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The Nuances of Staking in the Polkadot Ecosystem: Bits.media Founder Explains

Ivan Tikhonov spoke at the Blockchain Life forum, talking about how to become a Polkadot validator, about the features of the ecosystem and earning opportunities for cryptocurrency investors.

The Blockchain Life forum has been held in Moscow for the ninth time, traditionally bringing together the best experts, speakers and enthusiasts of the crypto community. Bits.media founder Ivan Tikhonov described his vision of the Polkadot ecosystem, listed the features of parachains and earning opportunities on staking.

According to Ivan Tikhonov, crypto winter is a time for development, creation of new projects and accumulation of cryptocurrency. However, just buying crypto assets “on the bottom” is not enough – they should be invested wisely and increased. As part of the report, Ivan highlighted one of the most interesting and affordable tools for making money on crypto assets – staking using the Polkadot ecosystem as an example.

Validators and nominators

The main crypto asset available for staking in the Polkadot ecosystem is the native cryptocurrency of the DOT network. According to Ivan, if you start looking into DOT staking, the first obvious option is to deploy a validator node. However, there are nuances to this process. The limit on validators is 297 nodes. As a result, the ecosystem will have a limit of 1000 validators. 644 million DOT staked in total.

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“If you want to be a validator, you have to forget about the weekend, otherwise you will lose money, not earn. You can not raise your node, but give DOT to the validator, then you will become a nominator – you will nominate someone for a validator with your own funds. It takes about 200 DOT to become a nominee. More is better,” said the founder of Bits.media.

According to Ivan, participation in the Polkadot ecosystem as a nominee has the following features:

  • Nominees have 84 days to receive their awards. If no rewards are received within this period of time, they may be lost.

  • It is necessary to study the size of the commission for staking from the validator, its statistics.

  • There can be no more than 256 nominators per validator. Validators will choose nominators based on the stake – the number of DOTs that the nominator can provide.

  • The network supports up to 50,000 nominees, but only 22,500 nominees will receive awards per era.

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Parachains

The parachain system is the main feature of Polkadot. Other projects, which are called parachains, can connect to the main network (Relay chain). They may have their own blockchain, but they enjoy the security and power of Polkadot’s main chain. The number of parachains is limited: the project must win the auction, where ecosystem participants vote with their DOTs. The projects that have collected the most DOT receive parachain leases.

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As a rule, the project rewards users who supported it with their own tokens. The user does not lose their DOT after voting, they are blocked for the duration of the parachain lease – two years. After that, DOTs are unlocked and again become available for trading and moving.

“During the lease of the parachain, you will not only keep your DOTs, but also receive tokens of the projects you voted for. This can in total cover the income from DOT staking for the same period,” Ivan Tikhonov explained.

Staking

You can participate in DOT staking through cryptocurrency exchanges. All major platforms provide their users with the ability to block DOT for staking without deploying their own node. Exchanges do it for users. For example, Binance has 13 active validators of approximately 2M DOT each, which is 26M DOT.

“Exchanges periodically give interest much more than you can get on staking. How do they do it? At high interest rates, exchanges usually accept small amounts for staking – from $10 to $50 and for a short period of time. Perhaps this is a marketing strategy – to accustom the user to enter the exchange and perform actions. It is always worth remembering that if you have brought money to the exchange, it is no longer your money, it is managed by the exchange,” Ivan Tikhonov said.

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It is necessary to thoroughly study projects before investing. It makes sense to pay attention to the dynamics of the project in the Polkadot-Kusama testnet. Often, projects interested in getting a parachain first participate in the Kusama parachain auction.

In Kusama, you can evaluate the potential profitability of the project – it can be similar when the project enters the parachain auction in the Polkadot main network.

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In conclusion, Ivan noted that it is necessary to remember about the security of staking and storing crypto assets:

“The main principle is not to keep all your eggs in one basket. Even if you have found a profitable project with a high income, do not invest all your money in it. If the project has problems, then you will lose all your investments.”

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Source: Bits

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