Lunie is a tool that allows users to safely store, manage and stake crypto assets in Proof of Stake (PoS) networks. We assume that because you have landed here you are interested in learning more about Proof of Stake and trying it out. We’re here to help!
TL;DR - Proof of Stake allows for individuals, groups and/or businesses to participate in the operation of a blockchain network. We will go over how you can get started with this as fast and securely as possible. For more background on the basics of staking please read our guide which can be found here: https://lunie.io/guides/what-is-staking/
While different Proof of Stake networks share a lot of similarities in philosophy, operationally they are all quite different. This guide will focus exclusively on the Terra protocol.
Let’s start with the assumption that you have already bought some of Terra protocol's native crypto asset LUNA and are ready to start earning rewards through staking. With Lunie, you can pick a validator to stake your tokens with, you can manage how you interact with that validator, and manage your other staking assets all through the Lunie interface.
About The Terra Network
Terra is a price-stable cryptocurrency with significant traction in the Korean and Mongolian e-commerce markets. Looking to solve a barrier hindering cryptocurrencies from being used as a medium of exchange, Terra provides a platform for transacting with the benefits of cryptocurrency minus the high volatility. Terra’s products currently have over 1 million users and the network is currently secured by 56 active validators.
Choosing a Validator
Voting power of a validator is a critical metric to consider when choosing where to delegate your LUNA. The voting power metric is representative of how much a stake a validator has been allocated by token holders and thus determines how likely they are to be selected by the network to vote on and propose a new block. This is how validators earn rewards for themselves and on behalf of those who staked their tokens with them.
Additional Considerations When Picking A Validator
Note - Lunie is not a validator any Proof of Stake blockchains - therefore we have no objective benefit to recommend one validator service over another - we simply offer the clearest indicators possible of what a validator’s performance and current status is and the rest of the judgement will fall on the user. As always, we are happy to field any questions you might have about this process and are open to feedback.
Slashing Risks - Staking on the Terra protocol comes with some risks of loss of funds. If a validator messes up by double signing, the validator and those who delegate to them will be slashed 5%. If a validator experiences significant downtime or does not participate in the oracle process, the slash will be less severe at .01%.
Lunie offers an easy to understand rewards estimate for each eligible validator on the network based off of a calculation of:
- The total annual validator rewards (voting power * annual provision - which is a variable defined in the protocol)
- Subtracting the validator’s commission from the annual calculation
- Assuming a 1 LUNA token delegation which will receive a percentage of the available rewards
- Based on how many tokens are already delegated to that validator
These rewards figures do not represent the compounding effect of rolling earned rewards back into the existing staked balance over time.
This rewards estimate is only a rough idea of what a delegator can expect over the course of a year and is subject to change. Validators can adjust their commission rates, experience downtime or cause a slashing event to occur.
Managing Staking Rewards
As with other networks built using the Cosmos SDK, Terra rewards, which are a mixture of LUNA and a variety of stablecoins, must be claimed with a “claim transaction.”
Assuming you have LUNA staked with a validator and you want to un-stake them, the LUNA will be subject to a mandatory 21-day lockup period enforced by the Terra protocol. This 21-day lockup period is built into the network to prevent long-range attacks. During this period, your account will not earn any rewards associated with staking those funds and they will not be transferable until the period is complete.
For example, if you have 100 LUNA staked and you un-delegate 25 LUNA, the 75 LUNA still staked will continue to earn their rewards, while the 25 LUNA will earn no rewards unless they are re-staked after the lock-up period.
However, token-holders can immediately change who they stake a portion or all of their stake to by re-staking directly to another validator, rather than un-staking, waiting for 21 days and then staking elsewhere. Although this allows your rewards to continue to be earned un-interrupted, restaking can only be performed once every 21 days.
Similar to the governance structure on Cosmos, Terra protocol token holders with staked LUNA are able to submit and vote on proposals through governance functionality provided in the Lunie interface. Currently there are 5 types of proposals within the Terra protocol:
- Text Proposals - are for creating general purpose petitions which can query the rest of the community for an opinion on a subject or ask the core developers to take action.
- Parameter Proposals - are able to alter specific parameters within the protocol that go directly into effect if they pass.
- Community Pool Spend Proposals - The community can vote on how to spend funds from an allocated portion of fees collected within the network.
- Monetary Policy Proposals - Macroeconomic factors such as network tax rates and reward rates are able to be proposed and voted on via monetary policy proposals.
- Software Upgrade Proposals - These are inherited from the Cosmos SDK specifications, however it is not something the Terra protocol has implemented or supports yet.