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Hedera Staking is a mechanism that allows users to participate in the Hedera network by staking their Hedera Hashgraph (HBAR) tokens. By staking their tokens, users become validator nodes on the network, which helps to secure the network and validate transactions. In return for their participation, users are rewarded with a percentage of the network’s transaction fees, paid out in HBAR tokens. The staking process is relatively simple, and users can do it by holding a certain amount of HBAR tokens in their digital wallet. The more HBAR tokens a user stakes, the higher their chances of earning rewards.
A consensus mechanism is vital for any blockchain network. To validate a transaction and place it into consensus, the Hedera network requires that it is validated by nodes representing an aggregate stake of over two-thirds of the network’s total number of HBARs. This means that for a transaction to be confirmed, it must be verified by validator nodes who have staked more than 67% of the total HBAR in the network. This consensus mechanism helps to ensure that the network is secure and that transactions are validated correctly. The Hedera network can prevent malicious actions from controlling the network or manipulating the consensus process by requiring a supermajority of staked tokens for validation.
Staking using the Hedera blockchain requires a long-term commitment, as users must hold their HBAR tokens for a certain period to be eligible for rewards and participate in the network’s consensus mechanism. It is important to ensure that most cryptocurrency is staked, so the network continues running. In the initial phase of the network, the Hedera Treasury will proxy-stake over two-thirds of the total number of hbars to nodes hosted by Council Members.
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Any user or group will be able to host a node on the network (i.e., it will be a permissionless network) after HBARs are more evenly distributed (such that no single user or group of users can obtain control of one-third of all hbars). A node must then announce one or more accounts that it can control and demonstrate that it has the private keys to those accounts when it joins the network at that point.
Out of that point, the hashgraph virtual voting mechanism will weigh those accounts’ votes based on the number of hbars they possess. It will also receive compensation for serving as a node. The compensation will be proportional to the number of hbars in those accounts. It is free to spend those HBARs whenever you want. As a result, bonded proof-of-stake models are not adversely affected by nodes reluctant to stake because they are concerned about the resulting loss of liquidity.
Additionally, by “proxy staking” their account to a node, a person who owns HBARs but does not own a node can still stake their HBARs and receive a small number of tokens in exchange for helping the network run. Giving credit for another account’s HBARs and letting the node use that stake when it contributes to consensus are what this entails. The owner of the hbars being proxy staked and the node split the running costs of the node (proportional to the amount staked). The owner of the HBARs still controls them even when they are being staked through proxy.
The owner will always have the option of stopping or switching the proxy staking to another node. Additionally, they will have unlimited access to the proxy staked hbars, albeit doing so would again lower the amount they are paid for staking. The node to whom the hbars are proxy staked cannot use the hbars. The network users’ proxy-staking capability won’t be accessible initially; it will be incorporated later in the platform’s development.
For a node to be able to influence consensus or to pay the costs related to sending transactions to the ledger, it must have at least some hbars in its account.
The process of Hedera staking can be broken down into several phases:
As of July 21, 2022, the staking capability is operational and accessible on both the Hedera Testnet and Mainnet. Users can technically stake their accounts to mainnet nodes in phase I, but this won’t affect a node’s consensus weight (voting power). This initial technical release does not reward participants but creates a playing field where all market participants can participate in the staking program.
Supported exchanges and wallets will be able to incorporate the staking capability during this phase to give account holders a simple way to stake their HBAR, but rewards will not be given out. Additionally, it’s expected that the retail industry will create web applications to assign stakes. Stake per node will be visible during this phase, and monthly updates will show how staking to a node affects its consensus weight (vote power).
The Hedera Governing Council will decide When the Hedera ecosystem has a minimum feasible set of integrations to enable Hedera staking rewards. The council (through CoinCom) will vote to update the reward rate once this has been decided, and the mainnet will then be updated with the new reward rate. CoinComm approved a staking reward rate of 1 billion HBAR/year.
Once the 250M total HBAR reward threshold has been reached, the staking reward account (0.0.800) will be qualified to distribute rewards earned by stakers. Even if, after this period, the balance of account 0.0.800 falls below 250M, rewards will continue to be distributed.
During this phase, the node uptime feature and 24-hour updates for stake visibility per node will be available. This indicates that node stake visibility will be updated on a 24-hour epoch interval rather than monthly. When the uptime feature takes effect, staked accounts will not earn rewards when nodes cannot participate in consensus.
The Hedera platform charges users to move cryptocurrency or add items to the ledger. We anticipate the fees to be a small portion of those charged by other public DLT platforms now available on the market because the Hedera network has a high throughput and does not require proof of work. The computational, bandwidth, and storage resources that nodes in the Hedera ledger use to reach consensus and render services are paid for. Some payment methods are node fee, network fee, and services fee. You can learn more about transaction fees and estimate your application costs here.
Hedera staking is a powerful mechanism that allows users to participate actively in the Hedera network and earn rewards for their contributions. By staking their HBAR tokens, users become validator nodes, which help to secure the network and validate transactions. One of the key advantages of using staking on the Hedera blockchain is that it allows users to earn rewards without needing extensive technical knowledge or resources. The staking process is relatively simple and can be done with a digital wallet and a small amount of HBAR tokens.
Another advantage of Hedera staking is that it helps to decentralize the network, making it more resilient and secure. As more users stake their tokens, the network becomes more robust, making it harder for any one entity to control or manipulate the network. It also allows users to earn passive income, as they can earn rewards for participating in the network. This can be an attractive option for investors looking for alternative forms of income.
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