The Cosmos network is an open-source, decentralized ecosystem that allows different blockchains to easily interoperate. Proven by its unique “strong staking” mechanism that aligned security and governance. ATOM, the native token of Cosmos, serves as the network’s lifeblood. It can be used to pay transaction fees, gives participants listing governance rights, and secures the system through staking. The Cosmos network has only about 180 validators currently producing blocks. Users can stake their ATOM to earn rewards in various ways. This guide provides an overview of Cosmos staking, highlighting key factors to consider when choosing a validator and exploring different platforms for staking ATOM.
Understanding Cosmos Staking
Cosmos staking requires ATOM tokens to be locked up. This helps to secure the network and allows you as an individual to earn rewards in exchange. When you delegate ATOM to validators, you are directly participating and contributing to the network’s consensus mechanism. In exchange, you receive some portion of the block rewards and transaction fees. To start, validators must verify transactions and produce new blocks while actively participating in governance decisions. Their standing is predicated on collateral considerations like uptime, performance, and even good faith participation in governance.
Validators are at the heart of the Cosmos network. They process transactions, generate new blocks, and vote on governance proposals as full, active stakeholders in the network. The slashing mechanics on the Cosmos network incentivizes validators who act maliciously or don’t keep up with the network’s expectations to be penalized. This mechanism makes sure that validators have skin in the game and are therefore incentivized to act in the best interest of the network.
ATOM is the heart of the Cosmos Hub, powering critical features that ensure the network’s long-term health and sustainability. ATOM facilitates payment of transaction fees on the network, usually about $0.01 in ATOM per transaction. This comprehensive approach makes Cosmos an accessible and affordable platform for any user. ATOM holders can actively participate in shaping the future of the Cosmos network by using their tokens to vote on proposals and influence the direction of the ecosystem. By staking ATOM, you’re making the network more secure. In exchange, you as a staker earn rewards, creating an ecosystem of aligned interests between stakers and the network.
Choosing a Validator
Choosing a trustworthy validator is important, not only to help you receive the most staking rewards possible but to help secure your ATOM tokens. Several factors should be considered when evaluating validators, including reputation, voting power, commission rate, and self-bonded ATOM.
A validator’s reputation is everything, as it directly correlates to their responsiveness and reliability in keeping the Cosmos ecosystem secured and trustworthy. Uptime, performance, and governance participation can all be used as indicators of a validator’s reputation. Validators that have a long history of high uptime and active participation in governance are typically viewed as more trustworthy.
Voting power reflects how much influence a validator has on the network’s consensus and governance decisions, which is significant. So potentially validators with a higher voting power could seem appealing. It’s important to distribute your stake among different validators to minimize the risk of centralization. Cosmostation holds significant voting power at 4.81% on the network. To the north, Figment makes an impact with a voting power of 3.13%.
Commission rate is the percentage of staking rewards that a validator takes as a fee for its service. While low commission rates can be enticing, you should focus on the validator’s long-term performance and value. There are real tradeoffs here too–validators charging higher commission rates probably provide more security and reliability. Self-bonded ATOM tokens This doesn’t mean the number of ATOM tokens a validator has self-bonded is irrelevant. It reflects their deep passion and desire for the success of the network. Validators with a significant amount of self-bonded ATOM are more likely to act in the best interest of the network.
Platforms for Staking ATOM
Many platforms present simple solutions to stake ATOM tokens, providing users with different advantages and functions. Self-custody wallets such as Keplr enhance user agency by offering them absolute authority over their assets. By comparison, centralized exchanges such as Kraken provide a seamless user experience and a wider variety of complementary services.
Keplr, a popular self-custody wallet. It puts power back in the hands of the user allowing them to control their ATOM tokens, and stake, directly from their web browser or mobile device. With over a million transacting users on its platform, Keplr has established itself as a trusted and reliable wallet within the Cosmos ecosystem. Additional Information Keplr currently provides an outstanding 18.06% APY for ATOM staking. This feature alone makes it an ideal option for crypto users looking to earn the most out of their staking rewards.
Kraken is one of the most recognizable brands in the world, and they offer a centralized and simple way to buy, sell and stake ATOM tokens. Over the years, Kraken has established a formidable reputation in the industry. With more than 13 million clients across 190 countries, it was the first exchange to earn a US banking license. Trading at Kraken has nearly some ATOM trading volume, now over $655k. This increase is a signal of high demand and liquidity for the token on its exchange platform. Kraken has a very tight liquidity score of 580 for ATOM. This is to make sure users can efficiently purchase or sell ATOM tokens without encountering high price slippage.
Ledger hardware and software products integrate Ledger Live with Ledger devices to securely store and manage ATOM tokens offline. This unique configuration provides yet another level of protection against hacking and theft. Ledger products are equipped with a secure element (SE), a highly secure chip, which is a key layer of security integrated into every Ledger device. This SE chip passively keeps your private keys out of reach from bad actors. Math- and cryptography-based, this ensures that your ATOM tokens are held secure.
Best Practices for Cosmos Staking
If you want a safe and rewarding staking experience, there are a few best practices that you should keep in mind. Read up on validators, stake to multiple ones for maximum security and decentralization, keep an eye on your staking rewards, and protect those private keys!
Before delegating your ATOM tokens, take the time to research different validators and assess their reputation, performance, and commission rate. Look beyond requirements like uptime, governance engagement, and self-bonded ATOM to choose a validator that best fits your priorities. By delegating with multiple validators, you can help protect your rewards from being lost as a result of downtime or slashing. By diversifying your stake across multiple validators, you can mitigate your risk from any one validator’s performance.
Re-stake your staking rewards regularly to compound your earnings. By automatically re-staking your rewards, you’ll harness the power of compounding and boost your overall staking returns. So, ensuring that your private keys are safe is the most important step in making sure no one accesses your ATOM tokens. Use a hardware wallet like Ledger to store your private keys offline and enable two-factor authentication (2FA) on your exchange accounts.
