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Before we get into the various staking possibilities on our platform, let’s first look into the basics of this particular crypto coin.
What is Polkadot (DOT)?
Like many post-Bitcoin cryptocurrencies, Polkadot is a token you can purchase or sell on exchanges like CEX.IO, and is also a decentralized protocol.
The Polkadot protocol allows unrelated blockchains to securely communicate with each other. In other words, it enables data or value to flow directly between the Ethereum and Bitcoin blockchains, for example, without the need for intermediaries. It is also scalable and fast thanks to the use of multiple parallel blockchains ("parachains"), which take a significant amount of the processing load off the main blockchain.
The Polkadot token (DOT) can serve two functions on the Polkadot Network. On the one hand, it is a governance token that empowers holders to have input on the future of the protocol. On the other hand, it’s also used for staking crypto, which is how the Polkadot network verifies transactions and generates new DOT tokens. As part of your investment strategy, you can buy and sell DOT on the CEX.IO Exchange.
The Structure of Polkadot
Polkadot's network contains a "relay chain” (the main blockchain) and many “parachains” (user-created parallel chains). It also includes a connecting layer ("bridge") that allows transferring data and value between any number of blockchains. This “bridge” can also serve as a connection to non-blockchain databases.
How Does Polkadot Work?
Polkadot is able to process all this information because the numerous parachains do most of the heavy lifting for its main relay chain. Consequently, the Polkadot network is capable of processing more than 1,000 transactions per second, compared to 30 for Ethereum, and just 7 for Bitcoin. Additionally, Polkadot is likely to become even faster as more parachains are added, meaning it could process a million transactions per minute in the future.
What is Proof of Stake (PoS)?
Proof of stake is a method that allows blockchain networks to reach distributed consensus. Anyone can join proof of stake networks and participate in staking by locking a certain amount of funds. Participants in the staking process may become validators and vote for network upgrades, or they can validate transactions and add them to the blockchain.
Polkadot Staking Explained
Polkadot uses the proof of stake consensus mechanism to create and distribute new DOT, verify transactions, and secure the network (by contrast, Bitcoin uses the proof of work consensus mechanism). There are many ways that DOT holders can interact with the staking system, depending on their technical knowledge, the amount of time, and the funds they are willing to devote.
Validators are the ones who do most of the work, although it is a significant commitment and requires technical knowledge. Becoming a validator requires operating a node — one of the computers that make up the network — with minimal downtime. Also, you will need to stake substantial amounts of your own DOT.
However, on the other end of the spectrum, you’ll be able to verify transactions and add new transaction "blocks" to the relay chain. You may also earn new DOT, tips, and a portion of the transaction fees. But, be careful: you can also lose some or all your staked DOT if you act maliciously, experience technical difficulties, or make a mistake.
Regular investors can participate in staking indirectly with the help of nominators. Delegating some of your DOT to a validator is possible if you trust they will follow the rules. In return, you receive a share of the DOT that your chosen validators earn. But, beware: you must be careful who you choose, because if your validator violates the rules, you could lose your stake.
Additionally, two specialized roles are available that usually require less commitment than a full validator, but more technical skill than is necessary to become a nominator. The first role is that of collators, who keep track of and submit valid parachain transactions to the relay chain validators. The second role is that of the fishermen, who help locate and report any bad behavior within the network.
You may be eligible to win DOT rewards for staking and taking part in the network through any of the previously mentioned roles. Also, remember that DOT holders have the right to vote on proposed software upgrades and participate in the governance of the network.
Where Can You Stake Polkadot?
Polkadot has received significant support from the cryptocurrency community, and DOT is among the most widely leveraged assets for staking. Many staking platforms allow crypto enthusiasts to choose validators and delegate tokens to them so they can potentially earn staking rewards. However, CEX.IO makes it easier and more flexible to stake crypto.
CEX.IO Staking doesn't require you to evaluate the offerings from different delegators, pay gas fees to stop staking your tokens, or restake your tokens. To participate in staking on CEX.IO, you only need to keep DOT tokens in your CEX.IO balance. In other words, earning potential stake rewards does not require taking any additional actions.
What are the Benefits of Staking DOT with CEX.IO?
You can benefit from numerous features that can make your staking experience more straightforward, when you stake cryptocurrencies on CEX.IO.
For example, CEX.IO does not have a lock-up period, which means that your funds will not be locked while participating in the staking process. The absence of a lock-up period opens up new opportunities for users, such as:
The option of adding funds to increase your potential staking rewards whenever you like
Simultaneously trading and staking cryptocurrencies
Withdrawing staked assets at any time, without waiting for your funds to return from the staking node
Another benefit is that CEX.IO Staking offers automated balance replenishment. You typically need to pay gas fees while restaking DOT tokens separately. However, your CEX.IO balance is automatically credited with staking rewards. Therefore, you could earn more staking rewards from consecutive staking periods with no additional commissions.
Lastly, CEX.IO Staking exists as a part of the CEX.IO ecosystem, which means you can stake cryptocurrencies while enjoying top-level security and additional services.
How to Stake Polkadot on CEX.IO
CEX.IO aims to make staking effortless for everyone, regardless of starting capital, experience with crypto, or technical knowledge. We strive to make it as easy as possible for users to interact with staked cryptocurrency.
Follow these simple steps to get started with CEX.IO Staking:
What is the Polkadot Staking Yield on CEX.IO?
The EAY (Estimated Annual Yield) shows how much you could earn (the potential yield) by staking cryptocurrencies on CEX.IO. Each cryptocurrency has a different Estimated Annual Yield, which is dependent on the validator and network performance. To find out the current EAY for staking DOT on CEX.IO, visit the staking dashboard or Staking page.
Keep in mind that the annual yield is estimated due to the many factors that can affect potential staking rewards. These factors are the reason why the estimated annual yield may vary from one staking period to the next, or why the EAY may be available only as a range.
How to Calculate Potential DOT Staking Rewards with the Earnings Calculator
Our Earnings Calculator can help you determine the potential staking reward you could earn with the current Polkadot interest rate. You can find the Earnings calculator on the Staking page and the staking dashboard.
You will see your reward for staking by selecting DOT from the dropdown list of available cryptocurrencies. Next, enter the number of tokens that you have, or plan to hold, in your CEX.IO balance. The calculator will then determine your estimated earnings for staking DOT with CEX.IO.
The staking calculator calculates the estimated amount of gain for each day, month, or year. Remember that the calculator's numbers/amounts are only an estimate, as they are based upon the current DOT price and current EAY, which may change over time.
Simultaneously, keep in mind that withdrawing or depositing funds from or to your CEX.IO balance will affect your potential reward. Potential staking rewards are recalculated every hour. Therefore, you can join CEX.IO Staking anytime you like and earn staking rewards regardless of how long you have stored stake-able crypto.
Can I deposit and withdraw DOT through the Polkadot Network?
You can also withdraw DOT via the Polkadot network by going to the Finance page. Click on the Withdrawal button beside DOT, and enter your amount and the destination wallet address.
What is the minimum holding requirement to stake DOT on CEX.IO?
However, remember that you will not be eligible for staking rewards if your CEX.IO token balance is lower than the minimum staking amount. To start using CEX.IO Staking, you can either deposit or purchase DOT any time.