Cosmos / ATOM Staking Guide

The Cosmos Hub MainNet is officially live!

The Cosmos Hub MainNet officially launched on Wednesday March 13th, 2019 at 7 PM EST (23:00 UTC). The current annual yield for staking ATOMs is ~ 31.8%.

To delegate your ATOMs to Staked, please use the following validator address:

cosmosvaloper1we6knm8qartmmh2r0qfpsz6pq0s7emv3e0meuw

There is a 21 day un-bonding process for staked ATOMs during which delegator ATOMs do not earn rewards and cannot be transferred, exchanged or spent.

Delegation is non-custodial and delegates cannot spend your ATOMs. Staked pays 90% of the block rewards to delegates, and offers the industry’s only 100% SLA on block production.

Instructions for delegating ATOMs are included below.

Staked has been operating validation nodes on Cosmos testnets for the past 9 months and recently participated in the Game of Stakes competition, earning 1 of 27 ‘never jailed’ designations for remaining in the set of ~ 185 validators the entire game and adapting to adversarial network conditions. This represents a key criteria for successful mainnet operation, particularly as it relates to slashing risk prevention.

Key Risks

Cosmos’s staking model uses “hard slashing”, which means that customer funds are at risk of being slashed in the event of a) double-signing blocks and b) extended validator downtime. You could lose a portion, or potentially all of your investment by participating in staking. Consider the risks and choose a validator carefully. Slashing risks are further detailed on our website.

Delegation Instructions

Every Cosmos account contains a 12 or 24-word mnemonic seed based on the BIP32 HD wallet specification from which it is possible to create any number of private key / public key pairs.

The funds stored in an account are controlled by the private key. This private key is generated using a one-way function from the mnemonic. If you lose the private key, you can retrieve it using the mnemonic. However, if you lose the mnemonic, you will lose access to all the derived private keys.

If you participated in the fundraiser, you should be in possession of a 12-words mnemonic. Newly generated mnemonics use 24 words, but 12-word mnemonics are also compatible with all the Cosmos tools.

1. Installing gaiacli

To get started staking ATOMs, you will need to install gaiacli , the command-line interface (CLI) used to connect to a gaiad full-node and interface with the Cosmos Hub.

You will need to compile the CLI from the source code using the instructions below.

https://cosmos.network/docs/gaia/installation.html#install-gaia

2. Restore Fundraiser Account

To restore your fundraiser account, you will need the following three values:

  • your_key_name : is an alias for the name of your account. It can be any value you want.
  • passphrase : a unique password created by you to encrypt your wallet.
  • mnemonic : a 12-word seed phrase issued in the ICO. Newly generated mnemonics contain 24 words.

Enter the following command to restore your fundraiser account (Note: omit the < > when entering command parameters):

gaiacli keys add <your_key_name> —-recover

After entering the recover command, you will be prompted to enter both your mnemonic and passphrase.

3. Connecting to the Network

In order to query state and send transactions, you will need to connect to the Cosmos Hub network. You can do this by connecting to a full-node operated by Staked. Connect to Staked’s full node by copying and pasting the following commands into your terminal.

gaiacli config node cosmos.staked.cloud:26657
gaiacli config trust-node false
gaiacli config chain-id cosmoshub-1

4. Bond Your Atoms

To bond your ATOMs, you will need the following four values.

  • validatorAddress : cosmosvaloper1we6knm8qartmmh2r0qfpsz6pq0s7emv3e0meuw
  • amountToBound : The amount of ATOMs you want to delegate, multiplied by 1,000,000 and stated in uatom. For example, if you want to delegate 10 ATOMs, the value would be 10,000,000uatom
  • gasPrice : Gas price for bonding tx (e.g 0.001)
  • Delegatorkeyname : This is your delegator alias and can be any value you choose (e.g MyDelegatorAlias)

Make sure to replace the validatorAddress, amountToBound, gasPrice and delegatorKeyName with the values as instructed above and the copy and paste the following command into your terminal.

gaiacli tx staking delegate <validatorAddress> <amountToBond> --from <delegatorKeyName> --gas auto --gas-prices <gasPrice>

An example delegation command for 10 ATOMs follows. Note: The command should be entered all one one line without any line breaks. Make sure there are spaces between each of the parameters.

gaiacli tx staking delegate cosmosvaloper1we6knm8qartmmh2r0qfpsz6pq0s7emv3e0meuw 10000000uatom 
--from delegatorKeyName --gas auto --gas-prices 3000uatom

We recommend a gas price of >= 3000uatom for bonding and withdrawal transactions.

5. Claim Rewards

You will need the following two values to withdraw your unclaimed ATOMs.

  • gasPrice : Gas price for bonding tx (e.g 0.001)
  • Delegatorkeyname : This is your delegator alias and can be any value you choose (e.g MyDelegatorAlias)

To withdraw your unclaimed staking rewards execute the following single command in your terminal:

gaiacli tx distr withdraw-all-rewards --from <delegatorKeyName> --gas auto --gas-prices <gasPrice>

Summary

Cosmos is a network of independent blockchains connected by the Cosmos Hub, a proof-of-stake (PoS) blockchain based on Tendermint, a byzantine fault tolerant (BFT) consensus protocol. The annual yield for staking ATOMs, the native cryptocurrency of the Cosmos Hub, is currently 31.8% as of block 10,000, with a total of 52,383,000, or 22.2% of the total ATOM supply staked. The mainnet launched successfully on Wednesday March 13th at 7 PM EST (23:00 UTC).

Token Economics (03/14/19)

Source: 1) ATOM supply calculations per Cosmos 2) The AIB’s 10% share of the ATOM supply is subject to a 2 year vesting period starting from Genesis per Cosmos. The estimated ATOM price is based on a current over-the-counter (OTC) quote, and is meant strictly for illustrative purposes.

Token Distribution at Genesis (03/13/19)

Source: https://github.com/cosmos/cosmos/blob/master/PLAN.md and Staked estimates.

Validators

Cosmos Hub validators participate in consensus by broadcasting cryptographic signatures, or votes, to commit blocks. Tendermint requires a fixed known set of validators, where each validator is identified by their public key. Validators attempt to come to consensus one block at a time, where a block is a list of transactions. Voting for consensus on a block proceeds in rounds. Each round has a round-leader who proposes a block. The validators then vote in stages to accept the proposed block or move on to the next round. The proposer for a round is chosen deterministically from the ordered list of validators in proportion to their voting power, which is determined by the percentage of ATOMs delegated to a validator.

Tendermint-based blockchains slow down with more validators due to the increased communication complexity. On genesis day, the maximum number of validators will be set to 100 determined by the validators with the most delegated stake, and will increase at a rate of 13% for 10 years for a maximum of 300 validators. Staked has enough ATOMs committed for delegation to ensure a slot in the initial validator set of 100.

Rewards

ATOMs are the native and only staking token of the Cosmos Hub. ATOMs represent the right to participate in consensus (vote, validate or delegate) for the Hub and earn inflationary ATOM block rewards and transaction fees in exchange.

Block rewards are paid to validators and delegators in newly issued (inflationary) ATOMs as an incentive for staking. The target stake rate for Cosmos is 66% of the total ATOM supply. At genesis, the initial inflation rate will be 7%. However, the rate will fluctuate around the target stake rate of 66% such that if the total bonded stake is less than 66% of the total ATOM supply, the inflation rate will increase until it reaches a maximum of 20%, and if the total bonded stake exceeds 66% of the ATOM supply, the inflation rate will decrease until it reaches the 7% floor. AIB (ALL IN BITS, Inc.) and the Interchain Foundation (ICF) each own 10% of the ATOM supply, but will not be staking in the immediate future implying a maximum stake rate of 80%.

The target annual inflation rate is recalculated each block. The exact formula for determining the inflation rate can be found here.

Block rewards and transaction fees are distributed at the protocol level. However, delegators need to submit a withdrawal transaction to claim rewards, and then another transaction to re-delegate the rewards in order to compound the yield earned.

While delegators can change validators automatically, there is a 21 day un-bonding process for staked ATOMs to prevent long range attacks during which delegator ATOMs do not earn rewards and cannot be transferred, exchanged or spent. ATOMs can however be slashed during the un-bonding period.

Slashing

Staking ATOMs is not risk free. Slashing penalties where both validator and delegator funds are destroyed exist at the protocol level for malicious behavior and uptime, making the operation of Cosmos validation nodes best suited for full-time, experienced operators.

The two main slashing conditions in Cosmos follow:

  • Double signing: If someone reports on chain A that a validator signed two blocks at the same height on chain A and chain B, this validator will get slashed on chain A. At launch, a 5% penalty will be imposed on both validator and delegators for double signing.
  • Unavailability: If a validator’s signature has not been included in the last X blocks, the validator will get slashed by a marginal amount proportional to X. If X is above a certain limit Y, then the validator will get un-bonded. At launch, a .01% penalty will be imposed if a validator misses 95% of the blocks in a rolling 10,000 block window. With an average block time of 5 seconds, a validator would need to miss 95% of the blocks over a period of 13 hours and 54 minutes.

Frequent hard forks, often requiring full network re-starts, are expected until the Inter-Blockchain Communication (IBC) specification has been implemented, further increasing the management and participation requirements for successful mainnet operation.


The Cosmos Staking Guide was heavily excerpted using the following sources:

  1. https://cosmos.network/resources/whitepaper
  2. https://github.com/cosmos/cosmos/blob/master/PLAN.md
  3. https://github.com/cosmos/cosmos-sdk/blob/develop/docs/gaia/delegator-guide-cli.md

About Staked

Staked helps institutional investors reliably and securely compound their crypto by 5% — 100% annually through staking and lending. Staked runs validation nodes for proof-of-stake currencies and offers access to on- and off-chain lending options that provide an annualized yield of in-kind currency.

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