Cosmos calls itself 'the internet of blockchains'. It's goal is to connect sovereing blockchains so that they can scale and communicate with each other. Thanks to tools like Tendermint, developers are able to quickly deploy new projects on the network. Cosmos in not limited to just tendermint-based chains, well known estabilished blockchain networks like Ethereum and Bitcoin can also be connected to it.
Cosmos Network is secured by the ATOM token. Those tokens can be delegated to validators to earn passive rewards. This process is called staking. You are free to choose when to delegate and who should the validator be. It's important to spend at least a couple of minutes on researching validators as your rewards depend on their performance. If a validator doesn't act appropriately (if they miss too many blocks) delegators will be punished by slashing, when it happens, between 0.01% and 5% of the delegated Atom tokens might be lost. Keep in mind that validators charge a commission on your rewards. Mintscan offers a list of validators along with the most important metrics: https://www.mintscan.io/cosmos/validators/. If you have a sizeable amount of Atom it's recommended to delegate to multiple validators as this minimizes the risk of slashing.
It's important to note that staking, unstaking and collecting rewards incur a small fee (usually around $0.01-$0.05 in Atom), due to this it's important to always have a small amount of Atom available (not staked) in your wallet. You can stop delegating your Atom at any time, however keep in mind that the assets will be locked for 21 days. Once locked, they can't be transferred and they don't earn rewards.
Staking rewards are generated through transaction fees as well as through newly created Atom tokens that are distributed to stakers. The annual inflation rate at the moment is around 7%. This means that if you plan on holding Atom for an extended period of time there is no reason not to stake it as your share in the network will dilute over time. At the moment the APY is around 9.5%, if there aren't enough validators it might go as high as 20% in order to incentivize running a node a delegating atom. Staking is very easy, below you can find a simple guide on how to do it in two (or even three) ways.
1. Staking through Ledger, a hardware wallet
In order to start staking on LEDGER you have to download the Cosmos app and create a wallet (if you haven't done this already). Go to Manager and use the search bar to find Cosmos:
In the Accounts menu create a new Cosmos wallet and confirm on your ledger. Now the only difficult thing is to buy some Atom and send it to your wallet (if you are looking to make an account you can use my Coinbase referral link for free $10 in BTC).
Once the tokens are in your account go to your wallet and click 'Delegate'. A window with a list of validators will appear:
Using the mintscan page on validators or any other resource, decide who should you delegate to. Once you put in how much you want to stake, the estimated network fee will appear and if it's acceptable for you, click continue and accept the transaction. You are done! Your staked Atom will start accruing interest straight away.
In order to undelegate your assets click on 'Manage' next to your validator
You will be given a warning about the lock-up period, an estimated fee and you can decide how much you want to undelegate. Once ready, as per usual click continue and approve the transaction on your ledger. As you can see in the screenshot above, you can also claim the rewards, you will be given an option to either Cash in (rewards go to your wallet and you can use them for transactions) or to Compound (rewards are automatically delegated to the same validator). Keep in mind that compounding costs more gas. You will be given a warning if the network fee is higher than the reward, see the screenshot below.
Staking Atom on Ledger is very easy. The only problem is that you have no control over the network fees and they can be quite costly when you operate with lower amounts of Atom. This can, however, be mitigated with web based wallets like Keplr.
2. Staking with web-based wallets like Keplr
In order to use Keplr you need to install the Keplr browser extension. It works just like METAMASK and it allows you to connect to the Cosmos ecosystem. Go to: https://wallet.keplr.app/#/ (or search Keplr in google), straight away you will see a pop up asking you to install the extension. Important note: make sure that you follow the link from the official page, if you don't do it you might download a scam 'wallet' and lose all of your funds.
Once downloaded, click on the Keplr icon on the extension bar and you will get the option to:
- Create a new account - you will need to create a new login and password and you will be given your private seed that allows you to recover the account on any device or wallet.
- Import existing account - use your seed words to import your account.
- Import ledger - connect your ledger, open the cosmos app, allow access and you will have access to your Cosmos account both in the ledger app as well as in Keplr. This enables you to lower the gas fees as Keplr allows you to adjust them to your needs, more on that later. Your account will still be protected by ledger, every transaction will have to be approved manually.
Once created, transfer Atom tokens to your account (if you imported an account, the balance will be the same as on the device/different wallet) and you can begin staking. From the menu on the left choose Cosmos -> Stake:
You will be shown a list of validators, do your research, choose which one you want to delegate to and start earning rewards. Before each transaction is executed you will see a summary:
As you can see the gas fee is much lower than on the ledger app and you can also choose how much gas you want to spend.
From Keplr you can also stake other tokens on the Cosmos network, for example Band, Kava or Secret Network. They all offer high APY.
As you can see staking Atom tokens is very simple, you can do it with or without a hardware wallet, with minimum cost, quickly and you start earning rewards from the get go. Hopefully this simple guide helps you with earning staking rewards on the Cosmos network.
If you are looking to start earning interest on your other crypto, even on the tokens that are not stakeable, I can recommend Celsius Network. It offers high interest rates (10% APY on stablecoins, 5.05% APY on Ether), weekly payouts, it's transparent, safe and they offer free withdrawals. You can earn $40 in Bitcoin for free on your first transfer of $400 or more in many different cryptos when you use my referral code when signing up: 1083379578 or simply click on the link: https://celsiusnetwork.app.link/1083379578. Find out more about Celsius and other similar platforms in the second part of my article.
Further reading:
- Intro to Cosmos
- An article from Ledger on staking Atom
