Avalanche (sAVAX) Liquid Staking Guide

This guide will give you a quick overview of Avalanche and how to liquid stake your AVAX with BENQI via Steakwallet.

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. Developed by Ava Labs, Avalanche aims to rival Ethereum through a higher transaction output of up to 6,500 transactions per second without the compromise of 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 taken by Bitcoin and Ethereum (namely having all nodes validate all transactions). Avalanche blockchains use different consensus mechanisms based on their use cases, but are interoperable within the ecosystem.

 
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.

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, which allows developers to fork EVM-compatible dApps. It uses the Snowman consensus mechanism.

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.

 

You can read more about how these chains and how the Avalanche ecosystem functions here.

What is liquid staking?

Liquid staking is the participation in the validation of Proof-of-Stake (PoS) blockchains via staking and receiving an interest-bearing asset in return (which reflects your staking rewards). Many blockchains have a certain unbonding period if a user wishes to unstake, through which assets are still locked, but not earning rewards. Liquid staking allows stakers to earn rewards while retaining liquidity through the tokenized version of the staked funds, which can be traded or used to earn additional rewards.

What is BENQI?

BENQI is a Decentralized Finance (DeFi) liquidity market protocol, built on the Avalanche blokchcain. BENQI consists of the BENQI Liquidity Market (BLM), a protocol that enables users to effortlessly lend, borrow, and earn interest with their digital assets.

Secondly, the BENQI Liquid Staking (BLS) protocol is a liquid staking solution that tokenizes staked AVAX to grant users the ability to utilize the yield-bearing asset within DeFi applications. The BENQI Liquid Staking protocol helps to free up the otherwise locked and staked AVAX by tokenizing the staked asset into sAVAX, which users can use freely with other DeFi dApps, creating greater capital efficiency within the Avalanche ecosystem.

 

 

Staking FAQs

 
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 — staking your AVAX helps secure the PoS Avalanche network. 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. Staking also allows you to participate in network governance.

 
  • Secure the network — with AVAX, you have the power to contribute to the security and governance of Avalanche 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 liquid 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.

 

However, alternatives like BENQI allow you to delegate your AVAX to a pool of respected validators and receive a yield-bearing liquid staked asset (in this case sAVAX) in return with which you earn rewards. From the staking rewards distributed by the network, the validator pool gives a certain percentage (stipulated by the network) back to the delegators (in this case holders of sAVAX) that have delegated (staked) their AVAX to them via BENQI & Steakwallet.

 

When using BENQI, users receive staking rewards in real-time, allowing for participation in the securing of Avalanche without locking their AVAX up in a staking node on the the P-Chain, and thus having the benefits of earning staking rewards while being able to use their sAVAX.

 

That's how you earn rewards.

How much can I earn from liquidstaking my AVAX?

At the time of writing, the APY (Annual Percentage Yield) for liquid staking AVAX is 7.2%.

 

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?

There is no minimum amount needed to liquid stake AVAX via BENQI, compared to the minimum of 25 AVAX that is required for AVAX native staking.

How do I liquid stake my AVAX?

When you stake your AVAX, you are able to choose how much of your AVAX you want to delegate to the BENQI validator pool. You can stake any amount of AVAX, for which you receive sAVAX tokens on a ~1:1 basis representing your staked AVAX.

 

Your sAVAX balance is updated on a daily basis to reflect your AVAX staking rewards and your sAVAX balances can be used like regular AVAX to earn yields and lending rewards. This is different from traditional staking where your assets are locked up and can’t be used while earning staking rewards.

 

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

What is staked AVAX (sAVAX)?

BENQI Liquid Staked AVAX, sAVAX is the token that users receive when staking their AVAX on the BENQI Liquid Staking protocol via Steakwallet. It is the tokenized version of staked AVAX and accrues interest through Avalanche staking rewards.

 

sAVAX tokens can be used as one would use AVAX, allowing you to earn Avalanche staking rewards while benefiting from, among other things, yields across decentralized finance products, such as borrowing or lending.

What can I do with my sAVAX

As a liquid asset, you can use sAVAX across a wide variety of dApps within the Avalanche ecosystem. You can swap sAVAX or provide liquidity on TraderJoe or Pangolin. You can also earn additional rewards through a Ribbon vault or borrow against your sAVAX via MoreMoney. You can connect to all of these dApps directly using WalletConnect in your Steakwallet.

Which validator is my AVAX staked to?

Validators on BENQI Liquid Staking are randomly selected from the current Avalanche validator set, as long as they meet the minimum criteria for delegation. The delegation strategy aims to distribute the staked AVAX to high performance validators with low commissions, to further decentralize the Avalanche network.

 

All validators can be part of the delegation set.

 

The current minimum criteria for validators are:

1. 30 day uptime  2. 98% uptime percentage 3. 2% delegation fee 4. 15 day remaining uptime 5. 6500 AVAX minimum stake 6. 1000 AVAX minimum delegation space

How do I unstake my AVAX?

AVAX can be withdrawn at any time by unstaking your sAVAX, but there is a 15 day unlock period. However, during this period your sAVAX is still earning rewards.

 

After the 15 day unlock period, there is a 2 day claim period in which you need to claim your AVAX (and with that all the earned rewards). Steakwallet will alert you at the start of your 2 day claim period via a push notification. If you do not claim your AVAX in those 2 days you need to restake it.

 

You can also swap your sAVAX to AVAX on many AMMs and other DeFi protocols, such as TraderJoe or Pangolin.

When will I start earning rewards?

You will start earning rewards immediately, but it may take up to 24 hours for you sAVAX to reflect the value of your earned rewards.

How do I claim my staking rewards?

There is no need to claim any rewards. The value of sAVAX to AVAX will continually accrue based on the BENQI Liquid Staking rewards rate shown in the app.

 

For example, if liquid staking rewards are ~7.2% APY, your sAVAX holdings will be worth ~7.2% more in AVAX after one year.

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

 

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

 
 

 
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