Avalanche is a layer 1 protocol launched by Ava Labs in 2020. This blockchain platform is smart-contract capable and offers high-throughput, fast finality, and unprecedented decentralization. By lowering transaction cost and increasing transaction speed and consequently scalability, it is a very attractive protocol to both users and developers of blockchain technology.
Avalanche is a blockchain platform that aims to address the blockchain trilemma of scalability, security and decentralization thanks to its unique Proof of Stake (PoS) mechanism.
Proof-of-Stake (PoS) relies on validators to propose new blocks or attest other validator’s blocks. This is done through locking up native tokens to earn a reward for securing the chain. PoS has taken over as the most popular consensus algorithm from mining in newer blockchain systems.
By locking a protocol’s native tokens (ie AVAX) to give “validators” the right to secure a chain. Validators propose new blocks or attest other validators’ blocks, gaining rewards for doing so.
Staking is a great way to earn rewards while benefiting the protocol you choose to stake on. It derives its value from the natural inflation rate of the blockchain’s native currency and is therefore a built-in form of reward that is easily calculated in advance.
By staking AVAX you are earning rewards while helping to secure the network and keep it decentralized. Conversely, by not staking your AVAX you are suffering from network inflation without benefiting the system nor making returns on your holdings.
Along with securing the network, there is a 7.93% GRR* reward on each block produced through staking AVAX with Kiln. (Source: https://protocolstaking.info/)
Kiln has a strong record of staking PoS cryptocurrencies such as AVAX and Ethereum. Kiln is considered a trusted name in blockchain protocol validation and is the leading enterprise-grade staking platform. The Kiln platform enables institutional customers to stake Avalanche, and to whitelabel Avalanche staking functionality into their offering.
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Proof-of-Stake (PoS) is a type of consensus mechanism used to validate cryptocurrency transactions. Through PoS, validators can contribute to the block production of a chain while keeping environmental concerns to a minimum, which is becoming an increasingly large issue in Proof-of-Work.
By staking capital rather than energy, validators risk losing a portion of their value and future potential for staking by misbehaving while creating blocks. This incentivizes collaboration and minimizes malicious activity in the consensus process.
Both are consensus algorithms, helping to democratize participation in securing a blockchain. dPoS is an iteration of PoS combining real-time voting with a system based off of reputation to reach consensus across the blockchain. Voting power is still determined by how many tokens they have however.
Staking AVAX gives users rewards with every block produced (every 3 seconds) only at the end of the staking period. Currently GRR is around 7.93%.
Rewards for staking AVAX are not automatically compounded with your current stake. You will need to manually re-delegate your stash + rewards when they are received at the end of the staking period.
There are no slashing penalties associated with staking AVAX. You can stake your coins without concern for issues related to slashing.
On Avalanche, validators must stake a minimum of 2,000 AVAX minimum to begin validating blocks. For delegators this number is far fewer and an individual can delegate as little as 25 AVAX to begin earning rewards.
While you may self-custody your staked AVAX (ideally using a Ledger hardware wallet), you may choose a third-party custodian to control the withdrawal of your staked AVAX (i.e. Fireblocks).
There is no unbonding possible. To be completed
There is no penalty. If your validator has 100% uptime or 80% uptime, you’ll receive the same reward.
The average block time on Avalanche is ~ 3 sec.
To become an Avalanche validator, you will need to have a wallet that supports your AVAX. There is a minimum of 2,000 AVAX minimum to validate blocks on the Avalanche network. To receive rewards, validators must block their stake for a minimum of two weeks and can only stake consistently for up to one year before having to re-stake.
In the context of Proof-of-Stake blockchains, the gross reward rate (GRR) refers to the total or gross amount of rewards earned from staking before deducting any fees or expenses. This is a reward rate that fluctuates with the operations of the protocol and the performance of validators, it is not set by Kiln. The net reward rate (NRR), on the other hand, takes into account the deductions or expenses, providing a measure of the actual rewards received after subtracting fees or costs.