Polkadot’s native token DOT is one of the recent additions to the staking market which has rapidly gained popularity among investors. Bitcoin Suisse has offered its all-in-one staking service for DOT since the Polkadot network went live earlier this year. And the results have been exceptional for clients who use the service.
Thanks to its technical and crypto-financial expertise, Bitcoin Suisse has been able to outperform the average protocol-based staking rewards and deliver 15%+ returns, compared to current estimates of average DOT staking returns of approximately 11-12%.
Polkadot is an ambitious project aiming to address one of the main barriers to mainstream adoption of blockchain – a lack of interoperability and scalability of the original blockchain technologies. The Polkadot network protocol allows independent blockchains to connect with each other, communicate information, and even perform cross-chain computations.
To date, Polkadot project had a solid start and delivered what was promised according to the schedule, with the mainnet launching in May 2020. It currently ranks in the top 10 crypto assets by market cap, with a $4.1B capitalization at the time of writing.
As Polkadot is a proof-of-stake blockchain, holders of DOTs can earn rewards by staking their tokens. DOT is a relatively recent addition to the fast growing staking market, and in a short time has managed to rise to its top.
The staking rewards come from locking crypto assets in the network to ensure consensus through proof-of-stake. Polkadot uses a variation of proof-of-stake – Nominated Proof-of-Stake (NPoS), where in addition to validators a special role is given to nominators. Any holder of DOTs can become a nominator by backing up to 16 validators. Validators then perform the work of ensuring consensus in the network, receive rewards for the service provided, and share it with their nominators.
The reward paid to the validators depends on staking participation, i.e. the share of staked coins. The distinctive characteristic of the Polkadot reward scheme is that the same amount is paid to all validators, regardless of the actual size of their stake. This way, the reward mechanism disincentivizes centralization of the validation pools.
In addition to the size of a validator’s stake, a nominator’s final reward depends on several factors. Each validator decides on their service fee, and the rest is distributed among its nominators pro-rata. Validators can become oversubscribed, when the amount of their nominators is higher than 256. In this case, some of the nominators will not get any reward. Finally, validators’ stake can be slashed for misbehavior (such as being offline, equivocation) which can also result in losses for their nominators.
Maximizing the earnings as a nominator requires deep understanding of the reward mechanism and protocol technology, constant monitoring of the validators and their performance. This task is time-consuming and requires certain expertise; so many investors choose to delegate it to a trusted service provider.
The Bitcoin Suisse advantage
Staking cryptocurrency for the customers is a big part of Bitcoin Suisse’s growing offering of financial services. The Bitcoin Suisse team has accumulated years of expertise to better understand the underlying mechanisms for staking rewards. This is key to developing a winning strategy that can beat the market returns.
The most important part, however, is the numbers. According to estimates by Staking Rewards, and based on calculations by the Polkadot development team, the annualized return on staking DOTs as a nominator is approximately 11-12%. The annualized return based on 4 months of staking DOTs with Bitcoin Suisse is over 15%.
This means that clients who have already begun staking DOT with Bitcoin Suisse have seen staking reward returns that are above the industry average.
As the market for DOT staking continues to grow and the network becomes more popular, it is likely that average rewards will continue to fall.
However, thanks to its deep crypto knowledge and technical expertise, Bitcoin Suisse will continue to help its clients maximize the potential of their staked assets.