Staking rewards in the world of cryptocurrencies are a way for holders to earn passive income while supporting the network. Staking rewards are like interest or dividends on your crypto holdings. Staking rewards are primarily associated with Proof of Stake (PoS) blockchains. Validators participate in the network by confirming transactions and maintaining the blockchain. In return for their participation, validators receive staking rewards. Eventuay validators share their rewards among their delegators.
Delegating is when you bond your tokens to a validator and earn rewards from that validator.
Delegating is non-custodial, which means that a validator cannot steal your coins just because
you delegated to them. However, there are a few risks to be aware of when delegating.
The first risk is called slashing, which are in-protocol penalties for validator misbehavior.
The two types of misbehavior are liveness (going offline for too long) and double signing
(equivocating about the state of the blockchain).
- Liveness has penalty of 0.05% which is relatively small.
- Double signing has a penalty of 5.0% which is considerably larger.
When you bond your tokens to a validator your tokens can be slashed.
The second risk is liquidity. When you bond your tokens, they remain in a bonded state for 21 additional days after you unbond them. So, if you bond your tokens and then want to transact with them, you need to plan ahead. Cryptocurrency market is quite volatile and while your tokens bonden, prices can go up or down.
Staked tokens are always at risk if validators miss blocks, going offline or double signing blocks. That is so important to choose a well-managed and trusted validator. Delegators might want to consider the following criteria to choose a validator:
- Commission rate: We try to keep our commission rate always low. Delegators earn attractive rewards.
- Experienced team: Our team consist of highly skilled engineers.
- Reachability/Support: Our support team can be reached 7x24 via the contact form.
- Secure/Reliable and redundant infrastructure: Our service is running on a secure and redundant infrastructure in multiple locations across the world. If something goes wrong on the active node, the validator services switch over to standby host immediately and automatically.
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