Tezos (XTZ) has introduced a revamped staking experience with the Paris protocol upgrade, which provides new opportunities for participants to secure the network and earn rewards. This comprehensive guide explains how to bet on Tezos, different betting scenarios and their implications, according to Tezos Spotlight.
Setting out and baking: an overview
When you bet on Tezos, you choose a baker and have your money contributed to that baker’s stake. This money remains in your account, but is frozen and subject to economic sanctions, known as slashing, if the baker misbehaves. Baking, on the other hand, involves running a machine that participates in securing the network, producing blocks, maintaining consensus, and voting on governance issues. Bakers receive rewards that are proportionate to their commitment to their work and the associated risks.
Delegation versus direct commitment
Delegation allows users to contribute to a baker’s efforts without freezing their funds. However, delegated funds carry only half the weight for receiving baking privileges and rewards compared to directly staked funds. In addition, rewards from delegated funds are paid to the baker, who may or may not redistribute them to the delegators.
Becoming a striker
To start staking, users must delegate their account to a chosen baker using the ‘set delegation’ command in Octez or through their wallet interface. After delegation, users can add a stake using the ‘stake’ command. Removing the stake involves the ‘unstake’ command, and switching bakers automatically unstakes all funds, which remain frozen for approximately 11 days before they can be completed and re-staked.
Understanding rewards
Wagering rewards are paid out to the staker’s account and automatically become part of their stake. The reward rate, which can fluctuate between 0.25% and 10% annually, is determined by the Adaptive Issuance mechanism. This mechanism adjusts the reward percentage based on the share of tez deployed, aiming for a target of approximately 50% of the total supply.
Manage overload
Overstaying occurs when the total stake exceeds a baker’s limit, resulting in lower rewards for all stakers. Bakers can accept up to five times their own stakes from third-party stakers, but any amount above this limit is treated as delegated and only earns half the rewards. It is critical that strikers monitor their baker’s capacity and ensure they are not contributing to overstaying.
Practical scenarios
Take a baker named Brian, who stakes 4,000 tez and sets a limit of 20,000 tez for outside wagering. If two stakers, Susan and Simon, each bet 10,000 tez, Brian reaches his limit. However, if a third staker, Sarah, adds another 10,000 tez, Brian becomes 50% staked. This scenario illustrates the importance of monitoring betting limits to avoid lower rewards.
Ensuring optimal deployment
To optimize rewards and maintain network health, stakers should regularly check their baker’s capacity, limits, and policies. Any change in the baker’s deployment can impact the overall deployment scenario, so continuous monitoring is essential.
For more information and community support, users can visit the Tezos Agora forum. Happy staking!
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