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 on our Help Center.
About The Kava Platform
Kava is a decentralized finance (DeFi) platform offering collateralized debt positions (CDP’s). With Kava you can use several major cryptocurrencies (BTC, ATOM, XRP, Tether and BNB) for collateral. Users receive stablecoins (USDX) pegged against the US Dollar when they create CDP's.
Users can unlock and retrieve funds from their CDP’s by paying back the amount of USDX borrowed as well as a stability fee to the network. If a debt-to-collateral ratio drops below a threshold, a margin-call occurs. When this happens, the CDP is liquidated, the debt is repaid and all issued stablecoins are burned. Finally, any remaining collateral gets returned to the user who created the CDP. The Kava token (KAVA) works primarily to facilitate governance, staking and validation on the network.
KAVA Token Facts:
- 100 million KAVA issued at launch
- Staked KAVA earns a variable reward rate of 3% - 20% annually
- CDP fees are paid in KAVA by users and burned, reducing the overall supply of KAVA
Choosing a Validator
Voting power of a validator is a critical metric to consider when choosing where to delegate your KAVA. The voting power metric is representative of how much of the total network stake a validator has allocated to them. This determines how likely they are to be selected by the network to vote on and propose new blocks. Proposing new blocks is how validators take part in consensus, earning rewards for themselves and those who stake with them.
Considerations When Picking A Validator
Slashing Risks - Staking on Kava comes with significant risk. If a validator messes up by double signing a block, the validator and those who stake to them will loste 5% of what they have at stake. 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 KAVA token stake which will receive a percentage of the available rewards
- Based on how many tokens are already delegated to that validator
These reward figures do not account for the compounding effect of restaking your rewards over time.
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 cause a slashing event to occur.
Managing Staking Rewards
As with other networks built using the Cosmos SDK, Kava rewards must be claimed with a “claim rewards” transaction. You can do this from the portfolio page in Lunie.
Un-staking will be subject to a mandatory 21-day lockup period enforced by the Kava protocol. This 21-day lockup period is built into the network to prevent long-range attacks. During this period, your funds will not earn any rewards and they will not be transferable until the period is complete.
For example, if you have 100 KAVA staked and you un-delegate 25 KAVA, the 75 KAVA still staked will continue to earn rewards. The 25 KAVA will not accrue rewards for the duration of the lock-up period.
Token holders can immediately change who they stake with by re-staking. This is done directly to another validator, rather than un-staking, waiting for 21 days and then staking elsewhere. This allows your rewards to continue to be earned un-interrupted.
Similar to the Cosmos Hub, token holders on Kava are able to vote for text based proposals and parameter changes. Users are able to participate in Kava governance from within the proposals tab in Lunie. You can learn more about how this is done in our governance guide. Token holders have similar voting rights to the MakerDAO MKR governance token. KAVA holders will vote to adjust issuance of USDX, add or remove accepted collateral types, change the collateral to debt ratio and the price of stability fees.