How to Earn Staking Rewards on Polkadot while Storing it Safely on your Ledger.
The DIFFICULTY LEVEL of this Guide is MEDIUM.
A beginner can definitely do it but there are sure to be a few new concepts and processes. It might take around 25 —30 minutes to complete everything.
Until all too recently, I had DOT stored on Celsius in a custodial account. It earned about 9% annually and I received a small interest rewards payment every Monday.
Luckily, I was able to move it all into a private wallet before things went sideways — but earning rewards by staking DOT just seems like a good option to have and a wise move for holding a crypto over a longer term.
Exodus (my wallet of choice) doesn’t support staking for DOT yet.
This is where Ledger Live comes in. I can sleep peacefully knowing that I’m not walking around with all my crypto (DOT in this case) in an app on my iPhone or sitting on a centralized exchange.
Earning 14% APY by staking it while storing securely on my Ledger Nano X is easily the best combination of all options.
In this step-by-step guide I’m going to walk through exactly how to set all this up. Starting with Ledger Live, adding the Polkadot wallet, bonding, and choosing the best validators and to earn staking rewards.
We’ll also talk about unstaking.
I’m using a Ledger Nano X and MacBook Pro.
Here’s what you’ll need:
You’ll need to have a Ledger Nano X (or Model S).
Also a computer.
I’m using a Ledger Nano X and recommend it. The X holds way more apps and cryptos and it can connect to a mobile device using Bluetooth.
You can also use a Ledger Nano S if that’s what you have. The only advantage of the S is that it’s less expensive. But again, I think the extra cost of the upgrade to X is well worth it.
You also need an account set up on Ledger Live that you can use to connect your Nano and transfer DOT to.
You’re going to need at least 10 DOT. Either by buying it or transferring it over from another wallet in Step 2.
A secure internet connection should almost go without saying.
Always do a test transaction first.
This will just ensure you have the correct wallet addresses and information. The fees are minimal.
I recommend making a habit of doing this with whenever you’re sending/receiving crypto with a new wallet or even sending to someone else.
Know the Lock-up periods.
Some cryptos will let you access your funds a day or two after you unstake. Others take weeks, or in the case of ETH it could be years. So just be aware of this going into it and make the decision based on how quickly you think you might want to use or sell these assets.
Know how long it takes to un-stake
This is different from the lock-up which is not-negotiable once you start staking. Once your lock-up period has ended you can unstake, but this doesn’t mean you’ll get your assets back right away. It’s still going to take time for the unstake to happen — usually a day or two.
Decide when you’ll take profits
This advice seems straightforward enough but I wish I’d had it a few times as I waited the last few bear marketings. You don’t want to HODL forever. At some point it’s going to be worth it to take profits and reap the benefits of a good investment.
As Rob over at Digital Asset News likes to say “Nobody ever went broke by taking profits.”.
He’s not wrong.
You should be familiar with these basic concepts before you go much further.
What is Staking?
In the simplest terms, staking means locking up some of your crypto (in this case DOT) in order to earn interest or rewards. These rewards vary according to the crypto and are a result of your tokens being used to help ensure that transactions are verified and secured (without a bank or payment processor in the middle). This is called Proof of Stake.
What is DOT?
DOT is the token that powers the Polkadot blockchain network.
Polkadot is designed to connect different blockchains together and allow them to exchange information.
Read all about Polkadot here.
What’s a Ledger Nano?
Ledger is the leading brand of cold storage crypto wallets. They have two models in their lineup: The Ledger Nano X and the Ledger Nano S Plus.
The Ledger Nano X is an upgrade over the Ledger Nano S Plus mainly because it holds more data (more apps/cryptos) and it has the option of connecting to a smartphone via Bluetooth. Worth the cost of the upgrade in my opinion.
These private crypto wallets allow you and only you to access the crypto on them— unlike centralized crypto exchanges.
As we like to say:
Not your Keys —
Not your Coins.
Cold storage means your crypto (Private Keys) are stored on a USB-like device that isn’t online when not in use. You connect them to your computer/phone and enter a PIN whenever you want to use them.
Ledger Live is an application that allows you to manage your crypto. You can buy, sell, exchange and stake using it. It’s available for both desktop and mobile and they sync together so you can use both simultaneously.
How much can you earn by staking DOT?
As of today it’s 13.9% APY (Annual Percentage Yield).
Calculate your potential earnings using the current rates on StakingCalculator.com.
Step 1 —
Install the Polkadot app to Ledger Live and onto your Ledger Nano
Assuming that you already have a Ledger Nano and that Ledger Live is all set up — you’re ready to install the Polkadot app.
Instal the Polkadot app on your Ledger Live and Ledger Nano.
Open Ledger Live and connect/unlock your Ledger.
Make sure you’re running the latest versions of everything. There might be a prompt to update your Nano.
Do this first.
Go into My Ledger to verify your version.
Then once your update is complete, search for Polkadot in the My Ledger / App Catalog search field (or you can find it Accounts / Add Account).
However you get there, find Polkadot and click install.
Confirm that you want to download the app with your device.
Give this account a name like “HelloPolkadot” or “Polkadot1” or something.
Confirm this new account using your device once gain.
Step 1 is complete once you have your new account set up. You’ll need to have some DOT in order to stake it.
Step 2 —
Add Funds to your Polkadot Account
It’s time to move some DOT onto your Ledger Live account. Then you’ll Bond it for staking.
Click on your newly created Polkadot account.
You’ll see a message “No crypto assets yet?”
Now, you’ll either buy some DOT from a crypto exchange or transfer some that you already own to Ledger from another wallet. Depending on where you are, you can even buy crypto right in Ledger Live (not in the USA unfortunately)
Note: There’s a 10 DOT minimum for staking.
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Let’s assume that you’ve already done this and move on. Otherwise you’ll have to go through it and come back.
Receive address rejected
If you see this error it just means you need to log in on your device (Nano) again.
Once you sign back in, you can copy the text from your Ledger Live to paste it (or scan the QR code) into your other exchange account.
Verify this on your device. Look at the first few and last few numbers to make sure they match.
Go over to the wallet where you have your DOT.
I have some on Exodus (the best crypto wallet) and so I’ll go there, into my Polkadot account and choose Send. It could also be called Transfer Funds or Withdraw. This action is usually represented by arrows pointing up / away… as opposed to Receive or Deposit which is a downward arrow. Back and forth arrows means Exchange.
Paste the address of your Ledger so the Exchange knows where to send it. Do a quick check of the first few and last few characters of the address. 👀
Staking Rule 1 — It’s always worthwhile to do a test transaction just to make sure you have the addresses correct. It costs very little in transaction fees and doesn’t take long so it’s worth it for the peace of mind.
Send the small amount for your test transaction. Maybe 3 or 4 DOT. There will be a small fee — approximately .05 DOT or so.
Add a description if you want for your records. You could add “Ledger” if you want to clarify this transaction for future reference.
Once it arrives in your Ledger Live account you’re ready to send the rest.
Now that your DOT is on your Ledger you’re one step closer to earning rewards.
Step 3 —
Bond your Assets
Now you’ll Bond (lock up) your DOT while it’s being staked.
At the bottom of your Ledger Live Polkadot account you’ll see Earn Rewards.
Note: Bonding doesn’t mean you’ll lose control of your assets — they are all still managed by your Ledger where you alone can control them. The DOT you will stake never leaves your possession, but you can’t use it or spend it while it’s bonded.
Staking Rule 2 — Understand the Lock-up Period
In this case, bonded assets can be unbonded at any time, but unbonding will take 28 days.
Decide how much DOT you want to Bond.
Note: Do not Bond all of it. Keep around 4 or 5 DOT available for transactions.
Enter your amount.
Before you continue you’ll need to decide what you want to do with the rewards you’ll earn. You can either keep adding them to your Bonded Balance and earn on them as this grows, or they can be added to your Available Balance where they will be available for you to spend or take profits. It’s up to you.
Decide and Continue.
Confirm on your device.
One your assets have been successfully bonded you will be able to nominate validators and start earning. It should take less than a minute.
Step 4 —
Evaluate and choose up to 16 validators.
Validators are pools of assets. You’ll delegate your assets to them and they’ll pay you rewards.
Not all validators are created equal and this part will take a bit of effort on your part.
Go into Ledger / Polkatdot and choose Stake from the top right.
In order to decide between validators there are a few things you’ll need to look at.
You’ll see a list of the validators that you can nominate from.
The first thing to look at is Commission rates
Obviously don’t choose a validator that charges 100% because that means you’ll get zero. Somewhere around 1—3% might be reasonable though. You can see the rate over in the right hand column.
Using live data available on polkadot.js.org you can see all of the validators that are available right now and compare them in a number of ways.
Looking at the Staking / Targets you’ll see that you can adjust the data by filtering the options along the top row above the listings.
One validator per operator — turn this on. It basically means that there is more decentralization
Commission < 10% — turn this on too. No reason to pay more than a few percent in commission.
With capacity — turn it on. This means that the validator is not oversubscribed. Look for the oversubscribed icon.
Nominating on Polkadot is an active role. If you just “set it and forget it” you may stop earning rewards if you don’t notice that some of your validators became oversubscribed.
To make sure you’re not losing out on rewards, keep checking your validators and choose new ones if necessary. Check whether you are nominating an oversubscribed validator here.
Recent payouts — I turned it on. It’s up to you
Currently elected — turn this on.
With an identity — it gives you some assurance that it’s a real entity if they list their contact information. The identity can be seen on the right side and then the address copied over into Ledger Live if you choose to add it to your validator nominations.
Look at a few of the validators and find ones that match all these criteria.
Approve (up to) 16 of them on your device. Broadcast the transaction.
Also, look at the Total stake / Own stake / Other stake
Here you can see how much DOT a validator has staked within their own pool. It seems reasonable to go with someone who has some skin in the game.
Read more about all this on this official Polkadot Guide— How do I know which validators to choose?
And that is it, you’re done.
It will take a day or so before you start seeing any rewards.
When you want to unstake, you’ll first need to unbond first. You can do this in your Ledger Live / Polkadot account in the Staking section.
Remember that this will take 28 days.
You’ve achieved something pretty significant here. You not only are staking and earning around 14% on DOT, you understand the process and how to choose validators, and importantly, you are keeping ownership and control of your assets the entire time by using a Ledger Nano.
Next you might want to look at staking other cryptos like ETH or ATOM.
ATOM earns even more than DOT — almost 19% at the time of this writing.
Finally, feel free to share this Guide with someone who can use it.
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