Understanding Staking

Staking is how Namada secures its network while allowing token holders to earn rewards. This guide explains how it works.

What is Staking?

Staking is the process of:

1. Locking up NAM tokens with a validator
2. Securing the network through proof-of-stake
3. Earning rewards for your participation

Your NAM → Delegate to Validator → Help secure network → Earn rewards

How Proof of Stake Works

Validators

Validators are node operators who:

• Run Namada software 24/7
• Validate and propose new blocks
• Sign transactions
• Maintain network security

Delegators (You!)

Delegators are token holders who:

• Choose validators to support
• Stake (delegate) their NAM
• Share in validator rewards
• Don't need to run any software

Staking Rewards

Where Do Rewards Come From?

Source	Description
Inflation	New NAM minted per epoch
Transaction fees	A portion goes to validators
Shielded rewards	Separate from staking

Reward Rate

The staking APY varies based on:

• Total NAM staked network-wide
• Your validator's performance
• Commission rate charged by validator

Typical range: 5-15% APY (varies over time)

Reward Distribution

Rewards are distributed each epoch (~12 hours):

Total Epoch Rewards
        │
        ├── Validator Commission (e.g., 5%)
        │
        └── Delegator Rewards (e.g., 95%)
                │
                └── Split proportionally by stake

Staking vs Shielded Rewards

Namada has TWO reward systems:

Type	Requirement	Rewards
Staking	Delegate to validator	~5-15% APY
Shielded	Hold in shielded pool	Varies

You can earn both! Shielded staking is coming soon.

Key Concepts

Delegation

The act of staking your tokens with a validator.

# Delegate 1000 NAM to a validator
namadac bond --source my-wallet --validator tnam1val... --amount 1000

Unbonding Period

When you unstake, there's a 21-day waiting period:

• Day 0: Request unbond
• Days 1-21: Tokens locked (no rewards)
• Day 21+: Tokens available

Plan Ahead

If you need liquidity, remember the 21-day unbonding period.

Slashing

Validators can be "slashed" (penalized) for misbehavior:

Offense	Penalty
Downtime	Small penalty
Double signing	Large penalty (5-10%+)

When a validator is slashed, delegators lose funds too. Choose validators carefully!

Commission

Validators charge a commission on rewards:

Your staking rewards = (Validator rewards × Your share) × (1 - Commission)

Example:

• Validator earns 100 NAM
• Your share: 10%
• Commission: 5%
• Your reward: 100 × 10% × 95% = 9.5 NAM

Choosing a Validator

Key factors to consider:

Factor	Why It Matters
Uptime	More uptime = more rewards
Commission	Lower = more rewards for you
Self-stake	Skin in the game
Reputation	Track record matters
Decentralization	Don't over-concentrate stake

See Choose a Validator for detailed guidance.

Staking Lifecycle

1. DELEGATE
   Your NAM → Validator
   Status: Bonded, earning rewards

2. EARN
   Each epoch, rewards accumulate
   Claim anytime

3. UNBOND (optional)
   Request unlock → 21 day wait
   No rewards during unbonding

4. WITHDRAW
   After 21 days, NAM available
   Can redelegate or use

Compound or Withdraw?

Compounding

Claim rewards and restake them:

Initial: 1000 NAM
After 1 year (10% APY, compounded): ~1,105 NAM

Withdrawing

Claim rewards and use them:

Initial: 1000 NAM
After 1 year (10% APY, withdrawn): 1000 NAM + 100 NAM rewards

Compounding grows your stake over time. Withdrawing provides regular income.

Risks of Staking

1. Slashing Risk

If your validator misbehaves, you lose a portion of stake.

Mitigation: Choose reputable validators, diversify.

2. Opportunity Cost

Staked NAM is locked. You can't use it for:

• Trading
• DeFi
• Quick liquidity needs

Mitigation: Only stake what you can lock for 21+ days.

3. Validator Failure

If validator goes offline:

• Rewards decrease
• Possible slashing

Mitigation: Monitor your validator, redelegate if needed.

Staking Economics

For the Network

Staking provides:

• Security (economic cost to attack)
• Decentralization (many validators)
• Governance participation

For You

Staking provides:

• Passive income
• Governance rights
• Support for the network

FAQ

How much NAM should I stake?

Stake what you can afford to lock for 21+ days. Keep some liquid for:

• Transaction fees
• Emergency needs
• Shielded pool participation

Can I stake shielded NAM?

Coming soon! Initially, staking requires transparent NAM.

How often should I claim rewards?

Depends on:

• Gas costs for claiming
• Compounding preference
• Tax situation

Many claim weekly or monthly.

Can I stake with multiple validators?

Yes! Diversifying reduces risk:

namadac bond --source my-wallet --validator val1 --amount 500
namadac bond --source my-wallet --validator val2 --amount 500

What happens if I don't claim rewards?

Rewards accumulate and stay safe. No rush to claim - they won't expire.

Next Steps

Ready to stake?

• How to Stake - Step-by-step staking guide
• Choose a Validator - Selection criteria
• Claim Rewards - Get your earnings