Introduction
Welcome to another edition of Zilliqa Zebra! Are you unsure how to stake on the Zilliqa blockchain? Or are you confused with what gZIL is and how to earn it? Let Zilliqa zebra help. In this article, I am going to share with you some great tips on how often you should claim your staking rewards, and how to maximise your profits from Zilliqa staking.
What is Staking?
To get a better grasp of what staking is, you’ll first need to understand how Proof of Stake (PoS) works.
PoS is a consensus mechanism that allows blockchains to operate more energy-efficiently while maintaining a decent degree of decentralization (at least, in theory).
Let’s dive into what PoS is and how staking works.
What is a Proof of Stake?
If you know how Bitcoin works, you’re probably familiar with Proof of Work (PoW).
It’s the mechanism that allows transactions to be gathered into blocks.
Then, these blocks are linked together to create the blockchain.
More specifically, miners compete to solve a complex mathematical puzzle, and whoever solves it first gets the right to add the next block to the blockchain.
Proof of Work has proven to be a very robust mechanism to facilitate consensus in a decentralized manner.
The problem is, it involves a lot of arbitrary computation.
The puzzle the miners are competing to solve serves no purpose other than keeping the network secure.
One could argue, this in itself makes this excess of computation justifiable.
At this point, you might be wondering: are there other ways to maintain decentralized consensus without the high computational cost?
Advantages of Proof of Stake
One of the biggest advantages of staking is that even a naïve user who doesn’t have many assets can opt for stake whereas in the case of mining one needs to have costly hardware and requires high power consumption which makes it beyond the capacity of simple users.
Coin holders can validate transactions on the network.
Staking offers rewards that are an additional source of income.
Staking is an energy-efficient process i.e it doesn’t require huge amounts of electricity.
No specific hardware requirements, like ASIC.
Reduces the 51% attack commonly experienced by miners
This way, what determines which participants create a block isn’t based on their ability to solve hash challenges as it is with Proof of Work.
Instead, it’s determined by how many staking coins they are holding.
Some might argue that the production of blocks through staking enables a higher degree of scalability for blockchains.
This is one of the reasons the Ethereum network is planned to migrate from PoW to PoS in a set of technical upgrades collectively referred to as ETH 2.0.
How to stake Zilliqa?
Before proceeding with this guide, it is necessary to have a few things to stake the cryptocurrency:
A wallet that supports Zilliqa, we recommend ZilPay but it is also possible to use Ledger;
At least one hundred ZIL on the wallet, because it is necessary to have the relative ZIL required for the fees, which will also be used for withdrawal and unstaking.
The first step will be to unlock the wallet (we will use ZilPay) and go to the platform dedicated to staking.
Choose one of the Staked Seed Nodes to stake your ZIL.
Staked seed nodes (SSNs) are a variant of seed nodes. SSNs are run by staking partners and are expected to serve JSON-RPC requests from the community.
In return for the service, these nodes are regularly given staking rewards in the form of $ZILs.
Staking rewards are determined based on the performance of the SSN.
Staking
For example, if you are using Atomic Wallet, you can directly receive ZIL from any exchange such as Binance, CoinHako, etc.
You can then stake your ZIL with the application.
Choose Amount to Stake
To stake, go to the Staking section, and then choose an amount to stake.
Now, remember to set aside some ZIL for network fee.
The network fee is deducted when you claim your staking rewards.
The staking may take a day or two or slightly longer.
You can then claim your staking rewards which would be added to the pool for further staking.
Unstaking
FIrst of all, you can’t unstake ZIL immediately after you staked it.
From the moment you delegate your funds to a validator they are getting locked for 8,000 blocks (approx. 1 day).
After that you can unstake ZIL leaving 10 ZIL (unspendable balance) to a validator by doing this:
1) Transaction to unbond the funds and waiting for its confirmation, which takes 24,000 blocks (approx. 10 days).
2) One more transaction to claim the balance.
Understanding the APR
Staking profits depends on the percentage of return a validator provides per annum a.k.a APR (Annual Percentage Rate).
When the staking feature is provided by wallets or exchanges, it is usually told what a percentage of the profits are.
Percentages are usually given on a daily, monthly and annual basis.
The APR is important as it varies from time to time.
What causes APR to vary?
Depending on the value, the related APR will change as follows:
49% if 10% of the supply is blocked;
25% if 20% of the supply is blocked;
17% if 30% of the supply is blocked;
13% if 40% of the supply is blocked;
10% if 50% of the supply is blocked.
Hence, it pays to stake as early as you can, as the staked supply will only get higher, leading to a decrease in the APR.
What is gZIL?
gZIL, short for governance ZIL, is a ZRC-2 compliant fungible token contract.
The rationale behind issuing gZIL is to capture long-term token holders and give them access to governance tokens that they can later use to make ecosystem-wide decisions.
Its maximum supply is 722,700 tokens and the reward duration is 1 year w.e.f. 14 October 2020.
gZIL derives part of its value from scarcity.
Hence, it will only be issued for 1 year starting from the launch of non-custodial $ZIL staking (14 October 2020), with the objective of incentivising early birds.
Zilliqa will control minting and distribution of gZIL, capping it at 722,700.
How do you earn gZIL?
gZIL will only be issued when a user withdraws their $ZIL stakings rewards from the designated SSN operator.
For every 1,000 $ZIL earned as staking reward, 1 gZIL will be issued (i.e. 0.001 gZIL will be issued for every 1 $ZIL staking reward).
As of 16 Feb 2021, 1 gZIL can be exchanged for USD 108.68.
Its all-time-high was USD 123.46 on 11 Jan 2021.
You are certainly encouraged to stake as early as possible to increase your chances of earning gZIL!
How often should you claim staking rewards?
The question that we all ask is “how often should we claim staking rewards?”.
A reddit user by the name of Book-Administrative did a calculation using a Google spreadsheet.
He made examples for daily, weekly, biweekly, monthly and yearly.
Compounded interest comes into play when you re-stake but the fees take away from the potential so your frequency matters here.
However, the less time your earnings are earning the entire concept starts to get hard to fit into a simple thought.
It seemed to him that if you have less than 12,420 ZIL staked you should not be claiming rewards daily.
As the year goes on and the real-time rate goes down this number will not be accurate but more like a better than nothing attempt to give you a close estimate.
Planning with a Real-time Calculator
In fact, if you are planning to do some serious zilliqa staking, you might want to check out the real time staking calculator at My-Zilliqa-Wallet.
Visit myzilliqawallet at https://myzilliqawallet.com/stakingapy.html to access the real time staking calculator.
The calculator is a useful took which takes into consideration your potential gZil earnings.
It then calculates the estimated annual returns factoring the returns from gZIL.
In fact, using this example here, if you invest 100,000 ZIL at 14.2 APY, you should get an estimated annual return including gZIL of 3372 USD with an estimated actual APY of 26% which is really fantastic.
With lots of great projects coming up, you are not only capturing the yield from staking but also the price appreciation of Zilliqa itself!
ow to maximise your staking rewards?
So, how can you maximise your profits from staking rewards?
First of all, Start early to capture more gZIL and benefit from higher APR.
If you have yet to start, it is not too late. You can try buying a few hundred dollars worth of ZIL and stake it in your preferred SSN.
Secondly. Do claim your rewards regularly bearing in mind the network fees.
Remember, if you hold less than 12,420 zils, you might want to wait longer to claim the rewards in order to maximise the compounding gains.
Thirdly, Continue to accumulate at the lows and stake them immediately so as to leverage the compounding effect.
