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How Does Ronin Staking Work?
On April 12th, the Ronin network (the blockchain of Axie Infinity and SkyMavis’ ecosystem of companies) began distributing staking rewards for the first time. In total, over 82,000 $RON was awarded to the community in the first 24 hours, about $100k equivalent at the time. We’ll see rewards of this size every day for the next 3 years, after which it’ll ratchet down to 76K $RON per day. Sounds like something worth getting into? I’m going to attempt a non-technical explanation, so please bear with me.
Every blockchain needs a consensus mechanism — a way to verify if transactions are valid. How can we trust that a transaction is valid, if there’s no central authority like a bank to vouch for it? Proof-of-Stake (POS) assumes that the community members who own the most of a given coin are probably the ones who care the most about making sure the network is 100% healthy and trustworthy. So the size of your holdings (your stake) determines whether you’re worthy of being the “official” verifier of transactions. Why would you want this job? Because of the rewards! Every time you successfully verify a batch of transactions, you get a staking reward for your efforts.
Delegated Proof-of-Stake (DPOS) adds some extra structure to this idea. People can group their funds (“delegate”) under a given leader or organization, and thus share in the rewards. In the Ronin network, the community can group their funds under 12 leaders — we call these “governing validators”. Additionally, every day, another 10 community-run validators are chosen based on the size of their respective stakes, bringing the number of daily active validators to 22. Each of these 22 validators take turns validating transactions throughout the day.
In all cases, the size of your personal staking reward is relative to the size of your chosen validator’s total pool. Example: if a given validator has a pool of 1,000,000 $RON and your contribution is 1,000 $RON, then you get 0.1% of the daily rewards allocated to that leader. You don’t get 0.1% of the 82,000 $RON, by the way. That 82,000 $RON is the total daily reward for the entire network, and gets split evenly amongst the 22 validators. The quick math goes like this: ((82000/22)*(your_stake/validator_total_pool)). Using the 1M $RON example above, your 1000 $RON would give you 3.7 $RON daily, which is about $5 equivalent right now. Note: most validator pools are much larger than 1M $RON right now, so don’t expect 1000 $RON to get you very far.
Because there are at least 22 validators (plus some candidates waiting for their shot) to choose from, it’s expected that people will shop around and look for the best deal. The Ronin Staking page helpfully sorts all of the validators by their effective APR, i.e., the annualized profit that you would receive if you delegated your funds to one of them. The range is currently between 11% and 30%, and you can claim your rewards every 24 hours. To give you a rough idea: my $10,000 stake has yielded about $25 since the rewards started flowing on April 12th. Obviously, in order for you to see similar numbers, $RON’s exchange rate needs to stay roughly the same … or at least above your acquisition price.
So here’s the trickiest part: the SkyMavis ecosystem has many different ways to earn money right now. Other than earning from playing Axie Infinity itself, there’s (1) AXS staking which yields 38% APR, (2) Katana liquidity pools which yield 60-80%, and now (3) Ronin staking which yields 10-30%. The question is why you would want to put your money in Ronin staking specifically, rather than any of these other places. My short answer is that Ronin staking is a general bet on the ecosystem itself, and isn’t dependent on any single game or function. That being said, your priorities might be different so it pays to review all the options out there.
$RON is up 30% over these last 7 days, as people get set up with their new DPOS network and a few new games join the ecosystem.
Keep safe out there, cryptofam!