As interest in cryptocurrencies grows exponentially, more people are exploring the benefits of staking crypto.
When cryptocurrencies first emerged, investors bought tokens to HODL or trade. If you HODL crypto, you are waiting, perhaps for several years, for the crypto to gain in value so you can sell for a profit. You might hold your crypto for five years or more and make little to no gains during that time.
Most first-generation cryptos used a proof of work (PoW) consensus mechanism, and many still do, including Bitcoin. PoS requires miners to create blocks and validate transactions.
Cardano (ADA) were the first cryptocurrency to launch with a proof of stake (PoS) consensus mechanism so that HODLers could buy Cardano (ADA) and stake it, earning annual rewards for as long as they delegated their holdings.
PoS consensus removes the need for miners. Anyone delegating their crypto tokens helps secure the network.
Many cryptocurrencies now use PoS consensus, which means a broader world of cryptos to buy and hold for rewards. Terra (LUNA) is one such cryptocurrency and, in this article, we will look at how to stake Terra (LUNA) so that you can reap the rewards from buying and holding this interesting crypto.
- What Is Terra (LUNA)?
- Who Founded Terra (LUNA)?
- What Makes Terra (LUNA) Unique?
- How To Stake Terra (LUNA)
- Conclusion For How To Stake Terra (LUNA)
What Is Terra (LUNA)?
Terra (LUNA) uses fiat pegged stablecoins for powering stable-price global payment systems. Terra has a white paper that suggests it combines the adoption and price stability of fiat currencies without the associated censorship.
Terra is a blockchain protocol that provides fast and affordable transactions.
Terra is the network, and LUNA is the native token used to stabilize prices for the protocols stablecoins. Holders of LUNA tokens can submit and vote on important proposals for the Terra network.
The Terra mainnet launched in April 2019. From September 2020, Terra offered stablecoins pegged to the United States dollar, the Mongolian Tugrik, the South Korean Won and the International Monetary Fund's Special Drawing Rights basket of currencies. And Terra has plans to roll out more options.
Who Founded Terra?
Daniel Shin and Do Kwon founded Terra in January 2018. They believed that the project could be a way to drive the exponential adoption of blockchain technology and cryptocurrencies.
The founders focused on usability and price stability, two things mostly missing from the cryptocurrency market. Kwon became the CEO of Terraform Labs, which is the founding company behind Terra.
Shin was the co-founder of Ticket Monster (TMON), which is a South Korean e-commerce platform. Later, he co-founded a startup incubator called Fast Track Asia. The incubator helps entrepreneurs to create and build fully operational companies.
Kwon was the founder and CEO of Anyfi, a startup that provides decentralized wireless mesh networking solutions. He also previously worked for Microsoft and Apple as a software engineer.
What Makes Terra Unique?
Terra uses fiat pegged stablecoins. From the start, the intention was to blend the uncensored benefits of cryptocurrencies with the daily price stability of fiat currencies. Terra uses an algorithm that keeps a one-to-one peg, automatically adjusting supply and demand.
Terra incentivizes LUNA holders to exchange their LUNA at profitable exchange rates, which helps the price of stablecoins to adapt as needed to supply and demand.
The Terra Alliance supports Terra by advocating for the adoption of Terra (LUNA). To date, the Alliance reports a membership base of 45 million users on e-commerce platforms across ten different countries, and with a $25 million gross merchandise value.
How To Stake Terra (LUNA)
You've decided you'd like to buy and delegate your Terra LUNA and start earning staking rewards:
But how do you stake Terra (LUNA)? Is it difficult to stake Terra (LUNA)?
It's pretty easy, so below, we've put together a step-by-step guide to show you how to stake Terra (LUNA).
1. Buy Terra (LUNA)
Find a reputable online cryptocurrency exchange such as Binance, Kucoin, Bitfinex or Coinbase and buy your LUNA coins.
Decide on the number of LUNA coins you wish to delegate and only buy what you can comfortably afford.
2. Download Terra Station
You can download the Terra Station desktop app from the Chrome Web Store. Once downloaded, open the app and click on 'connect', and a pop-up window will appear with a choice:
- Access with ledger
- Select wallet
- New wallet
- Recover existing wallet
- Import private key
3. Click on 'New Wallet'
Follow the prompts to set up your new Terra Station wallet, and be sure to write down all the wallet details correctly in a safe place.
4. Transfer your LUNA to Terra Station
Go to the platform where you purchased your Terra (LUNA) and find your way to the transfer option. It's different for all platforms but usually easy to figure out.
Enter your Terra key given to you when you created a new wallet and transfer the amount of Terra (LUNA) you wish to put in your wallet.
For security reasons, it's advisable to keep your (Terra) LUNA safe in your wallet rather than on an open exchange where it is at risk from hacking.
5. Click the 'Staking' tab
On the left of the page in the Terra Station app, click on the staking app
6. Select Your Validator
When you stake your (Terra) LUNA, it is known as delegating, and you cannot sell your LUNA for three weeks after you have undelegated (stopped staking).
If you intend to do short-term trading, delegation may not be your best choice for Terra (LUNA).
When choosing your validator, you can check uptime, validator commission and self-delegation. Assess these details carefully before deciding upon a validator for your LUNA tokens.
Here's a quick explanation.
Uptime – these details tell you how often the validator is online. Why is that important? Well, if they are offline, they aren't working to earn your rewards. It's as simple as that.
Look for validators with a 100% uptime.
Validator Commission – ideally, find a validator with zero commission charges, usually most new validators. A validator with trusted history typically takes a 5% commission. You might only be happy paying more commission if the validator is Angel Protocol, which means the commissions go to a good cause. But this is your choice.
Self-delegation – look for a validator that has staked LUNA because this means it's a real person or team, and it serves their purpose to work towards a good result with plenty of rewards from staking Terra (LUNA).
7. Click on 'Delegate'
Once you are happy with your choice of validator, click on the delegate button and confirm where you are transferring your LUNA from and how much LUNA you wish to delegate.
After re-entering your password, you have officially staked your LUNA.
Now, all you have to do is monitor your rewards, and that's it. No further work is required.
Conclusion For How To Stake Terra (LUNA)
It's easy to buy Terra (LUNA), set up a secure wallet, and delegate your stake.
Terra (LUNA) provides a valuable service for decentralized, stable price global payment systems.
Using fiat pegged stablecoins, Terra has combined the benefits of cryptocurrencies with the price stability of fiat currencies. It has the technology to adjust and stabilize prices according to supply and demand.
Price stability has always been an issue for the volatile cryptocurrency market, so Terra (LUNA) provides a much-needed improvement to the crypto industry.
Terra has already collaborated with several partners and is dedicated to further developing the adoption of Terra (LUNA) across the globe.
Daniel Shin and Do Kwon have a combined wealth of experience and a mission to change the face of global payments, pegging to, but without the centralized restrictions of, fiat currency.
Please note that the above information is not providing advice on tax, investment, or financial services. We provide the above information without consideration for risk tolerance and a specific investor's financial circumstances.
Trading or investing in financial instruments such as cryptos may not be suitable for all investors. It does involve risk and the possibility of a loss of capital. There are no guarantees for profiting from cryptocurrencies, and it's advisable only to risk what you can comfortably afford to lose.
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How Do I Earn Rewards For Staking Terra (LUNA)?
You earn rewards from staking Terra (LUNA) because your validator does, and you have invested in that delegator.
If the validator doesn't work, you gain no rewards. Because Terra (LUNA) is a proof of stake (PoS) consensus, the validator helps secure the network, and in return, Terra pays out LUNA reward tokens.
How much Terra (LUNA) do I need to stake?
There is no minimum requirement for staking LUNA as a delegator.
How much can I earn staking Terra (LUNA)?
You can earn up to 9% APY from staking Terra (LUNA).
Is it worth staking Terra (LUNA)?
Only you can decide if it is worth staking Terra (LUNA) because it depends on your risk tolerance and expectations.
There are no guarantees for an outcome from staking Terra (LUNA) but, if you are happy to delegate your LUNA tokens for a period, the rewards could be worth it.
How long does it take to unstake Terra (LUNA)?
It takes 21 days from initiation to unstake/undelegate your LUNA.
During the 21 days, you will not earn rewards, and you cannot exchange, spend or transfer your LUNA.
How Many Terra (LUNA) Coins Are There in Circulation?
Terra has a strict supply of 1 billion tokens. If the number of LUNA in circulation exceeds this amount, LUNA is burned until it restores to the requisite supply level.
The protocol's algorithm mints New LUNA tokens as needed, so the price of Terra stablecoins is maintained.
How Is the Terra Network Secured?
The Terra blockchain uses a proof-of-stake (PoS) consensus mechanism to secure the network. LUNA token holders validate transactions by staking their LUNA as collateral. In return, token holders receive rewards relative to the amount of LUNA staked.
Can I become a Terra (LUNA) Validator?
You probably could but whether you'd want to is another question.
Validating Terra (LUNA) even with the PoS consensus mechanism is risky, expensive and complex. You are responsible for your delegators LUNA, and there can only be 105 Terra validators activated at any one time.
So you'd need to stake a lot of LUNA. For instance, the latest validator has 374,000 staked LUNA, which at today's market price of $52.28, is worth over $1.9 million.