Algorand Staking: How And Where To Stake ALGO And Earn Money

Key Takeaways

• All ALGO holders earn basic participation rewards.
• Earn additional rewards by registering for governance and voting on important issues for the Algorand ecosystem.
• You must commit your tokens for three months to earn governance rewards.

With Algorand staking, you’re using your ALGO tokens to help secure the Algorand network. The good news is that all Algo holders earn a small yield just for holding one ALGO token or more in an on-chain wallet. But by participating in governance (voting), you can increase your earnings. Some exchanges also offer staking, allowing you to start earning with your ALGO tokens easily.

What Is Algorand Staking?

Every crypto network uses a consensus mechanism to validate transactions on the network.

• Consensus Mechanism: Individual computers on the network are called nodes, and to add transactions to the blockchain, these nodes must agree that the transactions are valid. The primary consensus (agreement) mechanisms used by cryptocurrency networks include proof-of-work (PoW) and proof-of-stake (PoS).
• Proof-of-work: Used by Bitcoin, Monero, and other blockchains, PoW uses complex math problems to validate blocks of transactions added to the chain. The “work” is the energy required to solve cryptographic puzzles, a process called mining. In PoW, the node that solves the puzzle gets to add a block of transactions to the ledger and receives a reward.
• Proof-of-stake: As an energy-friendly alternative to proof-of-work networks, proof-of-stake (PoS) networks use the network’s native token as part of the consensus mechanism. The “stake” refers to the tokens or coins used as a way to prevent fraudulent transactions from being added to the blockchain.

Algorand takes a novel approach to staking by using pure proof-of-stake (PPoS) to validate transactions on the network. This method differs from proof-of-stake and delegated proof-of-stake (DPoS) protocols used with other well-known crypto blockchains in that ALGO holders don’t need to choose a staking pool or a remote validator.

Instead, all ALGO holders help validate transactions (and earn rewards) simply by holding tokens in a supported wallet such as Pera Wallet or MyAlgo. These basic earnings, called participation rewards, serve as a first earnings tier that rewards all wallets holding at least one ALGO token. However, these basic rewards are low by design, encouraging users to participate in governance to earn more.

Algorand’s governance rewards offer stronger potential yields, bringing earnings as high as 10 to 15%, depending on how much of the network participates in governance. Fewer participants mean higher yields, while increased participation reduces individual yields.

How Much Can I Earn By Staking Algorand (ALGO)?

Earnings for Algorand staking vary depending on which method you choose. Basic participation rewards from keeping one ALGO or more in an on-chain wallet like Pera Wallet typically pay just a fraction of a percent annually. On the higher end, you can earn up to 10 or 15% APY for participating in Algorand governance and voting on issues that affect the blockchain.

Online staking calculators may not offer a true measure of yield for ALGO because the yield for each governor depends on the overall participation for each governance period. In other words, yields become smaller as more ALGO tokens get locked when approaching each governance deadline.

Check out more strategies for earning yield on crypto in our complete guide.

Staking Algorand (ALGO) - What To Know

One major exchange refers to Algorand staking rewards as inflation rewards. The moniker holds some truth because Algorand doesn’t follow the same staking model as other well-known blockchains. The ALGO rewards system adds to the circulating supply of tokens, which is inflationary.

Other factors also differentiate Algorand from other popular projects: ALGO token holders don’t delegate to a third-party validator, Algorand nodes don’t earn staking rewards, and the network protocol does not utilize slashing — a method of enforcement that discourages validation of fraudulent transactions.

In many other proof-of-stake networks, at stake is synonymous with at risk. But because Algorand does not use slashing, risks for Algorand are largely limited to network security risks present with all blockchains and price and liquidity risks common to all asset markets.

Algorand pays token holders rewards from the remaining balance of 10 billion ALGO tokens mined at launch, encouraging participation and governance of the network. Network participants that don’t commit tokens to governance (and vote) don’t earn governance rewards.

What Are ALGO Governance Rewards?

If you hold at least one token of ALGO in an on-chain wallet address, you earn participation rewards simply for keeping a balance. However, Algorand also offers governance rewards which provide a higher yield.

To earn governance rewards, connect your on-chain wallet to the Algorand Governance Platform and commit a percentage of your ALGO tokens for three months. In addition, you must vote on issues regarding the blockchain during the governance period. You also can’t use or trade your tokens during the lock-up period.

The voting structure is similar to shareholder votes for corporations. Algorand governance periods occur quarterly each year, giving you four chances annually to earn accelerated rewards.

How To Stake ALGO

Algorand offers four ways to earn additional tokens through staking, ranging from easy options like staking through an exchange to more involved options, such as participating in governance or even liquid staking. You also have the option to run your own node, but running a node does not currently provide additional token rewards.

• Delegating via a centralized exchange: Some exchanges allow you to stake Algorand directly through the exchange. With this option, the exchange keeps custody of your tokens. There may also be less clarity regarding how the exchange uses your tokens.
• Earn participation or governance rewards: Algorand pays a nominal reward, called a participation reward, for holding tokens in an on-chain wallet address. By committing some of your wallet balance to governance for three months and voting as required, you can earn additional tokens, boosting your yield compared to participation rewards. These two strategies allow you to keep control of your ALGO tokens, but the latter (governance) requires a three-month commitment and comes with voting responsibilities.
• Liquid staking Algorand: With liquid staking, you can earn the higher yields available from governance rewards while reducing the time commitment. After you meet your voting commitment for governance rewards, you may be able to use your tokens for other purposes, such as trading or using your tokens as collateral elsewhere.
• Run your own node: Any user can set up a participation node to support Algorand’s consensus protocol. However, Algorand does not pay additional rewards for running a node.

Staking Via A Centralized Exchange [Easy]

If you buy ALGO from a centralized exchange, you may be able to stake your tokens directly through the exchange. After purchasing your tokens, you can start earning with just a few clicks and without transferring your tokens off the platform.

How To Pick A Centralized Exchange

Not all exchanges offer staking, and those that do won’t support all stakable assets. If you think you’re considering staking ALGO through an exchange, research this aspect first. Transferring your tokens to another exchange that supports staking for ALGO tokens can be a multi-step (and potentially costly) process.

Also, weigh these other considerations:

• Fees: High trading fees can take a bite out of earnings, but you should also weigh deposit fees and withdrawal fees, as well as any commissions for staking. For example, some well-known exchanges charge staking fees as high as 25% of rewards.
• Security: Choose an exchange that puts security first. Remember, the exchange is the custodian for your tokens in this scenario, becoming an attractive target for hackers and scammers.
• Tax reporting: Both trading and staking cryptos create taxable events. Consider exchanges that make taxes easier by providing easy-to-read tax reports.

You might also want to weigh factors such as which other cryptos are supported and whether the exchange uses a proprietary wallet.

Pros And Cons of Staking ALGO Via a Centralized Exchange

Earn ALGO Participation Rewards [Easy]

The Algorand network pays participation rewards to everyone who holds tokens (1 ALGO minimum) in an on-chain wallet address. For example, you can earn rewards for keeping your ALGO tokens in Pera Wallet, MyAlgo wallet, or Exodus wallet.

Yields for participation rewards are lower than you’ll typically find on exchanges, but you keep control of your tokens in a self-custody wallet.

Editor’s Pick: Pera Wallet

How To Choose An ALGO Wallet

Formerly known as the Algorand Wallet, the now-rebranded Pera Wallet provides a well-supported open-source wallet specifically for storing and managing ALGO tokens.

Consider your use case when choosing a wallet. Pera Wallet is mobile only, but if you think you’ll need to use your ALGO in browser-based applications, you can also consider MyAlgo Wallet or Exodus Wallet, both of which offer (Chrome) browser integration.

Pros And Cons Of Participation Rewards

How To Earn Participation Rewards

You don’t need to take any extra steps to earn ALGO participation rewards, but you will need to transfer your ALGO tokens to a supported wallet, like Pera Wallet. You’ll find Pera Wallet in the App Store (iOS) or Play Store (Android).

Step 1: Start a new wallet.

Download the Pera Wallet app and select “create an account” to get started. You can also import an existing Algorand account using a passphrase or connect a Ledger hardware wallet.

Step 2: Create a passphrase backup.

Your passphrase is a 25-word phrase that allows you to restore your wallet if your phone becomes lost or damaged. Pera Wallet creates the phrase for you. Write this phrase down and keep it safe.

You’ll also be asked to verify certain words from your passphrase.

Step 3: Add ALGO to your wallet.

You can purchase ALGO through your wallet, but fees may be lower by buying through a centralized exchange. You can transfer tokens you’ve purchased on Coinbase, for example.

Pera Wallet offers a QR code, or you can use the wallet address to make the transfer.

This is a public key:

Use this key to transfer tokens from an exchange such as Coinbase:

Look for confirmation that the transaction is completed.

Once you have ALGO tokens in your wallet, you’ll earn participation rewards automatically. You’ll need to keep at least one ALGO token in your wallet to be eligible for rewards.

Earn ALGO Governance Rewards [Intermediate]

Algorand participation rewards don’t pay much, but you can boost your earnings by participating in governance. To be eligible, you just have to register your wallet address, commit a percentage of your tokens (3-month commitment), and vote on blockchain issues as required.

Pros And Cons Of Governance Rewards

How To Earn Governance Rewards

To earn governance rewards, you’ll need to connect your wallet to the Algorand Governance Platform, commit a balance, and vote as required.

Step 1: Connect to the Algorand Governance Platform.

Visit the Governance Platform. You’ll be invited to connect a wallet.

You can connect your Pera Wallet or another supported wallet.

Scan the QR code with your Pera Wallet app to connect to governance.

Step 2: Commit ALGO tokens to the vault.

Select the account.

Choosing “Max” still leaves a small amount of ALGO tokens in your account. This safeguard is important because if your balance falls below the committed amount, you lose eligibility for rewards.

Now, you’re eligible for voting and rewards.

Check back for voting sessions. If you don’t vote, you won’t earn governance rewards. You can learn more by reading the Algorand Governor's Guide.

Liquid Staking ALGO [Advanced]

Algorand governance rewards require a lockup period, during which you can’t use your tokens for collateral or trading. Liquid staking offers a solution by offering an equivalent token that you can use instead, bypassing the need to lock up your tokens for three months.

Current options for liquid staking platforms include AlgoFi Vault, Folks Finance, and GARD.

Editor’s Pick: AlgoFi

Pros And Cons Of Liquid Staking

How To Stake Your ALGO With Liquid Staking

In this example, we’ll use AlgoFi for liquid staking, paired with the Pera Wallet. This example assumes you have already purchased tokens and funded your Pera Wallet.

Step 1: Visit AlgoFi and connect your wallet.

Visit the AlgoFi governance page to view the current governance period stats and connect your wallet.

Select Pera Wallet or whichever wallet you’ve chosen.

Scan to connect.

Step 2: Add tokens to the vault.

Use the slider or type an amount of ALGO tokens to commit to the vault.

Opt-in to AlgoFi’s DeFi protocol.

You’ll also receive prompts on your phone if using Pera Wallet. Agree as needed to proceed. After granting permission in your wallet app, you’ll show a vault balance on AlgoFi.

Step 3: Choose an amount for governance.

Use the slider or type an amount you wish to commit to governance.

Step 4: Vote as needed.

Liquid staking allows access to your (liquid) tokens without waiting until the end of the governance period. However, you’ll still have to vote. You can generate keys for voting through AlgoFi.

Run Your Own Participation Node [Advanced]

First, it’s important to note that Algorand does not offer rewards for running a node. Instead, the new rewards system provides participation awards and governance awards.

Algorand’s network comprises both relay nodes and participation nodes. Relay nodes are limited to just 120 nodes listed by the Algorand Foundation. These specialized nodes communicate throughout the network. Non-relay nodes, or participation nodes, can participate in consensus and archive all or part of the blockchain but do not earn rewards.

Technical users interested in supporting the Algorand network by building an archival participation node can learn more at Algorand’s developer site.

First, it’s important to note that Algorand does not offer rewards for running a node. Instead, the new rewards system provides participation awards and governance awards.

Algorand’s network comprises both relay nodes and participation nodes. Relay nodes are limited to just 120 nodes listed by the Algorand Foundation. These specialized nodes communicate throughout the network. Non-relay nodes, or participation nodes, can participate in consensus and archive all or part of the blockchain but do not earn rewards.

Technical users interested in supporting the Algorand network by building an archival participation node can learn more at Algorand’s developer site.

What You Need To Run Your Own Network Validator Node

Algorand’s reasonable hardware requirements for node hardware make running a node accessible to anyone, but the process is best suited to technical users.

• Computer with 4GB of RAM (8GB recommended)
• Fast SSD drive (archival nodes may need larger drives)
• 100 Mbps internet connection (1 Gbps recommended)

Detailed instructions for installing node software are available on the developer portal. Supported operating systems include Windows, Mac, and DEB or RPM-based Linux systems such as Debian (DEB) or Fedora (RPM).

Pros And Cons of Running Your Own Algorand Node

How To Unstake ALGO

• Exchange: If staking through an exchange, follow the instructions on that exchange to unstake your ALGO. Exchanges may require a short unstaking or cool-down period of a few days.
• On-chain wallets: When using an on-chain wallet to earn participation rewards, you don’t need to take any additional steps. You can trade or lend your tokens at any time. However, if you’ve committed your tokens to governance, you have to wait until the governance period has ended. At this point, you are free to use the formerly locked tokens.
• Liquid staking: If you’re using a liquid staking option, such as AlgoFi, you can remove your committed tokens after voting. Follow the instructions on the platform you’ve chosen.

To Sum It Up

Designed with speed, scalability, and affordability as primary features, Algorand offers a unique value proposition in the crypto space. Already home to one Central Bank Digital Currency (CBDC), Algorand’s future looks promising.

For those holding ALGO tokens, earning opportunities can return higher yields compared to many other crypto projects for token holders willing to commit tokens and participate in governance. Liquid staking offers additional flexibility.

If you prefer the convenience of staking through a centralized exchange, there are also earning opportunities available.

Frequently Asked Questions