How much can you earn by staking your Avalanche (AVAX)?
What is Avalanche?
Avalanche is a blockchain platform with a unique Proof-of-Stake consensus mechanism and very fast transaction speeds. It is a platform of platforms, enabling anyone to create tailor-made, application-specific blockchains. Avalanche is similar to platforms like Polkadot and Cosmos but has higher throughput and faster transaction finality. The Avalanche platform supports smart contracts to run decentralized apps on its network which are programmed in Solidity, the language also used by Ethereum smart contracts.
AVAX is the native token of the Avalanche platform and is used to distribute system rewards, control governance, and power transactions on the network through the use of fees.
The initial concept for the Avalanche protocol was proposed by a pseudonymous group of software developers known as Team Rocket in 2018. Following their proposal of the concept, Emin Gün Sirer, a profressor of Computer Science at Cornell University, founded AVA Labs to create and develop the Avalanche blockchain. The Avalanche project raised $42 million through an ICO in July of 2020. Later in July of 2021, the Avalanche Foundation held a token sale raising $230 million.
Avalanche’s main feature that distinguishes it from other projects is its unique consensus mechanism on top of its Proof of Stake foundation that it has coined the Snowball Algorithm. By randomly and repeatedly sampling validators when checking for agreement on a transaction, the Snowball Algorithm is scalable, fast, robust, and decentralized. You can read more about it in Avalanche’s docs.
What is AVAX staking?
Avalanche is built with a Proof-of-Stake consensus mechanism, which means that users holding AVAX tokens can earn staking rewards in exchange for using their holdings to secure the blockchain. Staking is the process of locking up your AVAX tokens to provide economic security to the Avalanche network. Through the process of staking, the Avalanche network ties its security to the honesty of the majority who are incentivized as token holders to maintain the integrity and value of the network.
How do I stake my AVAX?
AVAX token holders can participate in staking as either a validator or a delegator using the Avalanche Wallet. The Avalanche Wallet is a web-app with no middleware or any kind of server communication.
If you don’t already have AVAX tokens to stake, then you can buy them on an exchange such as Coinbase and then send them to your Avalanche Wallet address.
Let’s compare the two ways to earn staking rewards on your AVAX:
- As a validator, you must operate and maintain a node that is connected to the Avalanche network to help process transactions and achieve consensus. Running a node as a validator requires time and technical skills, however it does provide a slightly higher yield than being a delegator. You will only receive a staking reward if your node is sufficiently online. A minimum of 2,000 AVAX tokens is required to be a validator.
- As a delegator, you choose to delegate your AVAX to an existing validator. This is the best approach for most people. Being a delegator is as simple as choosing your validator through the Avalanche Wallet, however delegating provides a slightly lower yield than being a validator. Be careful about choosing your validator as you will only receive staking rewards if your validator is sufficiently online and responsive. A minimum of 25 AVAX tokens is required to be a delegator.
You can read more about AVAX staking in the docs here.
