Cosmos Staking: How And Where To Stake ATOM And Earn Money
Key Takeaways
- Cosmos is a proof-of-stake blockchain that offers staking rewards when using your ATOM tokens to help validate the blockchain
- Cosmos offers high staking APYs starting at 9.7% and going up to 19%+
- Choose from several staking options, including centralized exchanges, delegating to validators, and running your own validator
The Cosmos blockchain operates using a proof-of-stake consensus mechanism which provides staking rewards for the Cosmos native token, ATOM. Staking is a necessary function used to validate transactions on proof-of-stake blockchains.
This article will discuss how, why, and where to stake Cosmos (ATOM), what staking services are available, what annual percentage yield (APY) rewards stakers can expect to receive from staking ATOM, and much more.
Staking Cosmos (ATOM)
Cosmos staking is similar to staking through other proof-of-stake blockchains but with added features.
ATOM holders can stake tokens through several different staking services in exchange for ATOM tokens as a reward.
- Cosmos stakers can stake ATOM via a centralized exchange, directly delegate to a validator, use a liquid staking pool, or run their own validator node. Each of these methods comes with their own advantages and drawbacks.
- Cosmos stakers can use Authz and REStake to auto-compound staked ATOM tokens, which can increase APY.
- Cosmos staking is supported across 33 different wallets, which include both hardware and software wallets.
| Token Information | Details |
|---|---|
| Cosmos Token Name | ATOM |
| Base APY for ATOM Staking | 9.7% |
| ATOM Market Cap | ~$3 billion |
| Supported Wallets | 33 |
What is Cosmos Staking?
Staking is the mechanism used to ensure the validity of transactions in a proof-of-stake blockchain. Blockchains incentivize users to stake by providing annual percentage yield (APY) rewards in the form of more tokens — in this case, Cosmos provides stakers with more ATOM tokens.
By staking ATOM via a validator or delegating ATOM to staking pools, ATOM holders are contributing to the decentralization and security of the Cosmos blockchain since each staking method either builds blocks or verifies blocks proposed by other validators.
Staking is a great way for ATOM holders to earn passive income. The protocol mints new ATOM tokens and utilizes transaction fees to generate the staking yield that stakers receive.
How Much Can I Earn by Staking ATOM?
Cosmos, like every other proof-of-stake blockchain, has a “base APY” for staking that is handed down from the protocol itself. For Cosmos, this base APY is 9.7%. Many exchanges and staking pools, however, offer a higher APY to encourage people to stake their Cosmos on their particular platform.
21-Day Unbonding Period
The Cosmos blockchain has a 21-day “unbonding” period in place for stakers. This means that any time you want to unstake your staked ATOM funds, you must wait 21 days after initiating the unstaking process in order to actually receive your tokens back.
The Cosmos network also offers a unique staking tool — REStake, which lets Cosmos validators claim and auto-compound staking rewards for you. This is beneficial for long-term Cosmos stakers as they won’t need to re-stake newly purchased Cosmos tokens. This process is executed using the Cosmos feature Authz.
Check out more strategies for earning yield on crypto in our complete guide.
How To Stake ATOM
ATOM can be staked in four different ways:
- Using a centralized exchange: Traders can delegate ATOM to centralized exchanges (with staking services) that stake your ATOM on your behalf and pass on the staking yield to you.
- Delegate directly to a validator: Traders can delegate their ATOM directly to a validator pool. This usually requires a Cosmos-supported wallet.
- Liquid staking Cosmos: Traders can also stake their ATOM through a liquid staking pool that provides a liquid token which can be traded while the ATOM funds are locked up.
- Run your own validator node: This is the most direct and decentralized staking method but requires significant upfront costs. Stakers will need a computer with 32GB RAM and 500GB-2TB storage in order to download the necessary software and connect to the Cosmos Hub Mainnet.
Staking Via A Centralized Exchange [Easy]
Major centralized exchanges provide support for easy ATOM staking. Staking through centralized exchanges usually provides modest APYs and can be done in just a few clicks. It’s important to note that if you stake your ATOM through a centralized exchange, you are giving up custody of your funds to the exchange.
How To Pick A Centralized Exchange
Traders interested in Cosmos staking on a centralized exchange should first consider how reputable the exchange is. Because centralized exchanges are operated by opaque corporations and require trust, it’s important to look into the exchange’s credibility and performance, how they’ve handled past incidents and scandals, and whether they’re faced with any current legal or regulatory issues.
After exchange reputation, the staking rewards/APY that the exchange offers is arguably the most important factor to consider. Some exchanges may generate a higher APY than others, but they may also take a higher commission fee.
It’s also important to check whether the exchange is insured by a traditional insurance firm, as there have been several multi-million hacks on exchanges over the last few years, such as Binance (2019) and KuCoin (2020).
Pros And Cons Of Staking Cosmos Via A Centralized Exchange
Pros
- Lower barrier to entry compared to running own validator
- Easier user interface to navigate
- Centralized exchanges are often insured, so stakers may be reimbursed in the event of a cybersecurity exploit
Cons
- Staking rewards/APY is often lower on centralized exchanges
- ATOM assets are custodied by the exchange rather than your personal wallet
- No opportunity to participate in Cosmos governance
Delegating Your Atom To An Existing Network Validator/wallet [Intermediate]
A more direct way of staking your ATOM tokens is to delegate them directly to validators. This gives you many of the same benefits as running your own staking validator, but without needing the technical know-how.
Keep in mind, however, that validators will often charge a commission for their services which will be taken out of your staking APY.
Delegating is done by installing a Cosmos-supported crypto wallet, depositing ATOM tokens, and delegating them to a validator of the staker’s choice.
How To Choose A Wallet
Cosmos stakers will first need to choose a wallet that supports ATOM staking. Both hardware wallets like Ledger Nano and software wallets like Keplr, Wallet.io, EXODUS, and Trust Wallet can be used for staking.
You should, however, take into account that while a hardware wallet can be less practical than an online wallet accessed via a browser extension, they store your crypto assets offline, which significantly reduces the likelihood of being hacked.
Cosmos stakers should consider the following when choosing a validator:
- Reputation of the validator (check out the validator’s website and transaction history)
- How decentralized the staking pool is
- What APY the validator is generating
- What commission the validator is asking for
- What the validator’s “up time” is
- Whether it offers the “REStake” feature
- How much voting power the validator holds
Alternatively, the staker could consider the validator’s “rank,” which is a single superscore that takes all of these factors into account.
Pros And Cons Of Staking Atom Via A Wallet
Pros
- Higher staking rewards/ APY than centralized exchange staking services
- ATOM can be staked on both a decentralized hardware and software wallet
Cons
- The research necessary to find a good validator is more involved, and the process isn’t streamlined
- Validators who do not do a good job of validating the blockchain may be at risk for having delegated funds taken (“slashed”) by the protocol
How To Stake Your Cosmos Directly With A Network Validator
Step 1: Install a Cosmos-supported crypto wallet and deposit ATOM tokens.
Step 2: Choose a Cosmos validator staking pool.
Step 3: Set the delegation or staked amount.
Step 4: View your staked ATOM on the wallet dashboard.
Liquid Staking Cosmos [Intermediate]
Cosmos liquid staking services work similarly to centralized staking, where a company takes your ATOM and stakes it for you. What’s unique about liquid staking, however, is that the protocol you are staking to will issue a liquid token that can be traded on the open market even while your regular ATOM tokens are staked and locked up.
How To Pick A Staking Pool
Cosmos stakers should first consider why they want to choose a liquid staking pool over delegating ATOM assets directly to validators, as there are advantages and drawbacks to each.
If a liquid staking pool is suitable, the staker should consider the following:
- Reputation of the staking pool
- How decentralized the liquid staking pool is — many liquid staking pools actually make up a huge portion of all staked funds on some blockchains
- What APY the staking pool is generating
- The market cap and volatility of the liquid staking token (such as pSTAKE)
- How secure and stable the platform issuing the liquid staking token is — if the platform experiences insolvency, the liquid staking token will almost certainly devalue, which could take your ATOM funds with it.
Pros And Cons Of Staking ATOM Via A Staking Pool
Pros
- Receive a liquid token that can be traded while your ATOM is locked up
- Offers higher staking rewards/APYs than centralized exchanges
Cons
- The liquid token introduces a new asset that you have to monitor in addition to your ATOM
- Liquid staking rewards are not standardized — different pools have different rules
- Swapping your ATOM tokens for liquid tokens when staking may be considered a taxable event
How To Stake Your ATOM In A Staking Pool
Step 1: Connect to pSTAKE with your Web3 wallet and connect to the Ethereum Mainnet.
Step 2: Add funds and convert to ATOM.
Step 3: Install one of Keplr, Ledger, or Cosmos SDK CLI to convert ATOM to pSTAKE and then select the Cosmos chain.
Step 4: Top up pSTAKE balance with pATOMs.
Step 5: Request pSTAKE connection, approve transaction and view updated balance.
Step 6: Stake pATOM by converting it to stkATOM.
Step 7: Review new stkATOM staking balance.
Run Your Own Validator Node [Hard]
The holy grail of decentralization is running your own validator node. This is where you run the hardware necessary to validate the blockchain yourself and you receive your staking rewards directly from the protocol, rather than through some intermediary.
What You Need To Run Your Own Network Validator Node
Cosmos validators will need a computation device with 32GB RAM and 500GB-2TB storage in order to run their own validator node through the Cosmos Hub Mainnet. Detailed instructions and hardware setup help can be found through the official Cosmos documentation here.
Cloud Providers
One way to run your own validator node that does not require you setting up the necessary hardware is through a white-label validator service from a cloud provider. Two of the most popular cloud providers for Cosmos validators are Allnodes and Blockdaemon.
- Allnodes: Allnodes has the reputation of being one of the biggest cloud providers for blockchains like Ethereum. The service helps host over 30,000 nodes and Cosmos validator nodes start from $360/month.
- Blockdaemon: Blockdaemon is a favorite cloud provider among institutional node validators. The platform offers a staking service as well as a while-label validator service that can be found here.
Pros And Cons Of Staking ATOM Via Your Own Validator Node
Pros
- Helping the decentralization of the Cosmos blockchain
- Custody all of your own assets and keys under your control
- Collect the highest protocol rewards directly from the protocol with no intermediaries
Cons
- May be subject to “hard slashing” if you double-sign a block or otherwise violate the protocol’s rules
- Must constantly run the correct version of the software to remain online
- Must take extreme care to ensure private keys are not compromised
Pros
- Helping the decentralization of the Cosmos blockchain
- Custody all of your own assets and keys under your control
- Collect the highest protocol rewards directly from the protocol with no intermediaries
Cons
- May be subject to “hard slashing” if you double-sign a block or otherwise violate the protocol’s rules
- Must constantly run the correct version of the software to remain online
- Must take extreme care to ensure private keys are not compromised
How To Stake Your ATOM On Your Own Network Validator Node
Step 1: Create your own validator via a new terminal window.
Step 2: Edit validator description.
Step 3: View validator description and track validator signing information.
Step 4: Confirm validator is running.
Frequently Asked Questions
Of the top 10 proof-of-stake run blockchains, Cosmos Hub is currently yielding the highest staking rewards. But stakers should always be aware of the financial risk involved in staking.
ATOM can be bought on a centralized exchange, or through a decentralized wallet or decentralized exchange.
You can stake your ATOM by delegating it to a validator, through liquid staking, via a centralized exchange, or by running your own validator node.
Unlike blockchains like Ethereum where validators must have 32 ETH to stake, there are currently no significant minimums necessary to stake Cosmos’s ATOM token.
There are pros and cons to the different methods of Cosmos staking (ATOM).
Please refer to “Delegating via a Centralized Exchange,” “Delegate Directly to a Validator,” “Liquid Staking Cosmos” and “Run Your Own Validator Node” sections above.
