What are the benefits and risks of staking on Polkadot? Print
Modified on: Fri, 11 Sep, 2020 at 1:26 PM
Polkadot uses a nominated proof-of-stake (NPoS) system to select the validators that are responsible for securing the Relay Chain. That’s why staking is also referred to as nominating on the Polkadot network.
DOT holders who don’t want to set up a validator node themselves can stake their tokens and participate as nominators to earn a share of the validators’ rewards.
Why stake on Polkadot?
When you stake your tokens as a nominator you are actively supporting the network, making it more secure: The more the community uses its funds to back validators, the less likely it is that a single whale (owner of a large number of tokens) could use their power to sway the vote on network governance issues.
Be aware, however, that nominating comes with a risk of being penalized (“slashed”) and losing some of your staked DOT tokens if the validator you choose behaves badly or deviates from their protocol. Slashing increases security in the network as nominators are thus economically incentivized to choose validators with a strong performance record.
To discover more about ways to pick trustworthy validators, see How do I know which validator to choose?
Staking can provide a source of income and increase the number of tokens you hold, rather than leaving them sitting idly in your wallet.
Discover more about staking in the Polkadot Wiki nominator guide or watch the following YouTube videos by members of the Web3 Foundation technical education team:
- Why nominate on Polkadot & Kusama
- Nominating Validators on Kusama and Polkadot - What to consider
- Picking Validators to Nominate (Stake) in Polkadot
Did you find it helpful?Send feedback