Cosmos Staking: How to Stake ATOM on Cosmos Hub Network

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September 20, 2022 - 9 Min Read

Staking Adj Reward %Avg Reward %Avg Fee %InflationMarket CapStaked Ratio

Cosmos

5.11%18.01%7.32%12.90%$3,793,063,76066.40%

Cosmos is one of the most exciting blockchains on the scene today, and Cosmos staking is one of the primary reasons why investors are so interested in buying and holding ATOM tokens. As one of the most popular Proof-of-Stake blockchains in existence, Cosmos allows investors the ability to invest in a popular cryptocurrency while also earning staking yields of up to 20% APY. Read on to learn everything you need to know about staking Cosmos (ATOM).

Key takeaways:

  • Ready to stake Cosmos now? Earn 12% APY staking yields by signing up and staking your ATOM at Uphold.com.
  • Cosmos is a Proof-of-Stake blockchain, meaning ATOM holders can "stake" their tokens to help secure the Cosmos network and also earn additional ATOM rewards of up to 20% APY.
  • Cosmos staking can be performed via a centralized crypto exchange, by delegating your ATOM to a validator, by liquid-staking your ATOM, or by running your own validator.
  • Depending on which method you choose, you may face a 21-day "unbonding" period when un-staking your ATOM.

What is Cosmos Staking?

Cosmos staking is the process of locking up your ATOM tokens in order to support the Cosmos network and earn rewards. Cosmos is a Proof-of-Stake network, meaning new blocks in the Cosmos blockchain are voted on and approved by "validators" who operate Cosmos "nodes". In return for operating these nodes, validators receive awards in the form of newly minted ATOM tokens, provided they are acting in good faith and voting in favor of the correct, legitimate transactions for the next block in the chain. Proof-of-Stake is an environmentally-friendly alternative to Proof-of-Work networks like Bitcoin, where miners instead utilize specialized hardware to solve difficult computational problems to secure the network and validate the next block in the chain.

When you stake ATOM, you are delegating your tokens to be voted by Cosmos validators that you believe will help maintain and grow the Cosmos network. Staking Cosmos also allows you to vote on governance proposals for the Cosmos Hub network, meaning the more ATOM you stake, the more say you have in how the Cosmos network is run. In addition, by staking ATOM you will earn rewards in the form of newly created ATOM tokens. The amount of rewards that you earn will depend on a number of factors, including how much ATOM you stake and the performance of the validators you have chosen to support.

If you are interested in staking ATOM, there are a few things you need to know before getting started:

How much can I earn staking ATOM?

Investors who stake their ATOM can earn yields of up to 20% APY depending on current network conditions, validator commissions, and validator performance. When you stake your ATOM, you will receive your proportional share of newly minted ATOM tokens, along with ATOM transaction fees which are paid to validators when Cosmos users transact on the Cosmos blockchain.

If you are delegating your ATOM to a validator or staking via a centralized exchange, you will likely pay a portion of your rewards to the validator or exchange for performing the staking service on your behalf. These fees typically range from 5%-20% of your rewards depending on the validator/exchange, and later in this article we will provide live data on the top Cosmos validators including their current commission rates.

How to Stake ATOM?

There are four primary methods for staking ATOM, each with their own benefits and disadvantages:

Staking on an Exchange

The simplest way to stake ATOM, and the most beginner-friendly, is to stake your ATOM via a cryptocurrency exchange. Crypto exchanges like Uphold.com allow you to easily stake your ATOM without needing any technical knowledge or even a Cosmos wallet. The exchange takes care of everything for you behind the scenes, and even provides you with simplified tax reporting, which can be cumbersome if you choose another route for staking your Cosmos.

While staking via an exchange is simple and convenient, there are some downsides. The main con of this method is you are surrendering custody of your ATOM tokens to the exchange, and will have limited to no recourse if the exchange suffers a hack or files bankruptcy. By choosing a reputable exchange you can mitigate this risk, but it will always exist to some level anytime you are not in control of your own private keys.

Delegating ATOM to a validator

The next method for staking your ATOM is to delegate your ATOM to a Cosmos validator. This allows you to stake your ATOM directly on the Cosmos blockchain, but without needing the technical know-how to set up a validator of your own. In order to delegate your ATOM, you will first need to create a Cosmos wallet and deposit your ATOM into the wallet.

Once your ATOM are in your Cosmos wallet, you can then select which validator to delegate your tokens to. It's important to pick the right validator for you, which requires researching each validator's reputation in the industry, commission structure, and performance.

How to Pick a Cosmos Validator?

When picking a Cosmos validator, the most important aspects to research are the validator's fee structure as well as their network performance. Below we have listed some of our preferred Cosmos validators, including information on their fee structures. The lower the fee structure, the more of your Cosmos staking rewards you will retain.

Liquid staking Cosmos

A third option for staking Cosmos is to "liquid stake" your ATOM tokens. This is a relatively new concept that entails exchanging your ATOM tokens for a redemption token which can be used to retrieve your original ATOM, plus accrued staking rewards, at any time. The original ATOM you send in will be staked on your behalf and accrue staking rewards, while you are free to use the redemption token in other DeFi protocols to generate additional yield.

Another benefit of liquid staking is you are not subject to any fixed durations while staking. Typically, when you unstake your ATOM you must wait 21 days for the ATOM to become fully unstaked. This can be cumbersome if you need the tokens quickly to sell them or pursue another yield opportunity elsewhere. With a liquid-staked ATOM token, you simply swap back for your original ATOM tokens at any time you wish.

Running a Cosmos Validator

The final option for staking ATOM is to run a Cosmos validator yourself. Validators are responsible for keeping the Cosmos network running smoothly and earn rewards in exchange for their services. Setting up your own validator requires more technical knowledge than delegating or staking via an exchange, but can be a fun and rewarding experience. The Cosmos Hub provides straightforward guidance for setting up your own Cosmos validator.

If you choose to run your own validator, you will need to purchase hardware powerful enough to support the Cosmos software and ensure that your validator is online and running 24/7. You will also need to choose a commission rate, which is the percentage of rewards you will keep when other users delegate their ATOM tokens to your validator. Validators with lower commission rates tend to be more popular as they provide delegators with more value.

To help offset the costs of running a validator, you can delegate your own ATOM tokens to yourself. This is a common practice among Cosmos validators and allows you to earn your ATOM rewards without paying commissions to another validator.

When running your own validator, it's important to stay up-to-date on any software updates or changes to the Cosmos network. As a validator, you are responsible for ensuring that your software is up-to-date and compliant with any changes to the network. Failing to do so could result in your validator being slashed, which would mean losing a portion of your staked ATOM tokens.

In summary, picking the right method for staking your ATOM tokens depends on your goals and comfort level with the available options. If you're looking for the simplest way to stake ATOM and earn rewards, staking via a centralized exchange is the way to go. For those looking for more control over their staking experience, running your own validator or liquid staking are both excellent choices. Whichever method you choose, be sure to do your research to pick the right option for you.

FAQs

  • How much can I earn staking ATOM?

  • Will I owe taxes on ATOM staking?

  • Where can I stake my ATOM?