Lunie is a tool that allows users to safely store, manage and stake crypto assets on 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 to see if it’s right for you. We’re here to help you do that!
TL;DR — Proof of Stake allows for individuals, groups and/or businesses to participate in the operation of a blockchain network and in some cases the governance surrounding how decisions are made. 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 to staking.
While Proof of Stake networks share a lot of similarities in philosophy, operationally they are all quite different. This guide will focus exclusively on how staking works in the Cosmos network on the Cosmos Hub.
Let’s start with the assumption that you already have some ATOM and are ready to begin earning rewards through staking. With Lunie, once you have picked a validator to stake your tokens with, you can manage how you interact with that validator and the governance mechanisms entirely from one interface.
The voting power of a Cosmos validator is a critical metric to consider when choosing where to stake your ATOM. 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 new blocks. This is how validators receive rewards for themselves and on behalf of those who staked to them.
Lunie offers an easy to understand rewards estimate for each eligible validator on the network. This calculation is based on:
- The total annual validator rewards which (voting power * annual provision—a variable defined in the protocol)
- The validator’s commission from the annual calculation
- Assuming 1 token staked, which will receive a percentage of the total available rewards
- How many tokens are already staked to that validator
These rewards figures do not currently represent the compounding effect of rolling rewards into the existing staked balance on a regular basis.
This rewards estimate is only a rough idea of what a token holder can expect over the course of a year and is subject to change. Validators can adjust their commission rates, experience downtime or be slashed for double signing. In these dynamic systems, we recommend re-evaluating where your tokens are staked over time.
As time passes and your staked ATOM earn you more and more rewards, you will see your balance of rewards increase in real-time. This is a separate balance from your primary available balance of ATOM. Rewards are not counted towards your staked balance, meaning their accumulated value does not represent what you currently have at stake. Rewards need to be claimed before they can be spent, sent, or staked.
It’s totally fine to let your rewards balance accumulate, but just consider it analogous to a 0% interest bearing piggy bank. If you are seeking to compound the rewards over time, you’ll have to claim the rewards and then stake them to a validator of your choice in two separate transactions.
The 21-day lockup period for those who un-stake their ATOM on the Cosmos network does not inhibit someone who is already staked to change validators instantly. This is called Re-staking. You can instantly begin earning rewards with the validator you switch to however you will still be subject to any penalties the original validator is subject to for the 21 day period.
In Lunie, you can choose a different validator than the one you are already staked with and move any amount of stake from one validator to another.
This feature is different from un-staking, an explanation of which follows below.
Un-staking is a transaction you can make to take your stake back from a validator. Un-staking is subject to a protocol-enforced 21 day period where the transaction cannot be reversed or interrupted. The tokens associated with the un-staking transaction will not earn any rewards or be transferable for the duration of the lock-up period. This lockup period is intended to prevent long-range attacks on the network.
For example, if you have 100 ATOM staked and you un-stake 25 ATOM, the 75 ATOM still staked will earn rewards while the 25 ATOM will earn no rewards for the duration of the lock-up period.
Voting on the Cosmos Hub is an exercise in on-chain governance where the community of developers and token holders come together to propose new ideas and implementations of those ideas to help move the network forward. Any token holder with staked tokens is eligible to create a proposal, deposit on a proposal, or vote on a proposal.
To leverage your balance of ATOM in voting using Lunie, just navigate to the proposals page in Lunie to see all the past and current proposals on the Cosmos Hub.
For more details about governance on the Cosmos Hub, check out our guide to how governance works.
Slashing Risks — Staking on the Cosmos network can result in a significant loss of funds. If a validator double signs or commits any malicious activity on the network their stake and the stake of everyone who staked with them would be subject to slashing events (a proportion of the ATOM will be eliminated).
There are currently 2 scenarios where slashing could occur with Cosmos Hub validators:
- A validator and their stakers get slashed 0.01% once if the validator is discovered to be unavailable for 18 hours or more. Once they are slashed, the validator is “jailed” and unable to participate in block proposals until they are able to send a transaction to the network proving they are back online.
- Validators and their stakers get slashed for double signing: The slashing percentage is 5% and is much more severe than downtime.
This is why active evaluation and participation in the Cosmos network is critical to not only understand which validators are doing the best jobs but also who are maintaining their status as trustworthy operators over time.
Additional Considerations When Picking A Validator
Note — Lunie is not a validator on Cosmos or any other Proof of Stake network and we have no objective benefit to recommend one validator over another. We try to offer the clearest indicators possible in Lunie.