Preparing to Stake Celo Gold (cGLD)
If you have invested in the cLabs raise and are preparing to stake when Celo launches, you’re likely wondering how locking cGLD and earning rewards will work. Figment will be participating as a validator. Here’s an initial look at Celo staking.
Planning to stake cGLD?
To receive staking rewards, you’ll need to do two things:
- Lock your Celo GOLD tokens, and
- vote for a validator group.
The validator group you vote for must be elected in order for you to begin receiving staking rewards. What is a validator group?
A Celo validator group is an entity that can be elected to secure the network. Within a group, there are up to five member validators that are controlled by the same entity or by different entities. That means as a token-holder, you are not voting for a validator, you are instead voting for the group that contains the validators.
Why validator groups?
It can be hard for stakers to know which validators to back. It can be hard for validators to market themselves and focus on operational security at the same time. cLabs is introducing the validator group so that the validator group can focus on auditing its validators’ operations and marketing, while the member validators can focus on security. This is why stakers must elect validator groups.
Risks & Rewards: Here’s what to expect as a staker
Some validator operators will start groups that will not include any outside validator operators, and some will include validators run by other operators in their groups. We may see non-validators that create groups, focusing on marketing and attracting staker votes and benefiting from their validator members. As a staker, here’s how validator groups will likely affect you.
Rewards: ~6% APR baseline
The baseline reward estimate is about 6% annually. Baseline rewards for stakers automatically increase and decrease depending on how much of the supply is staking to incentivize a targeted participation rate.
You should expect your maximum rate of rewards (ie. the baseline) if:
- the validator group that you vote for is elected and
- all of its members perform flawlessly.
Staking rewards will not be used to pay validators, so you will not pay a validator group a commission. Validators will automatically be compensated by the protocol.
Risks: reduced earnings
Stakers only risk opportunity cost (and no slashing), meaning that you may miss out on rewards that you otherwise would have received had the group you elected operated flawlessly. There are two ways this can happen: a validator is offline too long or commits a fault that puts the network safety at risk.
A validator safety violation cuts your rewards in half for one month.
If a validator in your elected group puts the safety of the Celo network at risk by “double-signing,” you will only earn half of your baseline rewards for one month.
Validator performance reduces your rewards relative to downtime.
Your validator group gets an “uptime” score for their performance, which begins to decline if any of the group’s validators are down for more than one minute (12 blocks). What does that mean?
Your rewards are proportional to average uptime score of your elected validator group. An “uptime” score of anything less than 1.00 will reduce the rewards you earn. The more that the group’s validators are offline, the more that your rewards earnings will be reduced.
Not all validators in a group will be elected
You may be disappointed to know that you can’t vote for your favourite validator–you must vote for a the group that your validator is a member of. Anywhere from none to all group member validators may be elected, so what determines whether or not a specific validator in the group is active?
- It depends upon number of votes for the group (ie. how much cGLD backing the group gets).
- The order for becoming active is set by the group owner.
The group owner may add, remove, or reorder the group’s member validators at any time, and validators that are active have a portion of their earnings sent to the group owner (based on the group owner’s commission rate).
Voting is easy, and you can still keep your keys secure
You don’t have to risk the key that controls your funds, because you may assign another address for voting. That means you can 1) vote for a validator group and 2) vote in governance easily using a dedicated voting key. This key cannot move your funds, and you can revoke it.
This is important because it makes governance voting more accessible and safer for large token-holders. Celo’s governance is entirely dependent upon stakers, since there’s no direct relationship between validators and on-chain governance. Stakers are strongly encouraged to participate in governance, so staying informed will be important.
Staying informed will be important for network participants to make good governance decisions. As we grow our staking platform services, we are expanding our offerings to include governance services. If you’re a large token-holder thinking about staking, consider reaching out to us: firstname.lastname@example.org.
Hopefully you found this useful. Questions? Comments? Feedback is always welcome! I’m on Twitter.