Overview of Staking on ICON Network
Overview of Staking on ICON Network
You already know all about ICONSENSUS and P-Reps from my last article, if not take a look here.
What is staking?
Staking is a mechanism by which a Proof-of-Stake (PoS) cryptocurrency holder locks their cryptocurrency for a period of time to validate transactions. Users can delegate their cryptocurrency to teams that operate validating nodes. These validation nodes then use the cryptocurrency that is delegated to them to vote and validate transactions. In return, the customers who chose to stake with a particular node are rewarded with cryptocurrency at a specific rate.
I will make an analogy with the bank system. In this case, an individual or organization decides to deposit funds into a bank to receive interest. If you do not deposit money in the bank to receive interest rate, your money will likely devalue due to inflation. Most bank interest rates are lower than inflation, but it is still better than earning 0%. Many banks offer higher interest rates if one is willing to lock up their funds for a longer period of time. These are called Certificate of Deposits (CDs) and are timed deposits that result in higher percentage earned. This time deposit is very similar to how staking rewards are calculated — lock up cryptocurrency for a period of time and be rewarded a percentage.
Why you should vote / stake on ICON Network?
- Because you will receive rewards. You can vote / delegate not only to P-Reps but also to DApps and EEPs in parallel. Voters delegating to P-Reps, DApps, and EEPs will see annual levels of reward varying from 2% to 12% for each category, resulting in 6% to 36% annual rewards for staking if participating in all three categories, based on the proportion of the circulating icon that is staked on the network. The less icon staked to the network, the greater the rate of reward, and vice versa. Staking rewards are in I-Score format. You will need to delegate ICX to P-Reps, EEPs, and DApps to obtain I-Score. I-Score is then converted from the Public Treasury to ICX, where 1,000 I-Score = 1 ICX. EEP and DApp delegation processes are still in work and expected to go live in late 2019. ICX holders will still be able to receive the appropriate EEP and DApp rewards, however, even though these items are not fully functional. More details on these aspects will be released as we get closer to staking in August.
- Because you will help secure the ICON Network through delegation of your ICX to P-Reps, while still maintaining full control over your ICX. Everyone has different methods of voting. I plan to choose 5–10 P-Reps and to delegate/vote to them. I think it is important to support multiple P-Reps, since there will be 22 in total that will be producing new ICON blocks. Thus they are very important to the successful operation of the ICON network. Additionally, each P-Rep team will participate in ICON Governance decisions and is expected to also contribute to the ICON community in some way (whether through media, development, outreach, or some other aspect). Thus, the P-Rep position can really help ICON succeed if there are 22 strong P-Reps, and could severely limit the ICON network if the P-Reps are not strong proponents and contributors to ICON. You can find the list with P-Reps here. Each P-Rep team has a unique proposal and different strengths and weaknesses. That is why I think it is important to vote for multiple teams in order to promote a diverse collection of P-Reps who will come together and create a strong and unified ICON network and community! These P-Reps will be responsible for teaming with ICON to run the network and eventually will be the sole nodes operating on the decentralized ICON network. (Note that the initial number of P-Reps that produce blocks will be 22, however, this number could grow in the future to promote an even more decentralized network. Additionally, there will be 100 P-Reps total, however, the top 22 in votes will be the ones producing new blocks and the other 78 will solely validate transactions with their votes. Whether you vote for a P-Rep in the top 22 or not, you will still receive rewards so long as the P-Rep node is up and running, so it is important to ensure that the P-Rep candidate you vote for has a good node setup).
- Ensure you are part of the ICX reward system and your ICX will not be devalued due to the inflation rate. Rewards will come from ICX transaction fees, however, if the fees do not cover the total amount of rewards, then new ICX will be minted to cover the disparity. Thus, by staking ICX, one can ensure their ICX grows at a rate that is at least proportional to the rate of ICX inflation. (Ubik Capital will be publishing another article in the near future to discuss the impact of inflation on ICX).
Q. What’s happen if a node you have chosen is down?
A. Your ICX will be safe. Delegating ICX will be done through signatures using ICONex wallet (through the wallet or you can also use a Ledger hardware wallet). Thus the ICX holder will maintain positive control of the ICX however if the node you have chosen is down then you will not receive rewards during that time as that P-Rep will not be active. That why is it is important to delegate to multiple strong P-Reps, that way you will reduce the risk of missing out on staking rewards.
Q. What is the minimum amount of ICX to stake on ICON Network?
A. No minimum amount — you can stake with as little as 1 ICX.
Q. What is the minimum period of time to lock your ICX to a P-Rep to receive rewards?
A. You must keep your ICX delegated to a P-Rep between 5 to 20 days, depending on the percentage of the network that has been staked. The higher the percentage of the network staked, the fewer the days you need to un-stake.
Q. When the staking will start?
Staking on ICON Network will take place in 2 phases:
- The first phase in August when will consist of a pre-voting period, followed by on-chain voting in September. During this period, a pool of ~3 million ICX will be released by ICON Foundation for pre-voting and rewards will be roughly 15% annually (divided by the time period).
-The second phase will start in September and will consist of on-chain P-Rep registration and voting -this will be the period in which the P-Reps are elected.
As a conclusion, we encourage you to participate in staking on the ICON Network and vote for your favorite P-Rep candidates. Be sure to research and choose your P-Rep / P-Reps wisely, earn rewards and enjoy the ICON Community!