A maximum APR of 127%? Taking a look at Ontology Stake Authorization

Hi everyone,

I’m Kain from Clay, the most convenient cryptocurrency wallet & dApp platform. (Official partner with Ontology foundation : you can see here)

Starting today, November 1st, Clay has launched Stake Authorization feature for Ontology holders.

TLDR;

• Delegation rewards (about USD 8.5 million as of Nov 1st) will be distributed to the stake participants. There are not many participants at the time of writing (411 million ONT staked, about USD 670 K), so there is a possibility that a small number of people will share the reward, or if the participants grow, ONT price is expected to rise.
• Users can delegate their ONT to the nodes and gain rewards (when they authorize the stakes, it will be locked in the smart contract for 20 days)
• Users can delegate their ONT in multiples of 500. (500 / 1,000 / 1,500 / …)
• Click here to download the Clay wallet, deposit some ONT, and stay updated on the official launch through the pre-registration below.

Click here to sign up for the pre-registration

What is Stake Authorization?

This is going to be a long article. The below is the summary of long hours of researching many articles and questions back and forth with the Ontology foundation.

Stake Authorization is a feature where the users can stake(deposit and lock) their ONT tokens to delegate and vote for nodes, and gain rewards from them.

Stake Authorization in OWallet

• Rounds : One round is 120,000 blocks. The current block time is about 15 seconds, so 1 round roughly equals to 21 days. At the time of writing this article, the next round starts in 80,000 blocks = 14 days.
  * The Ontology Foundation bonus, which is the main reward as of now, are distributed on the 1st of every month.
  * Added — You should stake at least a month before in order to get the foundation reward. ex) If you want to get 1.1 foundation reward, you should stake before 12.1

Every stake begins and ends with rounds, which is 120,000 blocks long(about 15 ~ 20 days — this is subject to change). If you apply now, your ONT will be staked at the beginning of the next round, and if you unstake, your ONT will be returned at the end of the round. (Rewards will be only given to the point of unstaking) // Foundation bonuses are distributed on the 1st, so in order to receive the bonus, ONT has to be staked during that time.

• Staking : You can stake in multiples of 500 ONT. If you stake your ONT, ONT are sent and awaits for staking to begin. When the round begins, the tokens will be staked.
• Unstaking : If you’re ONT is in awaiting status, it’ll be canceled and returned right away. If it was staked already, it’ll be unstaked and the ONT will be returned when the next round begins.
• Stake rewards : Each node can set their own reward proportion for others. If it is 0%, the nodes are not rewarding any delegated stakes, and if it is 100%, all node rewards will be distributed to the delegated stakes (the node will take 0 in this case)
• For example, if the reward proportion of Node A is 70%, the reward for the round is 10,000 ONG, and the total ONT staked by users is 10,000 including your 500 ONT, your reward would be :
  (70% * 10,000 ONG) * (500 ONT / 10,000 ONT) = 350 ONG

Staking Status and Expected Return

Current stakes and expected return (only for reference) There is a reward proportion on 7 Consensus Nodes and the returns of the other nodes are outliers.

• Currently, the only top 7 Consensus Nodes have reward proportions, so you can stake on these nodes.
• The reward is distributed as follows -
• Total Node Reward : Ontology transaction fees ONG + Foundation bonus (10,000,000 ONG every year, for a total of 3 years)
• Consensus Node (7 as of now) : 1/2 of total node reward will be distributed (transaction fees differ by staked ONT, and foundation bonus is equally shared)
• Candidate Node (26 as of now) : 1/2 of total node reward will be distributed (transaction fees differ by staked ONT, and foundation bonus is equally shared)
• The user reward is already calculated in the above example, so the issue from now is how the reward proportion will change, and the amount of user stakes that will be coming.
• Current user stake amount is 4,110,000 ONT. Half of it is staked on Dubhe, which is not very smart because all the users will share the reward. (I have also staked on Dubhe first and unstaked…)
• Simply put, total amount of staked ONT is 4,110,000, and the total node reward of 10,000,000 ONG is distributed to the staked ONT (ONG fees are not significant, so we’ll just assume that the reward equals the foundation bonus). That is 2.4 ONG per 1 ONT every year. That would equal to 127% APR (annual percentage rate).
  * 127% APR is based on the current conditions. If there are more users staking ONT, or if the nodes reduce the reward proportion, the rates can differ.
  ** The maximum return in best case scenario, is when I stake 500 ONT and nobody else stakes. I can take 10,000 USD per month, with 500 ONT (about 900 USD) which is about 15802%.
• Also, if you hold ONT, you will receive 8% ONG, which adds up to 135% per year.
  (How to calculate ONG profit from PoS)
• It is very difficult to predict how the parameters will vary when the node competition and user staking gets big
  — Expected stakes to become a Consensus Node
  — Consensus Node / Candidate Node ratio (It may be better to stake on a candidate node now because the candidate nodes are few)
  — Reward proportion set by the nodes (it is easier to bring stakes if the proportion is 100%, but there will be users still staking for lower proportion. Also, the proportion of competing nodes will have to be taken into consideration)
  — Total amount of ONT staked by users (user rewards reduce as more users participate)
  — ONT and ONG price trend
• These parameters will eventually find an equilibrium. It is impossible to predict how it will span out at this point. However, the return of stake rewards is high, so anyone who is coming in will either profit from stake rewards or enjoy a price jump deriving from increased ONT demand.

About Ontology Nodes

If you have read the above summary (Kudos to the survivors!), I assume that you’ll be curious about how the Ontology nodes are operated. Here is a summary of how they work, after long conversations with the devs in Ontology foundation.

• To become a node : You have to stake a minimum of 200,000 ONT. There are also other qualifications(https://info.ont.io/trionesintro/en). Once they are met, the foundation approves the nodes.
• Types of nodes : Consensus Node > Candidate Node. It’s like major and minor league. Half of the node rewards will be distributed to the Consensus nodes and the other half to the Candidate nodes.
• Promotion/demotions of nodes : In order to become a node, you have to stake a lot of ONT (your own stake + user stakes). Nodes will be selected every round, and during the competition rounds, there will be no promotions or demotions. After the competition round is over, nodes will be promoted or demoted according to the staked ONT.
  * Special qualifications apply in becoming a Consensus Node. They will be announced at the Ontology official meetup soon.
• Node disqualification : Nodes will be disqualified as soon as they unstake any amount of their staked ONT. (User stakes does not affect this)
• Node rewards : Nodes will be able to collect ONG transaction fees. Ontology blockchain charges 0.01 ONG per transaction. As specified above, 1/2 of fees are distributed to the Consensus nodes and the other half to Candidate nodes. They will be shared among each node by amount of ONT staked.
  (Total transaction of Ontology is about 800 thousand, so the transaction fees are not significant. However, if the ecosystem grows to the size of Ethereum/EOS, the fees will grow eventually)
• Foundation bonus : This is an incentive given by the foundation to promote node participation. Every year, the foundation will distribute 1% of the total ONG supply in the course of next three years. This is 10,000,000 ONG every year and about 8.5 million USD. Half of the bonus will be distributed to the Consensus nodes, and the other half to Candidate nodes. It will be equally shared among the nodes regardless of the staked amount.

Pre-register through the link, and you’ll be able to use the staking feature before others do. We will also keep you updated on the profitability of Stake Authorization through email.

Click here to sign up for the pre-registration

What is Clay?

Clay is a multi-wallet, which supports Ethereum, Ontology, and various exchange wallets such as Binance, Bittrex, and HitBTC (major exchanges like Upbit, and Huobi will be added soon) We want to make it easier to store, send, and use cryptocurrency wherever you are.

Also as a dApp platform, Clay supports exchange trading(Binance, Bittrex, HitBTC), token swap using Kyber Network, and cryptocurrency purchase through Simplex. We make cryptocurrency simple and easy.

Look up “Clay” on App store, or click here to download.

Ontology UX/UI in Clay app

Clay team with Ontology CEO Li Jun

Disclaimer : This article is an introduction to certain features within Ontology, and is not financial advice. Me or my company, Clay.one is not responsible for any profit/loss in cryptocurrency investment. (Clay.one does not profit from Staking features, ONT storage or usage within the Clay app). The investor is solely responsible for their actions.