Lunie is a tool that allows users to safely store, manage and stake crypto assets in Proof of Stake (PoS) networks. There are hours upon hours of reading available on Proof of Stake, its well-established predecessor Proof of Work (PoW) and the endless debate on which is better and more secure.
We assume that because you have landed here you are at least 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 which can be found here: https://lunie.io/guides/what-is-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 the Cosmos network.
Let’s start with the assumption that you have already bought some crypto tokens such as ATOM and are ready to begin getting rewards through staking. With Lunie, once you have picked a validator to delegate your tokens to for staking, you can manage how you interact with that validator entirely from one interface.
The voting power of a Cosmos validator is a critical metric to consider when choosing where to delegate your ATOM. The voting power metric is representative of how much a stake a validator has been allocated by delegators and thus determines how likely they are to be selected by the network to vote on and propose a new block. This is when validators receive rewards for themselves and on behalf of those who delegated their stake to them.
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 which are
voting power * annual provision(a variable defined in the protocol)
- Subtracting the validator’s commission from the annual calculation
- Assuming a 1 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 currently represent the compounding effect of rolling rewards into the existing staked balance periodically.
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 either through the validator adjusting their commission rates, experiencing downtime or some negative slashing effects, etc. Hence, you should evaluate each validator qualitatively as well as quantitatively and continue to re-evaluate where you delegate to overtime.
As time passes and your delegated ATOM earn you more and more rewards over time, you will see your balance of rewards increase dynamically. This is a separate balance from your primary available balance of ATOM in that they are unique. Rewards are not counted towards your staked balance, meaning their accumulated value does not represent your delegated balance. The rewards are also not available to spend - you cannot send rewards to someone directly until you claim them.
As a best practice, it is a good idea to check regularly on your rewards balance and make sure you have a strategic plan for these rewards at time goes on. It’s totally fine to just let the balance accumulate, but just consider it analogous to a 0% interest bearing piggy bank. If you are seeking to essentially compound the rewards over time, it is best to claim the rewards to your available balance and then delegate them to a validator of your choice.
The 21-day lockup period for those who un-bond their stake in the Cosmos network does not inhibit someone who is already delegating their ATOM to change validators on the fly. They can instantly begin earning rewards with the validator they switch to. However, this feature is different from un-bonding, waiting for 21 days and not earning rewards over that time period and then re-delegating. This is to discourage stickiness and consolidation around validators giving penalty-free options to delegators who want to make a switch.
In this case, within the Lunie app interface, you can choose a different validator than whom you are already delegating to and redirect any amount of your staking balance from one validator to another. This process can only be done once every 21 days.
Assuming you have ATOM delegated to a validator and you want to un-delegate them, the ATOM will be subject to a mandatory 21-day lockup period enforced by the network. 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 ATOM staked to Cryptium networks and you un-delegate 25 ATOM because you want to sell them on an exchange or send them to a friend, the 75 ATOM still staked will earn proportional rewards as they are delegated still, while the 25 ATOM will earn no proportional rewards anymore unless they are re-staked after lock-up.
Voting on Cosmos is an exercise in on-chain governance where the community of developers and users come together to propose new ideas and implementations of those ideas for the network and vote on them. It is not only symbolically important that there be a good turnout of voters on the network to make sure ideas are rigorously evaluated and critiqued, but also from a technical standpoint if a proposal does not get enough participation it cannot pass onto the stage where it would be tested and implemented into the main network.
To leverage your balance of ATOM in voting using Lunie, just navigate to https://app.lunie.io/proposals to view proposals that are under deposit or voting stage and you will be able to participate. We also offer a more in-depth guide to voting and Cosmos governance.
Additional Considerations When Picking A Validator
Note - Lunie is not a validator on Cosmos or any other Proof of Stake blockchain - 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 the current status are 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 Cosmos network comes with some risks of loss of funds. If a validator messes up by double signing or committing any malicious activity on the network and is caught, their stake, as well as all who delegated to them, will be slashed and a proportion of the ATOM will be eliminated.
There are currently 2 scenarios where slashing would occur with Cosmos validators:
- A validator and their delegators get slashed 0.01% once for validator downtime if they are discovered to be unavailable for 18 hours or more. Once they are slashed, they get “jailed” or 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 delegators get slashed for double signing: The slashing percentage is 5% and is obviously 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.