What is Staking?
Staking is a way of earning rewards for holding cryptocurrencies. It offers crypto holders rewards for supporting specific projects in ways that add value to the projects. Staking can be a vital way of securing a particular protocol or blockchain as well as a way to make a project more decentralized through distributing its native tokens. Sometimes when staking a user must lock their assets for a certain period of time, however, this is not always the case. In the context of decentralized projects and PoS (Proof of Stake Chains) users are in control of their tokens and supporting the projects they correspond to.
Unfortunately, some centralized crypto exchanges have corrupted what it means to stake assets. Similar to depositing cash into a high-yield savings account, centralized exchanges may lend out your deposits, and pay you interest on your account balance. While this may feel “more safe” or “better” than self-custody of your assets and interacting directly with chains, it has led to massive losses for users who trusted the wrong centralized exchanges.
Many blockchains use a proof of stake consensus mechanism. Under this system, network participants who want to support the blockchain by validating new transactions and adding new blocks must stake that chain’s native token. The process of staking allows users to “put their money where their mouth is” and allocate their assets to trusted parties who will in turn get to be the ones who propose and add new blocks to their respective chains.
Staking helps to ensure only legitimate data and transactions are added to the blockchain. Participants trying to earn a chance to validate new transactions offer to lock up sums of cryptocurrency in staking as a form of insurance.
What is Algorand Staking & What Are Algorand Staking Rewards?
Algorand Staking may refer to a number of different practices and this article will try to clarify them. Users may stake their ALGOs by contributing to Algorand Consensus, contributing to individual protocol distribution, participating in Algorand Governance, or by holding their assets on a CEX. These various methods have different potentials for rewards as well as different risks/advantages. See the below for a comprehensive list on ways to earn Algorand Staking Rewards:
- Delegation via a centralized exchange (CEX): Exchanges like Coinbase or Nexo allow you to earn rewards on your Algorand directly through the exchange. With this option, the exchange will keep custody of your $ALGO and there may be less clarity on how your $ALGO is used by the exchange.
- Earn participation or governance rewards: Algorand pays out a nominal reward, a participation reward, for holding tokens in an on-chain wallet address who also participate in voting. For more information on governance please click here.
- Liquid staking Algorand: With liquid staking, you can participate in both consensus and governance through a DeFi protocol like GARD. Liquid staking is the process of participating in staking to earn rewards and receiving an IOU in exchange for said assets. These assets should be redeemable for the ALGO you contributed once they are returned to the protocol.
- Run your own node: Any user can set up a participation node to support Algorand’s consensus protocol, however, Algorand does not pay additional rewards for running a node (yet). This is considered staking in the original sense of the word.
Current Status of Algorand Staking
The most popular way to take advantage of staking on Algorand is by participating in Algorand Governance, where users traditionally lock their ALGOs for a quarter and vote on the future of the Algorand blockchain in exchange for a slice of tens of millions of ALGO rewards distributed each quarter. This was a great way to earn a risk free rate of return and then DeFi protocols like GARD came along and shook things up. Now users take advantage of committing their ALGOs to Algorand governance with DeFi protocols like GARD in order to earn even more rewards. Thanks to efforts by GARD and other liquid staking protocols, the Algorand community has voted to pay out higher rewards to users who participate in Algorand governance through DeFi protocols. By borrowing $GARD against intrinsically valuable collateral, like $ALGO, users are able to earn more rewards for adding more value to the Algorand network and also gain utility from whatever additional rewards each protocol may provide. For example, if users stake their borrowed $GARD they are able to earn additional yield on the borrowed $GARD, currently ~7.33% APR.
There are many more ways in which Algorand ecosystem participants can take advantage of juicy staking APRs by leveraging other $ALGO derivatives like $gALGO and other Algorand Standard Assets (ASAs) like Glitter Finance’s $XGLI.
Glitter Finance x GARD Staking
Users can earn 38%+ APR by leveraging the GARD Protocol’s dApp to stake $XGLI and earn $xSOL via GARD’s world class Algorand staking contracts. This is a no-lock commitment, meaning users can unstake at any time. Many users benefit from this because they can ‘set and forget’ their stakes while being rewarded for raising awareness for the Glitter Finance product suite.
Folks Finance x GARD Staking
Users can earn 7.3%+ APR by leveraging the GARD Protocol’s dApp to stake $GARD borrowed against $gALGO used as collateral. This is a no-lock commitment, meaning users can unstake at any time.
Users can earn 7.3%+ APR by leveraging the GARD Protocol’s dApp to stake $GARD to earn more $GARD. Whether community members borrowed $GARD against their Algorand governance positions directly on the GARD dApp, borrow against other whitelisted ASAs like $gALGO, or simply purchased $GARD on a prominent DEX like Pact.fi or HumbleSwap, they can take advantage of $GARD for $GARD staking. This is also a no-lock commitment, meaning users can unstake at any time. Rewards are sustainable and are paid out as a result of protocol revenue sharing (80%) as well as a $1,000 - $2,000 weekly boost in $GARD thanks to an Aeneas grant awarded to the GARD Protocol from the Algorand Foundation.
Users can earn 194% APR by leveraging the GARD Protocol’s dApp to stake $GARDIAN to earn more $GARDIAN. This is a no-lock commitment, meaning users can unstake at any time. To learn more about the benefits and utility of $GARDIAN please review the GARD Protocol’s documentation.
For those holding $ALGO tokens, there are various ways to earn higher yield by taking advantage of staking compared to other crypto projects by participating in Algorand governance. By taking advantage of liquid staking products like those offered the GARD Protocol users can have additional flexibility and earn additional yield.
For users who prefer the convenience of staking through a centralized exchange, there are opportunities to do so via Coinbase and others.
This is not to be interpreted as financial advice of any kind and we strongly encourage folks to do their own research. More information on GARD Protocol's disclaimer can be found here.