Captain Stake's Guide to Staking on Tezos

Introduction

Hello citizens of Earth. I have come from Planet Staketon to help promote Staking on Tezos. On Staketon we do not use traditional money. We only transact on a proof-of-stake blockchain. And we do lots of other non-traditional things too. Things that your Earth minds would not be able to comprehend.

I arrived on Planet Earth very recently, specifically to participate on Tezos. I run several bakers and you can find me on the block explorer here:

I've put together this guide to help you stake your tez! I've assumed that you know a bit about Tezos already. If you don't, start here. I will use the Temple wallet to demonstrate staking. But first:

What is staking?

On the Tezos blockchain, the block production is called baking. The bakers are servers on the internet that produce blocks. Because Tezos is a proof-of-stake blockchain, each baker needs to hold a security bond in a wallet. The security bond is a guarantee against bad behaviour on the network. The amount blocks the baker is scheduled to produce (baking rights) is determined by the total balance of the baker.

Normal citizens of Tezos can delegate their tez coins to a baker. The delegated coins contribute to the baker's baking rights. When a block is produced, a small tez reward is minted and given to the baker. As the delegated funds contribute to the baking power, the baker pays a reward back to the delegator. This is a manual process and requires an arrangement between the baker and the delegator.

One problem is that the small tez reward is a fixed amount, so up until recently the Tezos blockchain was subject to a fixed inflation rate year-on-year.

Recently, Tezos adopted the ParisC protocol which includes Adaptive Issuance. This is a fancy Earth term for the mechanism of issuing rewards. The rewards given for baking blocks change in relation to the network. Also, the protocol encourages its users to freeze more coins and increase the security bond of the bakers. In an ideal world (like Planet Staketon) 50% of the tez on the network would be frozen.

Now the everyday citizens of Tezos can also stake their coins. First, they choose a baker by delegating to it, then they can stake coins up to their balance. The staked coins now form part of the baker's security bond and contribute to the baking rights. The unstaked coins are still considered to be delegated but contribute half as much to the baking rights as the staked coins.

Why stake?

Prior to staking on Tezos, users were encouraged to delegate their funds to that they received rewards from bakers and kept up with the network inflation.

The Tezos protocol encourages users to adapt their stake by adapting the rewards received for staked funds. Roughly speaking, when the network percentage of stake is low, the rewards for stakers are higher. When the network is approaching the target of 50% funds staked, the rewards will be lower. Over time the network will adjust the rewards to incentivise staking depending on the network stake.

The rewards for staking are usually higher than that for delegation because the baker is rewarded half for delegated funds versus staked funds. Note that the rewards for staking are paid automatically by the protocol. This means you can find a baker who accepts stakers, stake with them and not have to agree anything outside of the network. The baker may still spay you delegation rewards but this remains a manual process.

Ok that was a lot of information - so why should you stake? By staking you are:

automatically getting rewards on your staked funds without hassle,
participating in the security of the network,
thus keeping decentralised network activities safe and being a good Tezos citizen.

Also, at the time of writing, the staked fund ratio is low and so the incentives for staking are higher. You can benefit by staking now. But as a rule of thumb, if you are not delegating, you should be because you are missing out of rewards. If you are delegating and you are not staking, you will be receiving less rewards.

Choosing a baker to stake with

Bakers that offer delegation and staking services are listed on the tzkt block explorer.

For delegation rewards you rely on the baker paying manually so you should carefully review the feedback for each baker. There is little risk in delegating your funds other than your chosen baker might not pay you the rewards.

For staking you can rely on the Tezos protocol to take care of the reward payments automatically. The block explorer will tell you how much fee the baker will take from your rewards. For example, if you look at my baker you will see these values on the left:

This means my baker will accept 5 times the amount of stake it has and will receive 10% (0.1) of the rewards attributed to your staked tez. Your wallet will receive 90% of the rewards.

If the Staking over baking limit is 0, then the baker does not accept staking requests. If the limit is above 0 but the edge of baking over staking is 1 (100%) then the baker accepts staking but takes all the reward. This might not be what you want from a baker.

Also, it is a good idea to check that your chosen baker has space left for your stake. If a baker is overstaked you may not get as many rewards. For example, here you can see that my baker has 28k tez capacity.

Is my stake at risk?

Your stake contributes to the security deposit on the baker. Therefore, you need to make sure that you are comfortable that your baker can operate properly. If they behave badly on the network, your staked funds are at risk.

The biggest risk factor is double baking or attesting. This happens when the baker's wallet is used to sign two blocks at the same level, splitting the chain. This usually happens when the baker has a misconfiguration in their infrastructure or if their wallet has been compromised somehow.

Fortunately most bakers take precautions against double baking by protecting their wallet with a remote signer. We have not seen double baking on Tezos since 2021 and the reasons for the incidents are understood. However we did see incidents of double attesting recently in May, so it is as well to be aware of the risks.

If you are worried about this, choose a well-known baker or contact them first and ask them about their infrastructure before staking with them. The Tzkt bakers list has contact details for public bakers.

How to stake

Staking with the Temple Wallet is very easy. If you don't use Temple, you can stake by connecting your wallet to either TezGov or the Staking Dapp.

Open your browser and run Temple Wallet. Select the wallet you want to stake and go to the tokens tab. You may find it useful to use Maximise View. Here I am using my not so top-secret Earth slush fund.

Click the TEZ line and choose the Delegate & Stake tab.

Press the Delegate & Stake button. You can choose a known baker from the list. The list of bakers is kept up to date from tzkt.

If you are a beginner it's better to choose from the list. However as I am an impartial superhero, I will use my own baker. You can input a Tezos address or use a Tezos domain. I am using my Tezos domain captstake.tez. Once you've chosen your baker, press Delegate.

Temple will warn you if it does not think the baker is a known one. As I said above, if you are a beginner it is probably best to pick one from the list.

You will need to wait to confirm the delegation. This takes no longer than 20 seconds. Once done, you have delegated your funds to a baker. If you just want to delegate you can stop here. But we came here to stake right?

Now return the Delegation & Staking tab and you will be able to stake your tez:

Press the Stake button, then choose the amount you want to stake. You cannot stake everything because you need a bit of surplus for fees to stake. It is also wise to leave a small amount in case you want to unstake later. We have 10 tez and we will stake 9 tez.

Then I confirm the operation:

And that's it folks, I've staked some tez. Changes take 3 Tezos cycles to take effect which is currently about 3 of your Earth days since Rio. The change was made because a cycle is 1 day on the Planet Staketon and you earthlings were trying to kept up. Who would have guessed?

You can stake more tez by repeating the procedure above. You can stake as much as you want, leaving a little amount for fees.

How to unstake

At any time you can unstake your tez, but you will need to allow for 4 cycles before you can use your funds. To unstake using Temple, open your browser and wallet. Then go to the Tokens tab, the TEZ line, choose Delegate & Staking as with the Staking section above.

Click the Manage button.

Then click Request Unstake.

Choose the amount you want to unstake. If you want to unstake everything, you can click the underlined amount shown as available. Then click Unstake.

Now confirm the operation by pressing Confirm. Next you need to wait 4 Tezos cycles which is about 4 of your Earth days. The funds are still locked because they are still contributing to the network. After 4 cycles, you can unlock them by finalising the unstaking.

Your unstake requests will be listed in the Staking interface as above. You can monitor the process on the block explorer on the Unstake Requests tab.

When the 4 cycles have elapsed, the block explorer will show that the amount is finalisable:

You can use the Temple Delegation & Staking menu to finalise. Click the Unstake button:

Then confirm the operation by pressing Confirm.

It may take a little while to confirm the transaction but it will be reflected in the Temple wallet menu.

The funds are now spendable again. Of course, you can stake them again if you change your mind.

Are there any other docs that I can read?

Of course citizen, there are many documents including:

How to Stake - the techies at Nomadic Labs wrote this guide to staking.
Adaptive Issuance in Paris - the same techies up to their tricks!
Quick Start Guide for Adaptive Issuance - a guide designed for bakers.
A Walkthrough of Tezos’ New Staking Mechanism - an early guide to staking written by another Tezos superhero.
New Staking UX for AI - a super dev hero has made a video.