the block you get selected to harvest, it depends on network activity, etc.
Harvesting can be done with the NEM Nano Wallet. This wallet can also be used with the Trezor hardware wallet.
You will see a range of different numbers when checking the ROI for harvesting XEM. A common number seen is about 4% per year.
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