Tutorial — LUM Staking explained
Stake your LUM today: participate in securing the Lum Network and get rewarded for it
Lum Network uses a Delegated Proof of Stake algorithm to ensure the stability and security of the network.
Each LUM holder can participate in this process and get rewarded for it 🤩
What is staking?
Staking is the process of locking up a digital asset (LUM in the case of the Lum Network) to provide economic security for a public blockchain.
There are three main advantages to staking:
1/ Secure the chain
With your LUM, you have the power to contribute to the security of the decentralized network by delegating (aka staking) them to a validator.
2/ Earn rewards
As soon as you delegate some LUM to one or more validators you begin to earn staking rewards.
3/ Vote for the future
Staking LUM grants you with the right to vote on governance proposals and make decisions on the future of Lum Network.
When the staking transaction is complete, rewards will start to be generated immediately.
N.B: You can stake your LUM under vesting schedule, we highly recommend that.
Where do rewards come from?
Staking rewards are generated and distributed to LUM stakers in two ways:
Transaction fees collected on the Lum network are distributed to LUM stakers.
Newly created LUM
The total supply of LUM is inflated to reward stakers. LUM holders that do not stake do not receive rewards, meaning their LUM get diluted over time.
Staking LUM is not risk-free. If a validator ends up having too much node downtimes, 0.1% of LUM delegated to them may be forfeited.
To mitigate these risks, it is recommended that LUM holders delegate to multiple validators.
N.B: If a validator miss-manage their validator nodes they might end-up “double signing” and have 5% of the delegated LUM forfeited. Fortunately, this is an extremely rare event.
It is not recommended to choose a validator based on their voting power ranking or their low commission fees. It is better to distribute the voting power as much as possible in order to keep the most decentralised network.
Therefore, we recommend to select validators that you see active when it comes to participate to community discussions, voting on governance proposals and that do not have recurrent downtimes.
Keep in mind that validator(s) selection is important since they will eventually be driving the network stability, security and evolutions.
Ready to start staking?
Go to Lum Wallet and access your wallet. Then, hit the Staking tab.
At the beginning of the tutorial, we have no delegation yet. We will see later on how to delegate.
Scroll down a bit, you will see the following table.
To delegate, hit the delegate button next to a validator. The following popup will open.
Enter the desired amount and click on “Continue”, then click on “Delegate” and approve the transaction with your Ledger or Keplr wallet.
On the top of the screen, you should now see your staked LUM and the beginning of rewards’ buildup.
You can claim all your rewards by clicking on “Claim” button.
By clicking on “Actions” menu, you can perform four actions :
This withdraws all the pending rewards for a given delegation. Withdrawn LUM are not locked up and can be transferred or delegated at any time.
This unbonds the given amount of LUM from the given validator. This requires an existing delegation for that validator and implies a lock up period of 21 days on the unbonded LUM.
This stakes a given amount of LUM to a given validator.
This transfers all or a part of a staked amount from one validator to another validator. It requires an existing delegation for the source validator.
The following practical points are important to know to enhance your staking experience:
- Every new staking action leads to an automatic claim action. That is, if you delegate new LUM, undelegate LUM or redelegate LUM to/from one of the validators to whom you have an ongoing stake, yours pending rewards for this particular validator are automatically claimed.
- If you need to change the validator by using the same amount, it is better to use the redelegate action rather than “undelegate + delegate” actions. Redelegate action prevents the loss of the staking rewards during the lockup period that the “undelegate + delegate” imply.
- All of the staking actions are subject to fees. Then, it is mandatory to keep some LUM available to do it. These LUM will serve to pay your new withdrawal and delegation actions.