Staking in the Cosmos Network — Making the Ecosystem More Secure
Cosmos has grown into one of the largest blockchain ecosystems today, with more than $100 billion of digital assets under management. The market capitalization of Proof-of-Stake (PoS) blockchains like Cosmos chains is important, as the more assets staked on-chain, the more secure the network. Higher market cap chains are less vulnerable to threats such as 51% attacks and provide greater security and assurance to their communities.
You can help to play an active role in keeping the Cosmos network secure by staking your assets on-chain. In return for lending security to the network, you’ll receive incentives in the form of staking rewards. In this article, we’ll take a look at the benefits and risks of staking and what to keep in mind when selecting a validator. We’ll also examine the main staking solutions available (as well as some alternatives) in the Cosmos network today.
What Is Staking?
Staking is the process of committing your tokens for a period of time to secure the chain and earn rewards, giving you a chance to help grow the network and make your assets work for you at the same time. With staking, the blockchain uses your tokens to help secure the network and sign transactions in return for staking rewards. Staking is possible on PoS blockchains like Cosmos chains, that use validators to verify transactions according to their portion of tokens staked in the blockchain (their “stake”).
With staking, you are never required to relinquish control of your funds to a centralized authority. Your tokens never actually leave your wallet and you have custody over them the whole time. With no lengthy waiting time, rewards are paid out daily (sometimes even multiple times a day) and, while staking involves a small lockup period, it’s usually no more than 7–28 days, depending on the blockchain and token in question. It’s possible to stake your tokens using a cryptocurrency exchange like Binance or Kraken. However, taking custody of your own crypto means that you have to trust a third party.
Choosing a Validator
When you stake your tokens, you need to choose a validator to stake them with. This is called delegating your tokens. In this scenario, you become a delegator. Validators on PoS blockchains verify transactions to make sure that they are accurate and valid and then add them to the chain.
Before choosing a validator, you should consider several factors, including validator uptime, activity history, the amount of commission that the validator takes from your rewards, the unbonding time, and the validator’s reputation. Be sure to look into the validator’s history to make sure they don’t have a reputation for misbehaving. If the validator has consistent downtime or double signs any transactions, they will be punished by the network in a process called “slashing.”
When a validator is slashed, some of their tokens are burned as a penalty, resulting in a loss of funds and missed rewards for both the delegator and the validator; for Cosmos chains, those penalties go from 0.01% for a validator being down for more than 10,000 blocks (liveness slash) to 5% for a validator committing a double sign event on the blockchain.
That’s why it’s essential to select a validator with a good track record who is actively involved in growing the network and who has a shared alignment in its success. You can find information about validators from several resources. Checking Mintscan.io is a good place to start and will show you how active validators are in participating in governance, what their commissions and uptime are, etc. Many individual staking solutions mentioned later on also offer descriptions and information about their network validators.
Also, consider delegating your staked tokens to more than one validator, and keep in mind that if you choose a validator outside of the top 10 in a network, you will reduce the chances of any individual validator owning more than 50% of the market share.
Helping to keep the network decentralized is in your control. It may be tempting to choose a centralized exchange as you recognize the name, but this is not in the best interest of the network in terms of security and decentralization. Centralized exchanges often ignore votes which makes it difficult for proposals to reach quorum. They also don’t develop or contribute to the network beyond their own needs. Therefore, you should make a careful assessment before deciding to stake with centralized exchanges for the sake of decentralization.
Choosing a validator with 0% commission may also seem like a good idea in order to maximize your returns. But keep in mind that running a validator is a lot of work and comes at a cost to the operator. The commission rate is a contribution to the validator that is used to help cover the expenses of running it. Choosing zero commission may not promote a sustainable network; whereas supporting validators through commission will.
It can take a significant amount of time to understand the differences between validators and how they contribute to the ecosystem. But it’s worth putting in the work and doing some research to ensure that your delegations are helping to empower the validators that are actually contributing to the ecosystem.
The Benefits of Staking
Once you decide to support a crypto project, if you simply hold your tokens, they will sit idle in your wallet. If you decide to stake your tokens, on the other hand, you will help to secure the network and support the ecosystem rather than keeping your assets on an exchange. By adding “stake” to the blockchain, you help to make it more resistant to attacks and strengthen its ability to process transactions.
As mentioned, you’ll also have the chance to earn staking rewards. The rewards vary depending on the token in question and the validator commission. You can claim your rewards on a daily basis or even several times a day. This gives you a way of securing your tokens, as well as securing the network. And, unlike keeping your tokens on a centralized exchange where you have no control over your private keys, when you state your tokens with the blockchain, your tokens never actually leave your wallet so you are in control at all times.
Since your tokens are locked up for a period of time, you also avoid the risk of panic selling in adverse market conditions. You may also be eligible to receive new tokens from various airdrops as an additional reward for helping secure the blockchain.
The Risks of Staking
Staking is not entirely risk-free, so it’s important to understand what risks are involved and the best way to minimize them. Crypto assets are volatile and one main factor to keep in mind is market risk. If the price of the token goes down, you will have to absorb a loss in income despite receiving rewards. You also won’t be able to sell right away because of the lockup period. This may be a blessing in disguise depending on your tolerance to volatility!
Another risk associated with staking is the validator you choose, as detailed above. If your validator misbehaves, part of your stake may be slashed (up to 5% in most networks). There is also always a risk of external threats such as 51% attacks. 51% attacks are uncommon in established blockchains like the Cosmos Hub that are secured by billions of dollars of digital assets making the cost of an attack prohibitive. However, emerging blockchains in the bootstrapping stage are more vulnerable to attack. As a rule of thumb, the higher the staking rewards, the higher the potential risk.
Staking in the Cosmos Network
If you are interested in supporting the growth of a blockchain ecosystem and want to earn rewards, there are several solutions in the Cosmos network that allow you to stake your tokens. We’ll take a look at the most widely used noncustodial products that let you keep control of your tokens.
The Difference Between Wallets and Dashboards
Before diving into the solutions available to you, a quick note on the difference between wallets and dashboards, and how you will need to use them together in order to stake your tokens.
Wallets
Crypto wallets keep your private keys (the passwords that allow you to access your cryptocurrencies) safe and accessible, allowing you to take custody of your own assets. There are many different types of crypto wallets from mobile apps and web-based wallets to hardware wallets and paper wallets.
Software wallets are unique to blockchain ecosystems (i.e. Cosmos or Ethereum), whereas hardware wallets usually support cryptocurrencies from multiple blockchain ecosystems (i.e. Bitcoin, Ethereum, Cosmos). The main types of wallets are web-based wallets, such as Keplr or MetaMask, that work as a browser extension, desktop wallets, such as Atomic Wallet or Cosmostation, that are used on your computer and connect to a hardware wallet, and mobile wallets, such as Keplr or Exodus, that allow you to store crypto, send/receive transactions, and even import an existing wallet into the app by scanning a QR code.
Hardware wallets like Ledger allow you to keep your assets offline in cold storage and connect with an application (a dashboard) like Emeris or Keplr to transact. While your staking tokens always remain in your wallet, without connecting to a dashboard, you would not actually be able to stake your tokens. So, let’s take a look at how dashboards work.
Dashboards
Dashboards (or interfaces) connect to your wallet, whether software or hardware, and allow you to stake your tokens. Regardless of the wallet you use, you will be required to “sign” all transactions with your wallet to make sure that you actually want to take an action. The easiest way to stake your tokens quickly is by using a browser extension like Keplr. You will simply need to open up the dashboard, connect your wallet, decide what tokens you want to stake to which validator, and sign the transaction.
Thanks to the dashboard, you can see your token balances, pending rewards, the validators you stake with, and more, depending on the solution you use. We’ll be providing links to step-by-step guides and abundant resources throughout the article, so keep on reading!
The main staking solutions available to you in the Cosmos network, like Cosmostaion and Keplr, fall into both the dashboard and wallet categories, while others, like Emeris and OmniFlix, simply offer dashboard functionality. It should be noted that staking solutions are constantly evolving, so we’ll provide an update on new features later on in the year.
Cosmostation
Cosmostation is a wallet and dashboard solution, providing a mobile wallet for convenient staking straight from your phone as well as a web wallet that allows you to connect and sign transactions from your hardware wallet. As a long-standing contributor to the Cosmos ecosystem, Cosmostation has earned a solid reputation for providing outstanding end-user support through products like Cosmos explorer Mintscan, and both its app and web wallets. Cosmostation also supports more than 30 networks, providing users with many choices.
Cosmostation also operates an enterprise-level validator node on many networks, providing reassurance when it comes to selecting a reliable validator. Using Cosmostation, you have everything you need to stake from within one place. Interacting with the web or mobile wallet is fairly intuitive and Cosmostation supports a wide range of IBC-enabled tokens. Cosmostation also has plenty of support guides and resources to help if you get stuck.
If you want to select different validators, you can see their history, activity, and uptime straight from inside the validator section on Mintscan. You also have the convenience of fiat to crypto transactions through integrations like Moonpay. Coming up on the roadmap later this year, Cosmostation will be launching a browser extension for additional convenience. To get started staking via your mobile wallet, download Cosmostation for Android or iOS here.
Keplr
Keplr has quickly become the go-to wallet for the Cosmos ecosystem and staking using the Keplr wallet and dashboard is very straightforward. Keplr offers a mobile wallet app for iOS and Android as well as a browser extension similar to Metamask which is the easiest way to start staking safely. In addition to the browser extension, Keplr provides a simple dashboard to see your available tokens, staking balances, and rewards across the 20+ chains that it currently natively supports. Cosmos chains can also integrate the staking dashboard to allow users to stake tokens within their own ecosystems.
Keplr’s browser extension allows for the simple signing of staking transactions that is easier and more convenient than plugging in a hardware wallet. Along with Cosmostation, Keplr supports one of the largest numbers of networks. Coming up on the roadmap in 2022, Keplr has several improvements to the interface planned to make the user experience even more fluid. One example of this is the validator section.
Choosing the right validators is vital and newcomers to Cosmos may not know which ones to select, so Keplr wants to help validators that are highly active to gain a significant amount of voting power. The team plans to do this by revamping the validator page and providing useful descriptions that recognize validator contributions in the staking dashboard. There will also be a way for validators to communicate with delegators to encourage greater interaction. Abundant resources for staking on Keplr can be found here.
Emeris
You can also stake 28 Cosmos ecosystem tokens using the Emeris dashboard. With an emphasis on simplicity, Emeris offers one of the cleanest and most user-friendly experiences around, providing easy visualization with a clear overview of staking balances and staking rewards for each chain, as well as a concentrated aggregate of all balances on the main portfolio page.
Emeris is currently in its beta version. The team will be adding more features in the run-up to its public launch, including version 2 of Emeris staking. Staking V2 comes complete with an auto-compound feature that takes staking rewards and auto-compounds them on compatible chains, removing the need to manually claim and restake periodically and maximizing rewards generation.
To stake using Emeris, you’ll need to download and connect the Keplr wallet. At public launch later this year, Emeris will provide users with a browser extension and mobile wallet for additional convenience. To try out staking with Emeris, open the app here. You can also check out a step-by-step staking guide and find further resources here.
Other Staking Solutions Available
Atomic Wallet
Another solution for staking is Atomic Wallet, the first non-custodial wallet using cross-chain atomic swap technology. Supporting all the major blockchain ecosystems and over 300 tokens, Atomic Wallet is widely used in the crypto industry and has amassed more than 3 million users so far. Fiat to crypto transactions are available and you have a variety of token swaps instantly available.
Like Cosmostation, Atomic Wallet is available as a mobile wallet and a desktop wallet that connects with your hardware device. There is no browser extension currently. Staking using Atomic Wallet is very simple and being able to manage multiple chain tokens from one place provides a high level of convenience. APR rates are slightly lower with Atomic Wallet at 10% APR on ATOM and this solution currently only supports the Cosmos Hub (ATOM), no other Cosmos tokens yet. For more information about staking with Atomic Wallet please visit this link.
OmniFlix inSync
OmniFlix is a long-term contributor to the Cosmos network, working with various Cosmos SDK-based projects since 2018, demonstrating a working prototype at Game of Zones, and launching the FlixNet-x series of testnets in 2021. OmniFlix builds multiple tools to facilitate the growth of the ecosystem, including several interfaces for various Cosmos SDK-based chains. Dedicated to providing blockchains with a way of enabling interactions with their communities, OmniFlix’s inSync staking interface has been integrated by a growing number of Cosmos chains, currently, 9, including Juno, Fetch, LikeCoin, Cheqd, Chihuahua, Comdex, and has been forked by Rizon, Celestia, and Stargaze, with more integrations on the horizon.
The OmniFlix inSync staking interface offers an easy, clean, and intuitive experience that is dedicated to staking and makes delegating tokens as simple as possible. OmniFlix inSync allows people to interact with new and up-and-coming chains, support their growth, and earn rewards from staking.
As an open-source tool, OmniFlix inSync won the Agoric testnet challenge in June 2021 and rolled out its first staking interface with Juno upon its mainnet launch. Plans for the year ahead include building infrastructure for NFT creators and communities that bring together delegators, validators, and other stakeholders, and help continue to grow the Cosmos ecosystem. Here’s a quick preview of what’s coming up for OmniFlix inSync.
To stake using the OmniFlix interface, you’ll need to download the Keplr wallet and stake directly with the chain in question.
BitSong
BitSong has also recently launched the BitSong Multichain Wallet, a simple, no-frills interface that Cosmos chains can integrate to easily interact with their communities. From inside the dashboard, users can stake their tokens, delegate, undelegate, redelegate, vote on proposals, send tokens, or, in the case of BitSong, bridge BTSG from ERC-20 to bitsong-mainnet. So far, the BitSong wallet supports seven Cosmos chains, including BitSong, Cosmos Hub, Osmosis, Juno, LikeCoin, Chihuahua, and Stargaze, with more integrations in the pipeline.
Currently in its first version, users must connect the interface with the Keplr browser extension. Coming up on the roadmap, is the BitSong Chrome extension and the BitSong app for Ledger, providing simpler and faster access to the ecosystem. The BitSong team is also working on a feature enabling token holders to open governance proposals from within the wallet and the ability to view on-chain statistics. The Wallet is open-source and is available in this Github repository. For more information, hop on over to the BitSong blog here.
Please note that this list is not meant to be exhaustive. There are more than 30 different wallets available for you to choose from for staking your tokens. We hope to have provided a good starting point for your staking journey, highlighting the most commonly used solutions as well as some emerging and alternative options.
Final Thoughts
With multiple solutions available, depending on your personal preferences, staking in the Cosmos network is simple and accessible to all. You can help grow the ecosystem while earning rewards by staking in Cosmos today.
This article is for informational purposes only, you should not construe any information contained herein as investment, legal or financial advice. Nothing contained in this document constitutes a recommendation, endorsement, or suggestion to buy or sell any digital asset.
