Polkadot is a multichain network that operates on the nominated proof-of-stake (NPoS) blockchain, which focuses on interoperability of parachains connecting to and secured by the Relay Chain. Unlike restricted proof-of-work (PoW) blockchains like Bitcoin, the Polkadot blockchain allows cross-blockchain transfers of any asset or data, facilitates more transactions per second, and needs less infrastructure. The native token on the Polkadot blockchain is called DOT (DOT) and can be used on the Polkadot network for trading, staking, bonding, paying transaction fees, and voting in network governance.
Polkadot staking is using DOT tokens to nominate validators for earning rewards. The NPoS mechanism is a sophisticated process in which nominators select the validators who are allowed to participate in its consensus protocol. Generally, more participants and distributed nodes mean a more decentralized network, reducing the likelihood of successful blockchain attacks by hackers.
DOT staking requirements
For users to stake and nominate directly, they will need a fluctuating minimum amount of DOT. However, this rule does not apply when joining a nomination pool using a liquid staking method or using an exchange since users delegate their power to validators who meet minimum requirements. An exchange platform may impose additional requirements such as Know Your Customer/Anti-Money Laundering, minimum staking amounts, minimum lockup periods, or fees.
Why Stake Polkadot
Staking DOT provides security and decentralization to the network while earning staking rewards. By staking DOT, people can help maintain the network’s stability, development, and security in exchange for DOT. Stakers can use staked tokens as a passive revenue stream with the potential for growth in the ecosystem. Therefore, investors in the Polkadot ecosystem participate in the network’s governance while benefiting from the token’s appreciation.
How to Stake Polkadot (DOT)
DOT holders can participate in the network’s governance by staking their tokens and earning DOT token rewards. Users have the option to stake DOT directly as a nominator, join a nomination pool, use a cryptocurrency exchange, or use a wallet.
1. Using Polkadot.js UI: Stakers may use the Polkadot.js UI to either stake as a validator or a nominator. Here are the steps:
– Create a Polkadot account
– Navigate and select the “Network > Staking > Accounts page” tab
– Click “+ Nominator.”
– Choose a stash and controller account.
– Enter the amount to bond.
– Choose a desired validator.
2. Stake Natively or Join a Nomination Pool: Users can stake directly as a nominator or join a nomination pool.
3. Using a Cryptocurrency Exchange: Users can purchase DOT tokens on their chosen exchange, add them to their Polkadot wallet, and then click the stake button to begin staking.
4. Using a Wallet: Staking DOT through a wallet requires choosing up to 16 validators before staking. It is recommended to carefully evaluate validators before committing to the wallet method. Users must first get some DOT from an exchange and deposit it into a DOT wallet.
DOT Staking Rewards
Delegators and stakers receive Polkadot staking rewards depending on how many blocks their stake contributed to creating. Compared to other proof-of-stake blockchains and exchange staking, Polkadot likely provides higher returns. According to crypto-staking data aggregator Staking Rewards, the APY Polkadot holders may receive varies based on the wallet, the crypto-trading platform, and the DOT market rate.
In conclusion, Polkadot staking is a way to provide security and decentralization to the network while earning rewards. The four main ways to stake DOT are using Polkadot.js UI, stake natively or join a nomination pool, using a cryptocurrency exchange, or using a wallet. Staking DOT allows investors to participate in the network’s governance while benefiting from the token’s appreciation.