Polkadot Staking: How To Stake DOT

Key Takeaways

• You need a minimum of 10 DOT to stake on Polkadot.js
• Polkadot is a relatively new blockchain network, so it’s viewed as riskier than more established networks
• Bonding and unbonding staked DOT takes 28 days, during which you can’t trade or earn rewards on tokens

Polkadot is a relatively new, emerging blockchain technology that promises to provide scalability, privacy, multiple use cases, and decentralized democracy in fintech. Instead of operating as a single blockchain, it’s actually sharded and splintered to form multiple chains called parachains that operate simultaneously and can be used for many purposes.

Polkadot aims to bring divergent blockchains together, allowing interoperability among up to 100 networks, with the possibility of support for an unlimited number of parachains.

If you own DOT, Polkadot’s network token, you can vote on blockchain proposals, lease parachain slots, and earn crypto staking rewards on Polkadot to help validate network transactions. Here’s how to stake Polkadot as well as some considerations to weigh before you get started.

What is Polkadot (DOT)?

Polkadot markets itself as a versatile blockchain foundation upon which other chains and projects can be built. DOT coins are Polkadot’s network tokens, which are created when transactions are verified on the blockchain, the first of which was launched in May 2020. This is called a proof-of-stake protocol.

DOT tokens are used for three things: governance, bonding, and staking. For governing, DOT holders can vote with their tokens for parachain additions, upgrades, and more. With bonding, DOT tokens are tied to a parachain for its creation and then unavailable for a certain period until the parachain is removed. DOT tokens can also stake their DOT with a validator to earn a portion of the blockchain rewards when a new block of transactions is added.

How Does Polkadot Staking Work?

When staking Polkadot, you’re nominating your DOT tokens to a validator, also known as staking. The bet you’re making is that the validator you choose is properly verifying transactions on the network. A validator is a server that runs specialized software that can propose a block of transactions and verify (or not verify) a block of transactions.

Validators that properly verify transactions are rewarded with more DOT tokens distributed among the investors staked with the validator. Any validators that verify fraudulent transactions or attempt to cheat the system are penalized — or slashed — and lose staked DOT.

Staking DOT On An Exchange [Beginner]

DOT Liquid Staking [Intermediate to Expert]

Staking DOT With A Wallet [Expert]

Running A Validator Node [Expert]

Difficulty level: Expert

You can also stake by running your own validator node. However, this option requires technical expertise, bringing hardware, maintenance, and energy considerations into the staking equation.

Staking requirements for a validator vary with Polkadot. In effect, you can join the validator set by staking more than the lowest stake in the current set. You can find the current lowest stake at the top of this page, but be aware that requirements may change and the stake can come from either you or from nominators. Several active validators do not have their own DOT staked.

Potential Returns For Staking DOT

In exchange for putting your DOT tokens at risk, you can earn rewards. Expect stronger yields with Polkadot compared to many other PoS blockchains and staking on an exchange, but expect more complexity as well, staking with Polkadot isn’t always a straightforward process. However, potential returns for staking DOT with a validator on Polkadot is about 14.8%, but staking with an exchange or staking pool like Gemini or Kraken is around 10% to 12%.

How Much Can You Make Staking DOT?

Let’s say you decide to stake $1,000 of DOT. There are two main ways to do this: with a validator or on an exchange.

If you were to stake $1,000 of DOT for a year with exchanges, this is how much you could earn over the course of a year if you don’t reinvest your earnings to the exchange stake:

*APYs are advertised on each exchange and are calculated using factors like how many staked DOT tokens are on the network

**Based on the value of $7.52 per DOT, as of June 22, 2022

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

What to Know About Returns For Staking DOT

Before you stake any DOT tokens in your wallet, here’s what you need to know about the returns.

First, if you stake with Kraken, rewards are paid out weekly or twice a week, respectively. When you stake through Polkadot’s staking service, you can use a non-custodial wallet (like a software wallet) to nominate your tokens, but still keep control of them.

Keep in mind that nominating your coins with a validator on Polkadot requires at least 10 DOT, but only the top 256 nominators on a validator receive rewards during the payout. Rewards are paid out once per era, which is about 24 hours for Polkadot.

A unique aspect of delegating and receiving rewards for staked Polkadot on the Polkadot.js platform is that rewards aren’t automatically paid out. In fact, you have to submit a claim transaction if the validator doesn’t trigger the action. Stay on top of the validators you nominate to make sure you are receiving the rewards you’re entitled to.

Polkadot uses nominating as its term for staking or delegating your tokens to a validator. In essence, it's like voting for a validator.

Fees For Staking DOT

Validators, exchanges, and validator pools typically charge a commission for running the validator node. Running validators take expertise, electricity, attention, and maintenance. Commission fees vary by validator — for example, most validators on the Polkadot.js staking platform charge 10% or less for commission, but others have higher commission fees, up to 100%.

Pros And Cons of Staking DOT

Pros And Cons Explained

Pros

More Transparency

When you stake DOT through Polkadot.js, you can see the exact fees, validators, amount of nominated DOT and more on its platform. This provides much more transparency than staking other cryptocurrencies, because investors can choose their validator node based on how many tokens are already staked, fees, and more, to make more informed decisions when staking DOT.

Low Staking Requirement

The minimum amount required to nominate a validator is 10 DOT, which is around $70 to $75. This is a much lower threshold than staking with other native coins like Ethereum, which requires 32 ETH in most places. This means that investors can start with less than $100.

Helpful Resources

The Polkadot wiki is chock-full of guides, how-tos, and information on the blockchain network, its native token, and how to stake it. It’s somewhat beginner-friendly, as it delves into some complicated topics, but overall, is a handy resource to use when delegating DOT.

Cons

Slashing

Like many other validator networks, Polkadot uses slashing as a way to discourage improper validator behavior. When you stake by nominating a validator, some of your staked tokens may be at risk of forfeit. That’s why it’s important to always do your research to make sure you’re delegating to a reputable validator node.

Unbounding Period

Polkadot’s 28-day unbonding period warrants consideration when choosing whether to stake or a staking amount. You won’t be able to sell, trade, or use your Polkadot during this period. You also won’t earn rewards during the unbonding period.

Limited Delegator Selection

In order to receive rewards for your staked DOT, you have to be in the top 256 delegators on the validator. If you aren’t in the top 256, you won’t earn rewards. So you can either choose a validator with few delegators and tokens, thus it may not be nominated to validate, or choose a popular validator, which may be more difficult to get into the top 256.

Is It Safe To Stake DOT?

While Polkadot hails itself as a beacon of decentralized governance and blockchain technology, there are safety concerns to consider before investing in and staking DOT.

• New blockchain:Polkadot is a relatively new blockchain, so it doesn’t have a long track record of success compared to other networks like Ethereum or Bitcoin. It’s only about two years old, making it a riskier investment.
• Lack of guardrails:The nature of Polkadot’s staking platform makes it so the responsibility of choosing a validator to nominate falls on the investor. If you don’t choose a reputable validator, you could lose your tokens during a slashing penalty.

How To Stake DOT

Is Staking Polkadot Right For Me?

Polkadot offers outstanding yields, but you’ll have to assess your priorities before staking. Outsized returns can come at the cost of mobility. With plain staking, unbonding takes a full 28 days. You can’t jump in and out of a staking position like you can with some other PoS protocols.

However, Polkadot also enables interoperability between key projects, bringing a unique value to its DOT tokens and setting Polkadot apart from the pack. If you’re investing in Polkadot for the long term, staking can provide a passive way to accelerate your earnings. It does require some technical know-how to connect your wallets, and choose a validator, so anyone just starting out with crypto may want to stick to staking tokens like Ethereum.

Final Thoughts on Staking DOT

Staking DOT provides an interesting opportunity to directly nominate the validators that you choose. However, that opportunity brings extra responsibility and legwork for investors. If you’re willing to put in the work to research the best nominators to bond and stake your tokens, then you can see returns around 15%, paid out every 24 hours.

The Polkadot network’s unique design allows it to be used for a variety of applications like healthcare, education, and finance, so staking DOT helps the blockchain grow and increase in security and footprint. If you believe in Polkadot’s mission, then staking DOT may be right for you. As always, do your own research and assess your comfort with risk before investing.

Frequently Asked Questions