Complete Guide: How to Stake XTZ on the Tezos Blockchain

As you know, the cryptocurrency ecosystem opens up a multitude of opportunities for investors and enthusiasts. Apart from participating in an exciting Fantasy Game like Stables, it's also possible to contribute more broadly to Tezos, the infrastructure on which our game is built. Yes, Racers, you can participate in securing the network while being rewarded in return. In this guide, we'll delve into the world of staking XTZ on the Tezos blockchain, explaining in detail how it works, the benefits and drawbacks, and where you can start your staking journey.

Tezos and XTZ, what are they?

To put it simply, Tezos is an infrastructure blockchain that enables the execution of smart contracts. At the core of the engine lies the native cryptocurrency, XTZ. It plays a central role in the operation of Tezos, whether it's for network security, governance, or smart contract execution.

Tezos' model is based on a derivative of proof of stake (PoS), called liquid proof of stake (LPoS). As a reminder, proof of stake - also known as Proof of Stake - is a consensus system that validates transactions through validator nodes. These nodes exist if users lock cryptocurrencies (XTZ in our case) within the network. In return, they receive financial compensation: that's staking!

📎 To learn more, check out our comprehensive guide on the Tezos blockchain.

How does XTZ staking work on Tezos?

Differences between Bakers and Delegators

As you've understood, Tezos operates on a variant of proof of stake. Why is it called "liquid"? Simply because the system was built to facilitate staking activity and make it more accessible to everyone.

For example, on Ethereum: you need to hold 32 ETH to run a node and be a validator. This is cumbersome because it represents a substantial amount of money. Liquid staking solutions (Lido, Frax, Rocket Pool) exist and allow you to delegate your funds and participate with reduced means.

Know that this mechanism is directly inspired by Tezos' liquid proof of stake! Indeed, dear Racers, there are two types of validators on Tezos: bakers and delegators.

Bakers are the "official" validators. They must lock a minimum of 6,000 XTZ to achieve this status and are rewarded in proportion to their stake. The more XTZ they have locked, the more likely they are to validate a block and receive the reward.

As for delegators, as the name suggests, they can delegate their staking rights to a baker of their choice. Thus, they don't have to provide the 6,000 XTZ but can deposit the amount they wish.

XTZ Staking Method on Tezos

In the rest of this article, we will address delegators! Let's explore the general method to contribute to network security and transaction validation by delegating your XTZ on Tezos:

1 - Choose a Tezos wallet: you have a variety of wallet choices compatible with Tezos staking, whether it's a web extension or a hardware wallet. The list will be provided in the next section.

2 - Transfer XTZ to the wallet: to hold XTZ in your wallet, you will need to buy them natively through so-called "on-off ramp" tools or transfer them from a centralized exchange platform.

3 - Delegate XTZ: you must choose a baker to delegate to directly in your wallet and confirm the approval and deposit transaction of XTZ.

4 - Wait for the delegation period: before your XTZ start earning rewards, you must wait for a period of 7 cycles, approximately 24 days.

5 - Collect rewards: when your delegation is active, you earn rewards. Monitor them directly in your wallet.

Why Stake Your XTZ?

Advantages of Staking on Tezos

Staking is essential for Proof of Stake blockchains, whether it's Tezos or another one. Staking your XTZ in this activity means contributing to the functioning and overall health of Tezos!

Instead of letting your XTZ sit in a wallet, especially if it's on a centralized platform exposed to hacking or bankruptcy risks, it's certainly more interesting to lock them on the blockchain. Moreover, they are not locked and can be recovered at any time.

Lastly, the last advantage is obviously in generating passive income. While you continue with your daily life, your XTZ investment works for you and generates a yield of around 5% per year. Interesting, isn't it, Racers?

Disadvantages of Staking on Tezos

Of course, there is no such thing as zero risk, and this activity may have some risks. The first is the volatility of the XTZ price - as with the rest of the cryptocurrency market - which can impact the overall value of your assets.

The second is simply the principle of delegation. It's crucial to choose a reliable and responsible baker. Don't worry; we'll explain how to do that shortly!

📎 Are you diving into gaming? Here's how to buy XTZ and start the Stables adventure!

Which Wallet for XTZ Staking?

We've finally reached the part that should interest you: where can you place your XTZ for staking? In this section, we'll list a selection of popular and proven choices:

Galleon Wallet

Galleon Wallet is a Tezos wallet to download on your computer, available on MacOS, Windows, and Linux. It allows you to easily store and delegate your XTZ. You can even connect a hardware wallet like Ledger to enhance your security!

Kukai Wallet

Kukai Wallet is a non-custodial Tezos wallet available as a web extension to install in your browser. It allows for direct and straightforward interaction with decentralized applications. The functionality to delegate your XTZ for staking is natively included in Kukai and can be done easily from the interface.

📎 Check out our guide to creating a Kukai wallet on Tezos.

Temple Wallet

The main competitor to Kukai, Temple Wallet is also a non-custodial wallet in the form of a web extension, compatible with the Tezos blockchain. It offers the same range of features, but it provides more advanced support for staking. Temple offers a detailed list of bakers to help you make your choice. Note that Temple is also compatible with your Ledger!

Ledger Live

Speaking of Ledger, how can we not include them in this guide? For the past few months, the French unicorn has supported XTZ staking for its physical wallets. As a reminder, Ledger is the leader in the production and marketing of hardware wallets, the most secure solution for storing your cryptocurrencies. In Ledger Live, the application to manage your Ledger wallets, you can directly delegate your XTZ while maintaining a high level of security!

📎 To get started, learn how to buy XTZ on your Ledger.

These different options allow you to step into the world of XTZ staking while retaining complete control over your funds. Make sure to select an option that suits your needs and comfort level.

FAQ

Is XTZ staking risky?

The risk associated with delegating your XTZ is relatively low. However, since your funds are stored in a wallet, it's important to follow the usual security rules: back up the private key in a safe place, be cautious about phishing, etc.

Who controls my delegated XTZ?

When you delegate your XTZ, you retain ownership rights. The baker cannot act on them or control them in any way.

How do I manage my rewards?

As long as your XTZ are staked, your rewards are automatically restaked. When you end your delegation, you will retrieve your initial stake and your earnings.

What is the frequency of rewards?

The first one arrives after 7 cycles, approximately every 24 days. Afterward, it's every cycle, which is every 3 days.

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