Did you know Avalanche offers an opportunity for delegators to earn passive income by holding and staking their native token (AVAX)?
In this article, we are going to be discussing Avalanche and ways that we can make passive income by holding the AVAX token through staking.
Read: What Is Avalanche? – A Simple Guide
Disclaimer: This article contained in or provided from or through this website is not intended to be and does not constitute financial advice. The Information on this website and provided from or through this website is general in nature and is not specific to you, the user or anyone else. The information presented may not be current and could become outdated.
A Few Reminders
Let’s start with the basics. “Not your keys, not your crypto”
There is a huge difference between custodial and non-custodial staking. So before we go running off to earn our free AVAX let us break this down so we are all on the same page.
Custodial staking means that your hand handing over your crypto to someone else to stake it for you. This could be okay if you trust the entity you are handing over your hard-earned crypto to. But the whole point of crypto is to not have to rely on or trust third parties. If the entity you are trusting goes out of business, gets hacked or the owners decide to rug pull then you could be left with nothing; so remember, not your keys, not your crypto.
But your access to these staking services varies depending on your jurisdiction so make sure you look before you leap into this.
Kraken was forced to settle with the SEC and pay a $30 million fine in 2023 and that included a requirement that the exchange must shut down their staking-as-a-service program. If you are in the US, the SEC is working hard to make sure that non-custodial staking is your only option to earn staking rewards so you might as well start learning how it is done.
Read: Avalanche’s (AVAX) Firewood: A Game-Changer In Blockchain Data Management
Estimated Rewards Rate for AVAX and Staking Requirements
The current estimated reward rate for staking AVAX is 7.9% — that means that on average stakers of Avalanche are earning about 7.9% if they staked their tokens for one year.
A validator must take at least 2,000 AVAX to participate in the network consensus while to become a delegator you only need to hold 25 AVAX tokens.
The minimum period for staking is two weeks and the maximum period is one year for both validators and delegators.
Characteristic | Delegator | Validator |
Responsibilities | Passively stakes AVAX to a validator | Actively runs a node, validates transactions, and secures the network |
Minimum stake requirement | 25 AVAX | 2,000 AVAX |
Rewards distribution | Receives rewards from the validator they delegate to, minus a small fee | Receives rewards directly for their validation efforts |
Staking Options
As with most proof of stake networks you can stake your AVAX from a variety of different wallets — hardware wallets like Ledger are always a popular self-custody option.
But later in the tutorial we will try a new browser extension wallet called Core which just released their new public beta and is radically changing and improving the user experience for staking AVAX.
Read: Avalanche (AVAX) Technical Analysis: Will Bulls Defend The Next Support Level?
AVAX’s Main Chains
Let’s understand the chains or subnets on the Avalanche network that will be helpful later in the tutorial — they have three main chains that connect all of its subnets:
P-Chain: Manages validators and custom subnets.
X-Chain: The default blockchain for creating and exchanging assets.
C-Chain: Facilitates smart contracts and DApps.
AVAX Staking on Core Tutorial
1. Install the Core extension on your web browser.
2. Create a wallet and deposit at least 25 AVAX if you plan to delegate or 2,000 AVAX if you plan to become a validator.
Once you connect your Core extension wallet to Core web, navigate to “Stake” and then to the “Delegate” panel.
At this point you will see a prompt to “Learn More” which links to helpful additional information provided by the Avalanche team.
When ready, click on “Get Started” to proceed with delegating.
This is the point in the process where you really need to understand subnets and the different chains in the Avalanche ecosystem. In order to delegate, your AVAX holdings must be present on the P-Chain.
Based on the total AVAX available on the P-Chain in your wallet you can specify how much AVAX to delegate and click “Next”.
Core then gives users their choice of staking duration. The user interface even includes a yield curve to show estimated staking rewards for each duration.
But remember you have to stake a minimum of 25 AVAX for at least 14 days in order to become a delegator.
3. Select the node you want to delegate your AVAX
Users will then select the node they want to delegate their AVAX to. Validators charge fees to those delegating tokens and those fees represented as percentages are listed in the menu of possible nodes.
When you have chosen a node click “Select” and then “Next”.
4. Input a wallet address for any staking rewards to be delivered to
Input a wallet address for any staking rewards to be delivered to. Users can decide between their connected P-Chain wallet address or a custom address.
Core then flashes a summary of your delegating process and your selections — click “Submit Delegation”.
5. Confirm the transaction in the Core browser extension
Confirm the transaction in the core browser extension. Once completed users will see their delegation was successful and they will be able to view the transaction information by checking the Avalanche Subnet Explorer or return to Core.
Final Thoughts
And that’s it — you’re all set up to earn free AVAX on Core. With the current estimated rewards rate of 7.9% AVAX staking offers a promising avenue for passive income.