Cosmos Staking (and ATOM Liquid Staking) Explained

Get to grips with the basic concepts of Cosmo ATOM staking with this explainer by community member Fahad Sheikh. Learn about ATOM staking mechanics, rewards, and liquid staking.
Cosmos staking ATOM liquid staking

Author: Fahad Sheikh

Note: This is a community-written piece. The views expressed within are those of the author and not necessarily those of the pSTAKE team.

Cosmos (ATOM) is one of the top coins to be staked using an exchange or staking platform. Stakers can earn ~12% APR through passive rewards each year just for taking part in Cosmos staking via platforms such as pSTAKE. Staking is the process of delegating tokens to a staking platform or validator to help bolster the security of a blockchain network. 

Cosmos defines itself as a comprehensive solution to scalability and interoperability issues that the blockchain industry is trying to solve using the hybrid Proof of Stake mechanism. Proof of Stake is simply a way to help verify whether the transactions on a blockchain are legitimate, and being done properly. 

In exchange for their help securing the chain by staking, ATOM  stakers are rewarded in the form of ATOM. The rewards an individual receives for Cosmos staking depends upon the amount of Cosmos ATOMs they are staking, and the current APR of rewards the Cosmos blockchain is providing (generally around 12% APR).

What Is Cosmos Staking

Cosmos staking is a term that refers to staking ATOMs, which are the official tokens of the Cosmos blockchain. Cosmos staking requires you to deposit tokens into a staking platform or delegate to a validator node. Stakers then begin earning rewards regularly. 

Cosmos staking is essential for the Cosmos blockchain because it helps keep the Cosmos blockchain decentralized and safe. You can earn passive income, and perform a valuable service to the Cosmos community by being a Cosmos staker. 

The current annual reward APR is around 12%. Using a liquid staking platform such as pSTAKE to stake your ATOM, you can also receive DeFi yield using the stkATOM you receive, which is in addition to your staking rewards.

Do keep in mind that once you stake your Cosmos ATOMs you will need to wait 21 days to withdraw them. This waiting requirement was put in place by the Cosmos blockchain, thus it’s standardized across all validators and staking platforms – except liquid staking platforms. Liquid stakers using pSTAKE can bypass this waiting period by trading their stkATOM (basically trading their staked ATOM) on a DEX.

Why Participate in Cosmos Staking

Cosmos (ATOM) is a popular digital currency that uses a hybrid proof of stake protocol to secure its network and allows people to earn staking rewards. People who are already holding ATOMs should really consider participating in Cosmos staking, since all they need to do is deposit their ATOMs into a staking platform like pSTAKE or popular crypto wallet such as Cosmostation, and they will be able to passively earn ~12% APR in staking rewards. 

Besides the rewards for participating in Cosmos staking, as a staker you get to help verify transactions, and keep the Cosmos blockchain safe. If you are holding Cosmos ATOMs you should want to make sure that the Cosmos blockchain is safe and decentralized. 

Financial Rewards of Cosmos Staking (ATOM)

Staking Rewards

PoS blockchains usually have staking rewards built into their tokenomics, to ensure there is enough incentive to keep the chain secure for the foreseeable future. Native blockchain tokens (e.g. ATOM) are distributed to stakers who are helping to secure the network via staking. Staking rewards vary significantly between chains, but Cosmos offers a relatively attractive rate of around 12% APR in staking rewards.

Hedge Against Inflation

The Cosmos economy has an inflationary component, and a lot of the tokens being added into circulation through inflation are being given to stakers. Choosing not to participate in Cosmos staking doesn’t make much sense for someone already holding ATOMs. ATOM holders who choose not to participate in Cosmos staking are just depriving themselves of the staking rewards they could earn, which requires minimal effort.

Additionally, as more tokens are added into circulation those who decided to stake their ATOMs will receive staking rewards that could potentially offset the effects of inflation on their Cosmos ATOM holdings. 

Cosmos Staking is Available on pSTAKE

pSTAKE offers ATOM holders the opportunity to participate in liquid staking. Liquid staking ATOM via pSTAKE is a simple process and offers the opportunity to remain liquid while staking and generate more yield (on top of their staking rewards). pSTAKE has been audited multiple times, and has a big focus on keeping the platform safe. 

Liquid staking allows people to stake and receive liquid staked tokens which represent their underlying staked tokens. These synthetic tokens can then be used to interact with DeFi DApps like DEX/AMMs, and lending markets. The benefits of being able to utilize your staked tokens are huge, because it allows you to LP farm with your staked tokens, and this means you can get LP rewards as well as staking rewards from the same tokens. This leads to the question of many crypto enthusiasts, and that is what is liquid staking?

What is Liquid Staking

To answer the question of what is liquid staking, let us consider a major issue on crypto staking in general. Several crypto users are making substantial money with staking within the cryptoverse and that’s why many crypto platforms have integrated staking services. However, a major drawback impedes crypto users from utilizing staking services, and that is the lock-up periods – having to wait around 21 days to unstake PoS tokens. Liquid staking provides a solution to that problem. What is liquid staking fundamentally involved in is getting instant liquidity (in the form of representative tokens) for your staked tokens. 

Furthermore, what is liquid staking’s importance? Users are able to get their usual staking rewards and also utilize their representative tokens in DeFi at the same time. People who participate in liquid staking crypto are thus able to earn staking rewards from their underlying staked tokens, and additional yield by utilizing their representative assets in DeFi. 

Liquid staking works by giving users representative or synthetic tokens that get their value from the underlying staked tokens.These synthetic tokens can then be used in DeFi functions which can include trading, lending, yield farming, and others. 

What are liquid staking’s chances of thriving in the cryptoverse? Lock up periods and illiquidity of staked tokens is a major headache to crypto stakers. Since liquid staking provides an attractive alternative, it is poised to remain and thrive in the market for as long as PoS continues to grow in this market. 

Conclusion

Staking ATOM is a simple process and an easy way for ATOM holders to begin earning passive income from staking rewards. It not only provides financial benefits, but is also a super important aspect of the security of the Cosmos blockchain. Staking ATOM is a win-win.

Using the pSTAKE application, you can get started with ATOM staking in no time and begin earning additional yield via liquid staking.

Getting started is easy. All you need to do is get some ATOMs, and then just head on over to a staking platform. 

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