P2P Staking Strategy in Polkadot Before DOT Transfers

Post preview image

Polkadot staking has successfully launched. Validator elections has been held and issuance of first rewards has been started. If you have not nominated yet it is a good time to do it now.

P2P Validator has more than three years of experience as a non-custodial staking provider. We make staking clear and attractive to simplify the process, incentivizing token holders to secure the network. The main goal of our staking strategy is maximizing rewards for token holders.

To reach that goal in Polkadot, we have been validating Kusama since the first day to polish our approach. Currently, we operate over 25 Kusama nodes with 300,000 KSM nominations and provide ~15% benefit for our nominators compared to average.

Below I will briefly describe a temporary approach we are taking while DOT transfers are not enabled.

Nominate P2P to take part in this exciting journey.

Staking in Polkadot

In Polkadot nominators don't choose the amount delegated to a particular validator. Instead, they select preferred validators and their bonded stake automatically spreads amongst them to achieve an optimal distribution. Each token holder can pick up to 16 targets and the system will decide which ones will receive a delegation and the amount.

Nominations represent stake-weighted voting for validators who compete for the active set. In the long term validators in the active set receive equal rewards meaning that the least staked node can potentially be more efficient.

For example, assuming 0% commission, a nominator with 10 000 DOT will receive 50% if the total stake of a validator is 20 000 DOT and only 25% if 40 000 DOT. But, if a staking provider does not have enough votes it can remain outside of the active set.

To provide sustainable services validators need to find an optimal relation between the number of nodes and their total nominated stake. We run multiple nodes to provide an even distribution of stake for our nominators.

Dynamic adjustment strategy

The lower threshold of nominated stake decreases as the number of available seats in the active set increases and we will adjust to it retaining the number of our active nodes to be always one unit higher than the number that can win in elections.

The reserved validator will enter the active set if it is expanded or more token holders vote for these nodes. Once this happens tokens will be distributed amongst the higher quantity resulting in a lower stake on each node. In this case nominators get a higher share in it. To explain the idea let's look at an example, which is simplified for better understanding.


Let's assume that 12 000 DOT is required to win in elections and 30 000 DOT is staked with three validators two of which are in the active set while the third one is in reserve. In this case, tokens will be evenly distributed among the two active ones resulting in ~15 000 DOT staked with each of them.

If nominators vote for these three nodes with an additional 6 000 DOT or the number of validators in the active set increases, the reserved validator will most likely win in the next elections. Stake of nominators will be redistributed resulting in ~10 000 DOT per node and nominators will obtain a higher share. We will set a new reserve node that nominators can include in their nomination list in case of future changes.

This temporary strategy will help us to remain flexible in the changing conditions of the network optimizing staking return for nominators who included all validators.

Currently, we have ten nodes, which you can add to your nomination list.

About P2P Validator

P2P Validator is a world-leading non-custodial staking provider securing more than $3 billion by over 10,000 delegators/nominators across 25+ high-class networks. We have been present in all Polkadot testnets and have been actively participating on Kusama network since the beginning. P2P Validator invested its own funds in Polkadot in 2017 and intends to support the network in the long term.

Do not hesitate to ask questions in our Telegram chat or contact Alex via [email protected]. We are always ready to help and open for communication.

Web: https://p2p.org

Stake DOT with us: https://p2p.org/polkadot

Twitter: @p2pvalidator

Telegram: https://t.me/P2Pstaking

Subscribe to P2P-economy

Get the latest posts delivered right to your inbox

Alex Bondar

Research & Analytics at p2p.org.

Read more