Once you have staked your ATOMs, you are contributing to the network's security. In return, you will receive rewards in the form of newly minted ATOMs. Conversely, if you do not participate in staking, your assets will get diluted over time.
The Cosmos protocol states that validators are subject to punishment in case of malpractice. This is referred to as "slashing" and can occur in the wake of two events: the validator signing two blocks at the same height ("double signing") or the validator being offline for roughly half a day ("uptime"). The penalty for double signing is 5% of the total stake. The penalty for breaching "uptime" is significantly lower at roughly 0.01%. Penalties are imposed on both, validators as well as delegators.
Therefore, we advice you to carefully choose your validator. Please note, that the costs for running a secure and professional validator need to be covered by the commission rate. Hence, it is worthwhile to accept a certain amount of commission in order to secure your profits and minimize the risk of punishment. In addition, we have our own capital on the line in order to fully align our own interest with that of our customers.
Further risks include: key/asset mismanagement by the enduser resulting in loss of funds; protocol errors; or attacks against the network.
The validator you delegate your tokens to is not able to access your funds at any point in time since you are only delegating your staking rights. Your ATOMs always stay in your wallet and you may re-delegate them to another validator at any time.
Your annual revenue = block rewards + transaction fees - our commission fee
Use our Reward Calculator above to see how may ATOM you can earn through your stake.
Block rewards are paid in newly minted ATOMs and are subject to the annual inflation rate. The change of the annual inflation rate is dependent on the total amount of staked ATOMs. If less than two thirds of all tokens are staked, inflation can go up to 20%. If more than two thirds of the tokens are staked, the network inflation rate can be as low as 7% per year.
Each transfer on the Cosmos Hub comes with transactions fees. These fees can be paid in any currency that is whitelisted by the governing Cosmos community. Fees are distributed to bonded ATOM holders in proportion to their stake. The first whitelisted token at launch is ATOM.
For our service, we charge a commission fee of 10%. We use the fees to fund operating costs and invest back in building tools and software to support the development of the Cosmos ecosystem.
Unfortunately, neither of them applies. Your staking rewards are not bonded to a validator by default. In order to achieve compounding interest on your rewards, you have to claim and re-delegate them from time to time. This can easily be done through your wallet UI, learn how to here.
Unclaimed rewards remain under your custody and can be claimed anytime.
Rewards in Cosmos have to be claimed manually. You can do so via your wallet or the CLI. In our guides, we show how you can claim your ATOM rewards using the Keplr wallet.
Your tokens are locked (can't be transferred or sold) when staked at a validator. Unlocking ("unbonding") your tokens takes three weeks. During that period your funds do not earn rewards, are illiquid and may still be subject to slashing. This is stipulated by the protocol.
Our max commission rate is 25%. Rest assured that any increase in our current commission rate of 10% will be discussed well beforehand. Increasing the rate will help us stay flexible and allow us to continue providing a secure and sustainable service even in case of extreme price drops.
Our max daily commission change rate is 1% per day. If this rate ever becomes subject to change we will transparently discuss the reasoning well beforehand.
Unfortunately we cannot answer this question in a general manner as tax regulation differs among legislations. Nevertheless, we advice you to always track your staking operations so you can provide a detailed history of your staking rewards.