AVAX Staking: Is It Possible & How to Get Started

According to time-to-finality metrics, Avalanche is the blockchain industry’s fastest smart contract platform. Blockdeamon makes it simple to stake AVAX, the native token of the Avalanche network.

You can learn how to stake AVAX tokens in this manual. Keep in mind that staking is a non-custodial process, meaning that you retain full control over your private keys.

Read More: Custodial vs Non-Custodial Wallets – Difference & Which One to Choose

What is AVAX Staking and How Does It Work?

To participate in a blockchain’s Proof-of-Stake (PoS) consensus mechanism, cryptocurrency tokens must be staked, or deposited and locked up. Tokens that have been steered are used to verify transactions and protect the network they are connected to. This mechanism is used by several cryptocurrency blockchains, including Avalanche. Users who choose to lock up their coins can receive rewards for staking.

By locking a specific amount of AVAX, the native cryptocurrency of the blockchain, anyone who wants to support the Avalanche Proof-of-Stake mechanism can do so. During the locking period, the staked cryptocurrencies cannot be moved or used. Validation nodes are obligated to contribute to the growth and stability of the network by depositing staked AVAX tokens.

Becoming a validator or a delegator are the two options for users who want to stake AVAX tokens.

The active network nodes known as validators are responsible for securing the blockchain and validating transactions. The more tokens a validator has staked, the more frequently they will be asked to participate in the network, which results in higher rewards.

Delegators are those who want to stake but want to do so quietly. By transferring control of their staked tokens, delegators have faith in an active validator node. Following that, supporters are honored for their assistance.

AVAX Staking Steps With the Avalanche Wallet

Step 1 – Access the AVAX Wallet

• Go to wallet.avax.network and click Access Wallet. Choose how you want to get to your wallet.
• Enter the required information, and then click Access Wallet. You can now stake AVAX after the Avalanche dashboard opens.

Step 2 – Select the Blockdaemon Node ID

• Click Earn in the left sidebar of the dashboard.
• Make sure your money is present on the Platform Chain, also known as the P-Chain. You are prepared to delegate if your money is already on the P-Chain. The Avalanche documentation has more information on the various chains.
• You need to transfer your money to the P-Chain if it isn’t already there. Click Transfer in the Cross Chain Transfer area. Enter the Source Chain and the Destination Chain (P-Chain) as well as the transferable funds. Click Confirm, and then return to the Earn page.
• Click Add Delegator in the Delegator area.
• Copy and paste the Blockdaemon node ID into the Select node to delegate field, and then select the node.

A validator on the Avalanche network is only permitted to accept a certain number of delegations at any given time. Visit Avascan.info and paste the Blockdaemon node ID into the search bar to see if Blockdaemon has the capacity to accept your stake. Go to the Delegations area where you can see if there’s free space.

Step 3 – Specify the AVAX Stake Amount

• On the Earn page, enter the amount of AVAX you want to stake in Stake Amount.
• Enter the date you want the staking of the tokens to end in Staking End Date. Delegation must last at least two weeks. The staked tokens are delivered back to your address following the conclusion of the staking period. Then, using Blockdaemon, you can stake them once more.
• Click Confirm.
• Carefully review that the date, staked amount, wallet or reward address are correct, and then click Submit.

Step 4 – Set Delegation Amount and Confirm

• In the Transactions area in the right sidebar there’s a message saying Delegator added, which means that the delegation transaction was successful.

To check the status of your staking rewards, click Portfolio in the left sidebar. In the Balance area you can see the amount that is staking and in the Transactions area, you can see the rewards you’ve received.

How to Stake AVAX through An Exchange

An owner of an AVAX token can stake AVAX through a cryptocurrency exchange like Binance rather than delegating or starting a validator node. In this instance, Binance serves as the validator and handles all technical facets of staking in Avalanche. Rewards for staking are calculated and distributed each day.

First, use the Binance exchange. Visit the Binance exchange.

Step 2: Register for an account or log in. If you don’t already have a Binance account, click “Register” and follow the account guidelines. Log into your Binance account if you already have one.

Step 3: Purchase or deposit AVAX tokens. Purchase some AVAX tokens via the exchange, either through a fiat to cryptocurrency purchase or a crypto to crypto exchange, if you don’t already have any. Make a transfer to the exchange of any AVAX tokens you already possess.

Step 4. Binance Earn. Once funds are held in your Binance wallet, click the “Finance” tab at the top of the screen, followed by “Binance Earn”.

Finding AVAX products is step five. In the search bar, type “AVAX” and find the earning products related to AVAX tokens.

Step 6. Staking. Find the staking product and click “Stake”. Enter the number of AVAX tokens you want to stake and the length of time you want to lock up your funds.

Step 7. Confirm. Confirm the transaction and accept the terms of the agreement. Once verified, you can start earning staking rewards on the Binance exchange.

How Much Can I Earn by Staking Avalanche (AVAX)?

The average AVAX staking yield is reportedly around 10% APY as of the time of writing (September 2021) according to the Avalanche website. 11% APY is the maximum yield. A user must be accurate more than 60% of the time and wager every day throughout the year in order to earn the maximum payout.

Ultimately, how much a user can earn staking AVAX is dependent on a few factors:

• The amount of AVAX tokens being staked
• The locking period of AVAX
• The validator selected to validate transactions on behalf of a delegator (delegation fees will vary)
• the total amount of AVAX staked on the network. If there is an excess of AVAX, the incentive to stake will be marginally lowered, and vice versa

Real-world value will be determined by the market at the conclusion of the locking period. The total number of AVAX tokens, plus interest, will be worth more if the price of AVAX rises throughout the locking period. The cumulative total could, however, be worth less than it did at the beginning of the staking period if the price of AVAX falls.

Is Staking AVAX Safe?

Even though the Avalanche wallet runs inside of a web browser, staking AVAX tokens through it is a relatively secure process because the wallet is an offline application. The wallet is a JavaScript application that uses web technology for the front end. As a result, it runs in the browser without making a server connection.

By plugging in or disconnecting the computer from the Internet, a user can confirm they are connecting to the Avalanche network for added security. The process ought to continue to function even after a user enters their secret key or mnemonic phrase for wallet access.

Numerous investors have used the Avalanche wallet to stake AVAX thus far without experiencing any significant security issues.

Due to dealing with a third party, staking AVAX tokens through an exchange like Binance introduces an additional level of uncertainty. Despite the fact that Binance and other cryptocurrency exchanges are very secure, their connection to the Internet puts them inherently at greater risk.

(Read More: Is Staking Crypto Safe & Is It Worth Staking Crypto?)

Pros and Cons of Staking AVAX

Pros

• No system exists to eliminate staked tokens. The protocols used at Avalanche mean that there is no risk of digital assets being destroyed through a slashing-type process, unlike other Proof-of-Stake consensus mechanisms that implement a slashing technique to punish validators for malicious activity.
• low hardware requirements In contrast to other blockchains, the Avalanche network has a low hardware requirement for validators.
• Support the network. Staking AVAX tokens contributes to the active support and security of the Avalanche blockchain.
• Offline access. When choosing to stake through the AVAX wallet, holdings can be completely accessed offline.

Cons

• Malicious validators. Even though malicious validators are not subject to slashing, this would result in the loss of all interest income.
• Illiquidity. Assets that have been locked in for a predetermined amount of time cannot be traded if market conditions change.
• Accountable. A user may be unable to access their AVAX holdings if they misplace their wallet password and seed phrase.

When and How AVAX Rewards Are Paid

At the conclusion of your staking period, you are rewarded for staking Avalanche, and payments are made in AVAX tokens. You would receive two extra AVAX tokens, for instance, if you staked 25 AVAX over the course of a year and received an 8% APR.

The wallet to which the AVAX rewards are paid can also be chosen. You have the option of having it paid to a different wallet or having it sent to the same wallet address.

Your AVAX will continue to be located at your P-Chain address after the staking period is over. This is also where your staking rewards will be sent by default. You have two options after the staking period: either move your tokens to the X-Chain or choose a new validator and staking period.

The Risks of Staking AVAX

Since slashing is not used in Avalanche, the main threat to your tokens is eliminated. However, there might be additional staking risks, such as opportunity cost.

Prices for avalanches have likely decreased as a result of recent Terra Luna events or because of them. AVAX experienced a sharp decline in price during the general decline, going from over $52 to under $26. Although the price of AVAX has been steadily increasing since then, it is important to keep in mind that other factors, such as general market sentiment or unfavorable developments on other blockchains, could also have an impact on the currency’s value.

The inability to unstake or sell during your lock-up period is another potential risk to take into account.

• Lock-up period: You cannot change your mind after deciding on a staking period. You cannot sell your AVAX to fund the trade until this time period has passed, even if a better investment opportunity presents itself. Or, if your AVAX is staked and the price of AVAX drops by 90%, all you can do is observe.
• Earnings risk: When you stake to a validator, you are depending on that validator to pay out. There’s a chance you won’t get paid if the validator is down for a long time. To receive rewards, the validator’s uptime must be higher than 80%.

AVAX and Liquid Staking

Alternative staking strategies have become more prevalent as a result of the risk involved with lockup periods that can last up to a year. Liquid staking is an alternative strategy that enables you to use your AVAX tokens to earn rewards while maintaining the flexibility to unstake your tokens if necessary.

But it’s important to realize that the final stage of this process isn’t always immediate. For instance, after you unstake your tokens on Benqi, there is a 15-day cooldown period that is necessary. However, during this cooldown period, your staked AVAX will continue to earn rewards.

Lower yields are a potential tradeoff of liquid staking. Benqi uses the specialized token (sAVAX) to represent staked AVAX and offers a yield of about 7% APR.

The good news is that there is no minimal staking requirement for Benqi. The 25 AVAX needed for standard staking, at the current price, can be a significant investment for new investors. You can begin liquid staking on Benqi with any amount.

Liquid staking wallets that are compatible with Benqi include:

• Steakwallet
• MetaMask
• Coinbase Wallet
• WalletConnect-compatible wallets

Users can earn or borrow on the DeFi marketplace that Benqi also provides. These choices, though, are not staking in the traditional sense and might involve additional risks.

Yield Farming With AVAX

You might come across yield farming opportunities while looking into staking opportunities. The term “yield farming” describes the practice of using DeFi to maximize profits.

By offering liquidity on AVAX-stablecoin pairs, for instance, you can profit as a liquidity provider, earning 30% to 50%. As an alternative, you could lend your tokens and receive interest. The third choice entails putting up tokens that liquidity providers have earned by supplying liquidity on a decentralized exchange.

Since you are committing your tokens for a set amount of time with standard staking, you will typically be exposed to price risk. Contrarily, yield farming and other DeFi techniques may increase other kinds of risk, including exposure to additional assets (stablecoins that may or may not be stable), smart contract hacks or bugs, and a number of other risks to your portfolio. While deployed to a contract, you also give up custody of your tokens.

Before accepting any offer, it’s crucial to thoroughly research it because each one may come with a particular set of risks.

The popular places to find AVAX yield farming opportunities include:

• Trader Joe
• Yield Yak
• Pangolin
• Beefy Finance

Conclusion: is Avalanche Staking Right for You?

Comparatively speaking to many other crypto tokens, AVAX has a higher staking requirement with a 25 AVAX minimum. AVAX staking is worthwhile taking a closer look at because yields for plain staking can also be significantly higher.

The main disadvantage of plain staking is that you cannot sell your tokens while they are being staked. You might not be able to respond to market changes if you’ve chosen a longer staking period. However, if you’re in it for the long haul and don’t mind the occasional turbulence in the cryptocurrency market, AVAX staking offers a dependable way to grow your holdings — and possibly your long-term profits as well.

Frequently Asked Questions