Cosmos $ATOM token rewards

Is it worth the effort to stake and earn Cosmos ATOM token rewards? Let’s find out…

Jack Chan
KysenPool
5 min readJul 23, 2019

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Courtesy of History.com

Is it Worth It?

Does Cosmos ATOM staking rewards beat the S&P 500’s 30-year historical 6.7% annual returns?

Answer? The math says yes. Cosmos staking currently returns over 10% in token rewards according to the findings from StakingRewards.com.

What’s the Catch?

The catch is that ATOMs are not stable stable coins, fiat currencies (i.e. the US Dollar), or other government backed currencies in our recent memory. ATOM fluctuates, by a lot. But once you delegate the ATOM tokens to a bonded and active Cosmos Validator, you’re guaranteed a return of over 10% in ATOM tokens.

Volatility goes both ways

Why place my hard earned money into a highly volatile virtual asset that I would get consistent returns from, which wouldn’t mean anything if the volatility hurts my investment’s capital? Why use a vehicle like Cosmos Proof-of-Stake to return me more tokens that are equally volatile?

This is similar to asking why invest in a tech stock that provides 10% dividends if the stock itself fluctuates wildly within a week, a day, or even an hour!?

Maturity tames Volatility

The volatility is temporary, it will settle down once the Cosmos initiative gains price momentum in less volatile fashion. Much like how tech stocks were highly volatile in the past, from Microsoft, to Netscape, to Amazon, to AOL, to Netflix, to Google . . . every single one of them was a volatile stock back in the day! But now, it takes really huge breaking news to move those stock tickers by double digit percentages.

If we presume so, the follow on questions would be whether the investment into ATOMs even makes sense, as there are other historically stable vehicles such as real estate or the U.S. stock market.

I’m not convinced but I’m curious. How does this “delegating tokens” thing work?

Stake tokens, Get Rewards!

Delegate ATOM tokens to get Staking Rewards,” it’s easy as that. Upon acquiring ATOM tokens from the exchange of your choice, as shown in CoinMarketCap.com’s list of Exchanges that trade ATOMs, now it’s time to earn some token rewards!

There are several blogs with instructions on how to do so such as https://medium.com/stakecapital/cosmos-delegation-tutorial-non-technical-e8410c6bfd3a

-or- using KysenPool has a set of instructions to delegate via a Ledger Nano S or software wallets using Cosmostation or Lunie. Details available at https://www.kysenpool.io/how-to-stake.html

Let’s look at how easy (or hard) this is to do.

Comparing Account Setup

Let’s see what are the efforts involved to setup accounts in exchanges and crypto wallets to delegate Cosmos ATOMs vs. accounts to invest in the traditional equity markets via brokerage firms.

“The process to set this up is amazingly tedious.”

Setting up accounts to delegate Cosmos ATOMs via crypto wallets

These are some estimates in terms of the time needed to set you up with a set of ATOM tokens that can then starting earning rewards through Validators:

  • (1 to 4 weeks) On-ramp from fiat currencies to a common cryptocurrency like Bitcoin. U.S. has a few such as Coinbase, Kraken and Gemini. Europe has BitMex. Asia has Bitfinex and Huobi. You’ll have to setup your account there, perform KYC/AML procedures there.
  • (1 to 2 weeks) Upon getting fiat to crypto, one has to look for a suitable place to acquire ATOM tokens, which is namely Binance and Hotbit. You’ll have to setup your account there, perform KYC/AML procedures there.
  • (1 to 4 hours) Once you gain ATOM tokens, you’ll need to setup a wallet on your own. Either trusting a software on mobile/browser apps such as Lunie HQ or Cosmostation, or using hardware wallets such as Ledger Nano S.
  • (Less than an hour) You then have to transfer those ATOMs out of the exchanges and into your newly setup wallets. The transfer itself takes less than 7 seconds, but the crypto exchanges may prefer a few more minutes to confirm the transfers
  • (Less than an hour) From those wallets, read the instructions above in order to delegate the tokens to a Validator of your choice.

Let’s see how this compares with a more traditional means of setting an investment vehicle up

Setting up accounts in Equity Trading Brokerages

Because Equity trading brokerage firms are centralized, they can enable account creations really easy. These brokerage firms nowadays have the steps flipped the other way around, where the account setup could be rather straightforward, but money transfers can take days if not weeks (e.g. for retirement accounts) while purchasing ETFs will take a day to complete

  • (a few hours to a few days) Setup an equity trading account such as Fidelity, E*Trade and TD Ameritrade. If you have paperwork at hand that they need, you can walk into one of the physical brokerage locations to hand over those documents. If notaries are needed, they aren’t that difficult to locate in developed countries. If the ownership constitutes shared accounts, then it becomes a bit more complicated. These are the KYC/AML barriers of entry here (but no one calls it that!)
  • (three to five business days) Transfer your monies into the brokerage account. This assume wire transfers are a norm. Otherwise, one can walk into the physical brokerage locations to hand over a check or cash.
  • (a few business days to several weeks) Research to find your golden exchange traded fund (ETF), of your liking, make the purchase, and get confirmation. You may take the easy way out and just invest in S&P 500 tracking index ETFs. This is a matter of preference on your research (this can take weeks talking to trusted friends and professionals) to find a suitable one with a solid track record before you commit on making the investment. Once you confirm the investment, it usually take a few business days for the transaction to settle.

Conclusion — YES, it’s worth your time!

Comparing setting up Cosmos ATOMs delegation with purchasing an ETF from a centralized firm, it’s not too different. But the compounding effect of the rewards could be really profitable over time. It’ll be worth your time! Every single moment you’ll spend on getting this setup since the steps aren’t too different from setting up traditional onramps into an investment vehicle.

Another benefit is once you’ve set this up, you’ve just opened up a whole new world of investable vehicles with plenty of other projects that will have investable tokens in the future.

So, would you be acquiring and staking Cosmos ATOM tokens today?

DISCLAIMER: The author is the Head of Blockchain Research at KysenPool. This disclaimer informs readers that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual.

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Jack Chan
KysenPool

Engineering away at Web Scalability and Blockchains