Are your LUNA tokens idling in an exchange or your Terra Station wallet? You might want to put them to better use with staking.
But what is staking? How do you get started? What rewards can you gain from it?
We will answer all of these questions and more in this article.
Before first, let us take a step back to explore what staking actually is.
Introduction to staking
In Proof of Stake (PoS) blockchains like Terra, transactions on the blockchain are validated by people invested in the blockchain, by putting up tokens as stake.
Instead of having all validators compete to solve cryptographic problems (like in Proof of Work), the PoS network chooses validators based on the size of their stake and the length of time validators have held the stake.
This fairly rewards the most invested participants in the network.
Why should I stake?
For us users, what role can we play in this?
We can do our part by delegating our LUNA tokens to validators. This helps the validators to participate in consensus, and allows us to play a role in securing the Terra blockchain and ensuring its accuracy.
But of course, another key reason why many users choose to stake is the potential rewards. When we stake our LUNA tokens to validators, we receive a portion of transaction fees as staking rewards.
Currently, we will receive about 8% return on staking per year. In addition, we will also receive regular airdrops from different protocols on Terra.
Intrigued? Let’s move on to explore the different ways we can stake our Luna tokens on the Terra blockchain.
Staking on Terra Station
The easiest way to stake your Luna tokens is through the Terra Station wallet.
You will first need to create a Terra Station wallet, and transfer your Luna tokens from any of the exchanges you have purchased them from.
For more information on how to transfer your native Luna tokens to Terra Station, you can refer to this article.
Once you have your native tokens ready in the wallet, simply go to the Staking tab and choose between the different validators available.
I typically prefer validators with lower validator commission and highest uptimes, to ensure lowest risk and highest rewards from staking.
I also prefer to choose names that I recognize as active contributors in the Terra ecosystem.
Once you’ve chosen the validator(s), simply delegate, and you’re done!
Do note that if you choose to stop staking, there is a 21 day unstaking period to receive your Luna tokens. During this period, the unbonding Luna can’t be traded, and you will no longer receive any staking rewards.
Staking on Stader Labs
Another novel way to do staking on Terra is through Stader Labs.
Stader Labs is a staking platform that helps users conveniently discover and access best validators in the blockchain, while earning the best yields based on our risk preferences.
It recently launched in November 2021, with two main products: Plain Staking and Liquid Staking.
Plain staking is very similar to the usual staking we discussed above. You stake at selected validators, earn rewards, and your stake has a 21 day unstaking period.
But on top of these benefits, Stader Labs offers a few useful features.
First, validator pools. A problem that many people new to staking will have is choosing the validators to stake with.
Stader’s three validator pools (Blue Chip, Community and Airdrops Plus) are a curated pool of high performing validators, selected to ensure the best returns and minimise slashing.
Second, auto compounding rewards. Stader Labs helps to auto compound the LUNA and other rewards you earn via staking.
When you stake at Terra Station, you will also earn stablecoins in other currencies, such as KRT and JPT. Stader also helps to claim and swap these stablecoins into LUNA, and automatically restakes them.
Third, one click airdrops. You can also claim airdrops from various Terra protocols all in one place, with just one click.
For these benefits, Stader charges 3% of staking rewards as plain staking fees.
Usually when you stake your tokens, you will be unable to access them within a short time due to the unstaking period.
In contrast, with liquid staking, you can enjoy the rewards of staking, while being able to instantly unlock your staked tokens whenever you need them.
This comes in the form of LunaX.
LunaX is a liquid staking token by Stader. It enables instant unlocking of staked LUNA, and opens up possibilities across DeFi protocols.
With LunaX, you can still enjoy the benefits of staking: staking rewards and airdrops. You will also be able to have instant liquidity by unlocking it immediately.
Another exciting benefit for LunaX is the opportunities on DeFi. For example, you can contribute LunaX in the Stader LunaX-Luna liquidity pool to earn extra rewards (on top of staking rewards)!
In future, you can use it for other yield enhancing opportunities, such as other liquidity pools, using LunaX as collateral to borrow, and many more.
To mint LunaX, simply go to the Liquid Staking tab of Stader → Pools → Stake Luna to mint LunaX.
If you are new to staking, I would recommend starting with staking on Terra Station or Stader’s plain staking features.
Once you have a better grasp of DeFi and want to explore opportunities of a liquid staking token, you can then try liquid staking with LunaX at Stader.
Either way, staking puts your Luna tokens to work, and helps secure the Terra blockchain. Win-win!
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: CryptoPumpNews / Chain Debrief