Cosmos Staking is for the Serious HODLer
Cosmos

Cosmos Staking is for the Serious HODLer

By AlgoRhythm | PoS Algorithms | 16 Jun 2020


I began my crypto journey in 2014 like many: buying Bitcoin and selling it for a decent profit at the time, only to realize I knew nothing about the reward of HODLing until watching all the lost profit of late-2017 while my BTC wallet sat at 0. After 5 years of passively following the crypto world, and a little more spending money, I decided to get back into the game in 2019. This time, I wasn't going to make the same mistake. 

A lot has changed over the years with new coins, algorithms, and exchanges giving everyone their own flavor of cryptocurrency to get behind.  I myself have settled into the Proof of Staking algorithm world as the Proof of Work coins have made it hard to keep up with the hardware demand. I've researched a handful of the top PoS coins (rule #1, learn about the coin before investing in it) and settled on two coins to primarily focus my time on: Tezos and Cosmos.

With the creation of so many coins, a common problem is getting information from one chain to another. This is where Cosmos comes in. Cosmos provides a communication protocol, a consensus engine, and a core software development kit for building customized blockchains. using the Cosmos SDK, teams and organizations can create interblockchain applications that can transfer data and assets across traditional siloed chains. A quick introduction video can be found below.

Cosmos's Proof of Stake algorithm is Bonded Proof of Stake (BPoS). Like most PoS algorithms, BPoS gives users the option to delegate, or stake, their coins with a validator on the network for the benefit of receiving a staking reward around 7% of their staked coins. However, unlike other PoS networks where delegated coins are not at risk, choosing a validator should not be done quickly. In BPoS, delegated coins are "bonded" to a validator. If the validator misses blocks or purposefully tampers with the network, both the validator's and the delegator's coins are at risk of being slashed. 

Bonded Proof of Stake also has a time limitation for how long a delegator has to wait between undelegating and having full control of their coins. For the Cosmos network, delegators must wait 21 days after they undelegate until they can move the coins from their wallet. Looking to sell your staked coins? The price you see today will be long gone by the time you're able to sell. Just in the past 21 days, Cosmos has had a 20% swing, from a low of $2.55 to a high of $3.15, and everything in the middle. While Cosmos staking's return of investment looks great, it's not for someone looking to only invest for a short time. 

In conclusion, it takes both research and time to stake in Cosmos. Delegators must research their validator and pick a professional staking provider to minimize the chance of losing their delegated balance due to slashing. When a delegator wants to sell, trade, redelegate, or otherwise move their coins, they must wait 21 days before having this opportunity. With these limitations, delegating on the Cosmos network is for those who believe in the network, trust the system is going to grow, and is willing to HODL for the longterm. 


AlgoRhythm
AlgoRhythm

Dabbling in all things crypto, specializing in PoS networks. Living the sweet life of building nodes and staking coins.


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