Poloniex is proud to be the first exchange to offer daily staking rewards to Cosmos ATOM holders (non-US customers only) without a lock-up period. Customers who hold ATOM on Poloniex will automatically earn staking rewards each day! No lock-up period means no 21-day unbonding process for unstaking ATOM. You’re free to trade and withdraw your ATOM at anytime.
This is the initial rollout of our staking offering and it will continue to evolve with the Cosmos network. Staking is part of our broader commitment to support the Cosmos project and to enable our customers to benefit from the unique properties of the Cosmos network.
Cosmos staking on Poloniex
For this initial product offering, Poloniex and Circle have partnered with Infinity Stones, which is one of the industry’s leading blockchain infrastructure providers. Effective immediately, we will begin staking a portion of non-US customer ATOM with an Infinity Stones validator and pass rewards to customers on a daily basis.
Poloniex charges a 25% service fee for providing staking to customers. This fee covers the operational costs and risks associated with managing staking services. After the fee is collected, customers will see their staking reward in the form of a daily deposit.
Non-US customers will begin earning staking rewards within one day of depositing ATOM to Poloniex. To calculate reward distribution, a daily snapshot is taken of non-US ATOM balances, including the balances of ATOM margin borrowers. Staking rewards are then distributed daily proportionate to each user’s balance.
The benefits & trade-offs of exchange staking
To earn staking rewards on Cosmos, ATOM must be delegated to a validator. To transfer ATOM once it’s been delegated, it must first undergo a 21-day “unbonding” period. This means that if you wished to trade your ATOM, you would have to first unbond them and wait three weeks before trading. ATOM do not earn staking rewards during the 21-day unbonding period.
With Poloniex’s staking offering, non-US customers will earn ATOM rewards while maintaining the flexibility to trade and withdraw at all times. This is the first offering of its kind. Along with this flexibility, customers will also be able to continuously earn staking rewards up to the moment they decide to trade their ATOM for another asset. This approach removes a barrier that until now, has prevented traders from benefiting from staking.
There are also trade-offs with this approach to exchange staking. In order for Poloniex to enable 24/7 ATOM trading and withdrawals, we do not stake 100% of non-US customer ATOMs. Since we do not stake 100% of ATOMs, customers will not receive the same reward as ATOM holders who delegate directly to a validator.
This is an evolving service. To begin, we will stake roughly 25% of non-US customer ATOMs and over time we may optimize the total amount staked to maximize customer rewards. Staking yields may vary, depending on the portion of ATOMs staked. We anticipate annual yields of up to 3% during this initial phase and up to 10% as we begin to stake a greater portion of ATOMs.
There are risks for any ATOM holder delegating ATOMs to a validator. In the Cosmos network, disincentives known as “slashing” exist to ensure that validators perform in a manner that keeps the network functioning.
If a validator is not actively participating in the network or attempts to double-sign a block, the ATOMs delegated to that validator will get slashed. Slashing results in a percentage of the ATOMs delegated to that validator getting burned, resulting in a loss.
Given the risks involved, it’s important that ATOMs are delegated to a high-quality validator. This is why we have partnered with blockchain infrastructure provider Infinity Stones. Infinity Stones has an excellent track record of uptime and has never had a double-signing slashing event to date. In the event of downtime slashing, customers will be fully protected against losses. In the unlikely event that a double-sign slash occurs, Poloniex intends to compensate customers for ATOMs lost due to slashing. However, as with any crypto asset, and especially given the risks inherent in staking, customers should not obtain ATOM with funds that they cannot afford to lose.
For more information about staking fees, risks, and criteria for eligibility, please view our Help Center article about staking.
The future of staking on Poloniex
At Circle and Poloniex, we are incredibly excited by the new opportunities that next generation blockchains provide for more direct participation in crypto networks. As proof-of-stake networks like Cosmos grow and evolve, we are dedicated to enabling our customers to participate in the opportunities they create.
Moving forward, we will explore setting up a standalone Poloniex validator on the Cosmos network to enable ATOM holders to stake directly with us. This is our first proof-of-stake offering and opens the door for similar services with other proof-of-stake blockchains.