This guide will focus exclusively on the Polkadot network.

In this guide we will standardize some of the language across Polkadot’s protocol and relate it to our app’s specific staking language. 

Also, from here on out:

Nominators = Token Holders

Nominating = Staking

Polkadot Staking

Polkadot is a NPoS (Nominated Proof-of-Stake) blockchain developed by the Web3 Foundation, with a native token called DOT, which will be available for use at the launch of the network’s mainnet. A DOT holder is able to receive rewards in DOTs over time. To encourage DOT stakers to diversify who they delegate to, they can pick up to 16 different validators to distribute their stake to.

As with most other POS blockchain networks, validators assume the role of producing new blocks and guaranteeing finality, so understanding a bit about how this works will be helpful to any user looking to participate in staking on the Polkadot network. 

Creating and Importing Accounts

Users who create their Polkadot addresses using the Lunie app suite will be given a 24 word seed phrase which is unique to Lunie and will restore the account from any Lunie app. 

Depending on where you have your DOT’s stored, whether from the token sale or bought from an exchange, you will be able to import existing Polkadot accounts into Lunie via several import options. For simplicity-sake, Lunie gives users the ability to import their Polkadot accounts in a few different ways. 

  1. 24 word seed phrase
  2. 12 word seed phrase
  3. A raw private seeed

If your Ledger Nano device has the Polkadot app already installed you will be able to use it for signing transactions on Lunie as well. 

Within the Polkadot protocol, there are more advanced options to manage staking with one’s keys, however Lunie has abstracted away some of this complexity in the first integration. This allows users to stake and participate in governance only from their single Polkadot address, rather than having separate addresses for various purposes like having one for voting and one for staking. 

Specifically regarding account types, there are two different accounts from a protocol level for managing funds in Polkadot: 

Stash accounts hold funds bonded for staking, but delegate some functionality to a Controller account. As a result, you may actively participate with a Stash key kept in a cold wallet, meaning it stays offline all the time.

Controller accounts are able to act on behalf of the Stash account, signalling decisions about nominating and validating.

When using Lunie-originated Polkadot account, both the stash and controller account will be the same. 

To learn more about how Lunie recommends users think about and manage their keys, please read our keys management guide on it in our knowledge base.

Staking Rewards 

Lunie offers an easy to browse list of Polkadot validators with high level information about their past performance in the network as well as estimated rewards. 

Rewards are recorded per session, or every four hours on Polkadot. Payments are made per era, or every twenty-four hours minus commissions charged by validators, which are set at their own discretion and publicly advertised on the Lunie platform for token holders to evaluate. 

Lock-Up Periods, Selecting Validators and Staking DOTs

DOT’s staked to validators are “locked” and cannot be used for other purposes. You can receive new DOTs in your account but you cannot transfer DOTs away from your account. If you wish to un-stake or “un-lock” DOTs from a validator, they will continue to be unavailable for use for  28 eras (1 era = 1 day aprox). 

When picking validators for consideration, a token holder only chooses which ones he wants to stake with, but not the specific amounts of DOTs allocated to each validator. This is chosen by the Polkadot network phragmen algorithm. When tokens are locked up with a specific set of validators chosen, the set of validators will remain the same as long as those funds are locked up. The only way to alter the validator set is to unlock the staked funds entirely, wait the full un-locking period and then re-stake with an updated validator set. 

While funds cannot be withdrawn from locked up DOTs without going through the unlocking period of 28 days, funds can be added to the locked balance and staked to validators. 

For example: if token holders stake 10 DOTs to 2 validators (A and B), a fraction of the 10 DOTs will be staked in validator A and the rest in validator B.

Slashing Risks

As with other networks such as Cosmos, the Polkadot blockchain uses slashing as a penalty against validators who are not available 24/7 or who behave badly through malicious behavior on the network. If a validator is slashed, the stake of DOTs that are staked to them will also be slashed in proportion.

On Polkadot slashes are percentage-based, which means that validators who have more stake delegated to them will lose more. For example, if a validator has 100,000 DOTs delegated to them and they get slashed 5%, they have just lost 5,000 dots. If a validator has 1,000 dots and gets slashed 5% for the same offense, they lost 50 dots. Token holders are affected the same way in regards to the locked-up DOTs they have staked to a validator.

Validator responsiveness is punished if multiple validators (>= 10% of the active set) are offline at the same time.  Double-signing is always punished.  

The higher the percentage of validators caught engaging in the same behavior behavior, the higher the likelihood of an attack on the network, and therefore the higher the percentage of slashing.  

For example, for non-responsiveness, slashing can range from 0% ( < 10% offline) up to 7%.  It climbs to ~ 43% offline (e.g., if 15% validators are offline, they will be slashed ~ 1%, if 20% are offline, then they are slashed ~ 2%, etc.)

Please note that Lunie is not a validator on Polkadot or any other Proof of Stake blockchain - therefor 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. 

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