Avalanche (AVAX) Staking Guide

This guide will give you an overview of Avalanche and how to stake your AVAX tokens.

Last updated on May 14, 2022

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Avalanche is a layer one blockchain that functions as a platform for decentralized applications and custom blockchain networks. It is developed by Ava Labs and by many perceived as an Ethereum rival. It aims to do so by having a higher transaction output of up to 6,500 transactions per second while not compromising scalability.

This is made possible by Avalanche’s unique architecture. The Avalanche network consists of three individual blockchains: the X-Chain, C-Chain and P-Chain. Each chain has a distinct purpose, which is radically different from the approach Bitcoin and Ethereum use, namely having all nodes validate all transactions. Avalanche blockchains even use different consensus mechanisms based on their use cases but are interoperable within the ecosystem:

The Exchange Chain (X-Chain)

The Exchange Chain (X-Chain) is employed to create and exchange the native AVAX tokens and other assets. Similar to the ERC-20 standard on Ethereum, these tokens follow a set of standardized rules. It uses the Avalanche consensus mechanism.

The Contract Chain (C-Chain)

The Contract Chain (C-Chain) hosts smart contracts and decentralized applications. It has its own Avalanche Virtual Machine, similar to the Ethereum Virtual Machine, allowing developers to fork EVM-compatible DApps. It uses the Snowman consensus mechanism.

The Platfrom Chain (P-Chain)

The Platform Chain (P-Chain) coordinates network validators, tracks active subnets and enables the creation of new subnets. Subnets are sets of validators. Each subnet can be validating several blockchains, but a blockchain can only be validated by one subnet. It also uses the Snowman consensus mechanism.

This division of computing tasks enables higher throughput without compromising on decentralization, while the modular structure also improves interoperability with other blockchains wishing to integrate with the Avalanche ecosystem.

Ava Labs also developed the Avalanche bridge allowing users to easily move funds from Ethereum to Avalanche.

 
Why should I stake my AVAX?

Staking is the process of locking up a digital asset (AVAX) to provide economic security for a public blockchain, therefore staking your AVAX helps secure the PoS Avalanche network. Further, most PoS blockchains are initially inflationary in nature, so staking your AVAX prevents you from getting inflated out of your position as you earn rewards for helping secure the network and validate transactions. Lastly, you can participate in network governance.

  • Secure the network – With AVAX, you have the power to contribute to the security and governance of Stargaze through staking and voting on governance proposals.
  • Earn rewards – When you stake to a validator, you are contributing to the security of the network and are rewarded with AVAX through staking rewards.
  • Vote for the future – Staking AVAX allows you to vote on governance proposals and contribute to making decisions on the future and direction of the network.
What happens when I stake my AVAX?

As Avalanche utilizes a PoS consensus mechanism, you can delegate an amount of AVAX you hold to a "validator", making you the "delegator". Validators on the Avalanche blockchain (and most other PoS blockchains) validate the network by approving transactions. The more AVAX a validator holds the more powerful they are and the more "vote" the have in the network, which allows them to validate more transactions, thus earning more rewards. By delegating your AVAX, you trust the selected validator to be a good network participant. From the earned rewards, the validator gives a certain percentage (stipulated by the network) back to the delegators that have delegated (staked) their AVAX to them.

That's how you earn rewards.

How much can I earn from staking my AVAX?

At the time this post was published, the APY (Annual Percentage Yield) for staking AVAX is 9.6%.

For the most up-to-date rewards rate, you can check out the Steakwallet app.

What is the minimum amount of AVAX I can stake?

To stake AVAX, a minimum of 25 AVAX is required. You should always make sure to have enough AVAX available to pay for network fees, as all blockchain interactions (such as sending a transaction, staking, unstaking, or interacting with other dApps) require them.

How do I stake my AVAX?

When you stake your AVAX, you are able to choose how much of your AVAX you want to delegate to the validator. You can stake any amount of AVAX, as long as it’s above the minimum of 25 required by the network, and you will immediately star earning rewards. You will not be able to use the staked AVAX for anything else or sell them during the period the AVAX are staked.

On Avalanche, you must select the time period and amount you wish to delegate. These are left entirely up to you, but remember you will not receive rewards before this period. So if you need the AVAX in the short term, make sure you do not choose too long a period here. If, on the other hand, you don't need these funds in the short term, then the longer you stake the better.

The minimum amount of time one can stake funds for delegation is 2 weeks and the maximum is 1 year. AVAX validators are also time limited so you can stake at maximum for the time period the validator is up. At the end of the period you AVAX will automatically be distributed.

Make sure you have enough AVAX in your wallet to pay for network transaction fees.

Please note: You will need re-delegate your AVAX after your selected period is over to earn the maximum possible compound rewards.
Why can’t I stake my AVAX?

There are a few reasons why you might be unable to stake your AVAX.

  • You don’t have the minimum AVAX to stake, you must have 25 AVAX plus a small amount to pay gas fees to be able to stake AVAX.
  • The delegation period is up. The minimum amount of time you can stake tokens for on AVAX is two weeks. Steakwallet creates a new validator every three months so you need to ensure you stake in the first two weeks of the validator being spun up, otherwise you’ll need to wait another two weeks for the next cycle to start.
  • The maximum delegation amount has been reached. To ensure network security, the maximum stake a validator can have delegated to it is min(5 * self amount staked, 3M AVAX). If this is the case, you’ll need to wait for the next cycle to start before you can delegate via Steakwallet.
Which validator is my AVAX staked to?

Currently, if you stake your AVAX with Steakwallet your stake gets delegated to Steakwallet validators pwoered by Figment. Figment is a reliable partner and one of the most trusted validator providers in the industry. We plan to offer more optionality in the future.

How do I unstake my AVAX?

As Avalanche staking is time-bound you will receive your AVAX and your rewards at the end of the selected time period.

So if you need the AVAX in the short term, make sure you do not choose too long a period here. If, on the other hand, you don't need these funds in the short term, then the longer you stake the better.

Why can’t I unstake my AVAX?

Avalanche has no concept of unstaking. Once staked your AVAX will be locked for up for a maximum of 12 weeks, Steakwallet will send you a push notification when your AVAX has been released.

This has nothing to do with Steakwallet and is how the Avalanche protocol works. Please read our Staking Semantics section below for more information on this.

When will I start earning rewards?

When you start staking your AVAX and the delegation is confirmed, you will start earning rewards on the staked amount instantly. Rewards are generated every block, distributed at the end of the staking timeframe.

Why is my AVAX locked?

There are a few API calls involved with staking AVAX, for more details on this please read our Staking Semantics section below. If any of these API requests, fail your tokens could be shown in Steakwallet as “Locked”. If your tokens are locked, you will have two options to

  • Stake locked AVAX
  • Unlock locked AVAX

which will either stake all the AVAX or withdraw it to your available balance.

How do I claim my staking rewards?

AVAX rewards work a little different from other PoS blockchains. You don't receive the reward every epoch or every block. Instead you commit to a certain period after which your AVAX + rewards will be distributed back to you.

The validator nodes themselves also commit to validate for a certain period. When the validator period expires, every delegator is automatically kicked off and paid their respective rewards. If you log into the wallet after your validator period expires, you'll see your funds 100% available again.

Does Steakwallet take a cut of my rewards or charge a fee?

No. Steakwallet never charges a fee on your staking rewards.

Is AVAX staking safe?

Given that you always maintain custody of your assets (as Steakwallet is non-custodial), you always remain in full control.

While there’s always risk in crypto, AVAX is relatively safe as there are no slashing penalties for AVAX staking.

Staking Semantics

To understand how Avalanche staking works, we first need to understand a little about how Avalanche as a blockchain works. The Avalanche network is actually better described as a collection of blockchains, each one doing a specific job for the ecosystem.

The Contract Chain (C-Chain) is an Ethereum Virtual Machine (EVM) network where smart contracts can be deployed. This is where most of the DeFi/NFT activity on Avalanche happens and will be the most familiar environment for you.

The Platform Chain (P-Chain) is where validators are created and delegators delegate (stake) to validators to earn rewards.

When staking via Steakwallet, Steakwallet automatically handles transferring your tokens to the P chain and then delegating them to our trusted validator partner Figment.

There are a few API calls involved with this process, if any of them fail your tokens will be shown in Steakwallet as “Locked”. If your tokens are locked, you will be able to “Stake locked AVAX” or “Unlock locked AVAX" which will either stake all the AVAX or withdraw it to your available balance.

Delegation Periods

Every three months Steakwallet creates a validator that you can then stake to. We do this to maximise rewards, if you stake for a period of 12 months your rewards would be less than if you compound them every few months.

After each delegation period and when the new validator is ready, you will receive a push notification via your Steakwallet, prompting you to delegate again for the next period.

 

 
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