Terra staking update: 9.75% LUNA rewards

Summary

  • Low-fee transactions had made Terra staking risks greater than rewards
  • Figment is one of 21 validators that drove the proposal to subsidize the network with block rewards
  • LUNA stakers on Terra will receive subsidized block rewards to bootstrap the network (ie. make staking rewards worth the risks)
  • Stakers are currently being rewarded at a rate of 9.75% annually
  • The rate can change based on the total staked LUNA
  • The annual 21.6M LUNA subsidy is divided proportionally over the total 221.6M LUNA staked
  • If needed, 100M LUNA are committed for five years of block reward subsidies
  • Staked LUNA has already increased by 5.6M, from 216M to 221.6M
  • Learn how to compound your LUNA rewards


A Growing Ecosystem 🌱

Terra, the Korea-based stablecoin blockchain, wasted no time rallying end-user blockchain adoption after launching in April 2019. Terra-based payments app, Chai, reportedly became one of Korea’s most widely used blockchain-based apps, both on Google Play and the App Store. Chai also reportedly reached 1M USD in daily transaction volume and 240k users in its first 40 days of operation. With upcoming integrations announced, including Sinsang Market (B2B fashion commerce), and Terra’s integration with Bitberry wallet and lending platform Nexo, stakers are expecting rewards that reflect the LUNA that they have staked to secure this rapidly growing network.

Rewards are important for a number of reasons. They incentivize participation in the secure operation of the Terra network against the risk of the participant’s bond being slashed, and the opportunity cost of a 21-day unbonding period. Professional validators like Figment earn a commission on staking rewards, and then reinvest resources into the security and growth of the Terra network.


Terra Network Rewards

However, the Terra network is non-inflationary, so rewards are based solely upon transaction fees. Low-cost transactions and a young network mean that it may not yet make economic sense to risk staking LUNA — at least not before the transaction volume grows.

Though the Terra team remain strong believers in Terra’s value-centric reward model and growth potential, they have supported our proposal for a period of LUNA-based block rewards to help bootstrap the network for Terra’s security and success. This is a proposal that the Terra community has signed and supported. As a member of the Terra community, we believe that these rewards will help to offset the risks of staking and validator costs.

As of August 8, 2019, 21.6 million LUNA tokens have begun being distributed, and that will continue over the next year. As of August 15, there are 221.6M LUNA staked, so stakers should expect 9.75% annual rewards.

If the number of staked LUNA changes, so will the subsidized rewards: divide 21.6M by the total staked to approximate the annual rate of rewards.


The Future of Terra Rewards

The Ghost, Goliath, Marine and Wraith validators have reportedly agreed to commit up to 100M LUNA over the next five years for future block reward subsidies if block rewards fail to become competitive with the industry standard. Read more here: https://github.com/terra-project/santa/blob/master/MOTIVATION.md


Compounding Your LUNA Rewards

Since LUNA stakers will receive additional LUNA each block, token-holders may wish to stake these rewards as well, in order to compound their LUNA.

Here’s how to stake your rewards.


Terra Station

Have your seed phrase before installing the latest version.

Terra Station doesn’t yet support Ledger hardware wallet devices, so this may not be your preferred method.

The latest version of Terra Station can be downloaded from https://terra.money.

After selecting your validator, you’ll need to ‘Withdraw Rewards.’ Then select ‘Delegate’ and decide how many LUNA you want to stake. The Terra team created this set of instructions for staking with Terra Station.


Ledger Hardware Wallet

If you’re using a Ledger device:
1. Connect it and head to 01Node’s page to claim your LUNA rewards
2. Then delegate your LUNA to stake them and compound your rewards.


Within one week, we have already seen staked LUNA increase by 5.6M, from 216M to 221.6M, and we anticipate the rate of participation to continue to increase. In order to maximize your stake in the Terra network, we recommend staking your holdings and rewards as soon as possible.

If you have difficulty, contact@figment.network for support.

Hopefully you found this useful. Feedback is always welcome! I’m on Twitter.

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