Polkadot Yielding Opportunities:
Staking that DOT
Disclaimer: I am not a certified account, lawyer or financial advisor. Everything I write is for educational purposes. Before conducting any of the information here, be sure to consult an expert on the topics here before executing them.
In my last article, I discussed the features of Polkadot, its comparison to Cosmos and some brief and simple money making opportunities in Polkadot. Although I play favoritism towards Cosmos, I still think Polkadot could be a great opportunity. So why the hell would I overlook it? As author of this blog, it is my duty to find all the nooks and crannies where opportunities can be found. There are some difficulties that come with staking DOT so I decided to create this article to cover some of the areas.
Possible Gemini Earn launch
Recently as of writing this article, Gemini added Polkadot to their exchange. A while back in an interview, I remember Tyler and Cameron Winklevoss discussing why ethereum was the only smart contract blockchain coin on their exchange. Their answer was simple; Ethereum represented 90% of the entire crypto ecosystem and wanted to see how these other blockchains would pan out and develop.
With DOT added, there is a very strong chance DOT is being seen as blue chip cryptocurrency. I remember back in the Crypto Mindset Course Q1 2021, Charlie and Miguel were discussing DOT as a “light” bluechip, a cryptocurrency with strong sticking power. Especially with a possible competition for governance rights on Polkadot, we can easily see Gemini lending DOT for some yield.
However, Gemini currently doesn’t offer Polkadot on their Gemini Earn Program. This is purely speculative. However, I don’t think it would be out of the realm of possibility. When you consider cryptocurrencies like BTC, LTC, ETH, SOL, XTZ, FTM are offered on their earn program, it wouldn’t be outlandish that we see DOT added.
Staking with a validator
Given this is a Proof of Stake chain, securing the network with your crypto is a very important feature. This means you can get yield for the coins you own. However, in my previous article, I mentioned it can be very complicated to actually stake your polkadot and will require you to be very attentive to your stakes. In addition, there is a minimum staking requirement to participate.
If you want to simplify your life, an easy way to do this is to use the fearless wallet. When I was initially staking my Polkadot, I was using the fearless wallet. I found it extremely easy and intuitive to use and took a lot of the heavy work out of researching validators.
You should look at the Polkadot js Wallet supported by the web3 foundation; the institution that created and founded Polkadot and Kusama. I had mentioned how complicated it can be to stake Polkadot. I don’t want to go into too much detail in this blog post. If you want to learn more about staking polkadot or kusama, check out the wiki.
Stafi (Staking Finance)
This is a really cool app running on polkadot. The prime purpose of this dapp is to create synthetic assets based on a series of staked assets. What is even cooler is that this is an app running on Polkadot which will be seeking a polkadot parachain auction. If you are interested in the larger polkadot ecosystem, you should be paying attention to this project.
When dealing with proof of stake networks, there is an inherent dilemma; You can either use your coins to secure the network or you can use your coins to engage with the network. When doing research on projects, I hear complaints about this problem. The use of Liquid Staking is becoming more and more popular in development. What liquid staking does is create a synthetic copy of an asset when you choose to stake with the protocol. This way the underlying asset yields and secures the network while having assets to swap and make transactions or lend it.
Ankr Protocol
I should mention this just so you are aware of it. Ankr is another liquid staking protocol like Stafi. At the moment, they are developing a new protocol for staking DOT. I am simply bringing it up for your attention.
Lido
The Lido app is known for making ethereum staking available to the ordinary person. However, they do have liquid staking for other ecosystems, including Polkadot. I should note that staking with Lido does take a new learning curve but the protocol does make it reasonably simple to follow.
The first thing you must know about the Lido polkadot liquid staking protocol is that it is a smart contract that runs on moonbeam. You might be asking “what is moonbeam?” Moonbeam happens to be a layer-1 blockchain using the ethereum virtual machine on a polkadot parachain. Upfront this is a problem. On Moonbeam, you pay for transactions in GLMR coins, not DOT. In addition, your DOT is not an ERC-20 token that can be moved around on the Moonbeam chain. The roundabout solution is to create an erc-20 token representing 1 dot known as xcDOT. xc happens to be the token nomenclature standardization used on moonbeam.
In order to use this protocol you need to do the following:
1)Send some Polkadot to your polkadot.js wallet. Make sure on the right hand side of your account, you have settings set to “polkadot relay chain.”
2)Go to https://polkadot.lido.fi/ to get to the staking page, and hit the transfer tab. This will allow you to convert the DOT in your polkadot.js wallet to a xcDOT in your metamask.
3)Instruction 3 is for those without any GLMR in their metamask.
3a.1) You will need to get some GLMR. You can get some GLMR by either using a faucet such as https://glmr.supply/. This is just enough GLMR to do one or two transactions.
3a.2) Go to Stellarswap and bridge some assets from either Ethereum, BSC, Polygon, or Avalanche. Then go to https://app.stellaswap.com/bridge/gas-swap and press the try faucet link. Put in the transaction hash that you bridged your asset into the then press request GLMR. This is just enough GLMR to do one or two transactions.
3b) Go to Stellarswap and swap some xcDOT for at least 1 GLMR.
4) Then go to the stake tab at lido finance and select how much xcDOT you want to stake.
Acala
You might have looked at the staking with Lido and saw the process a little more complicated given that it is harder to onboard directly into the moonbeam ecosystem. If you didn’t provide any DOT for the parachain slot auction, you likely have no Acala(ACA) coins to use. Luckily Acala is a far more simple dapp to use. I will even argue that it is superior to LIDO staking.
Using Acala for transaction fees is a choice. Unlike Moonbeam where you NEED GLMR coins. In Acala, you can choose between Acala or some other supported coin, including DOT. This makes onboarding into the acala network a breeze.
Another feature that makes staking with Acala superior is the bonus rewards. When you stake your DOT with Acala, you receive LDOT in return. Then you can do a “collateral stake” which pays you additional coins, adding an additional APY on your DOT greater than staking on chain.
Parallel Finance
Parallel Finance is a cool dapp like Acala. It also has a liquid staking program very similar to Acala. Not only do you get the staking rewards for staking your DOT, you get additional rewards in PARA tokens, the tokens native to Parallel finance. Unlike Acala, you need to make transactions with the PARA token. I don’t even know how to get the token. If you didn’t contribute to the parachain auction, you're shit out of luck.
Concluding thoughts
The benefits of staking your DOT can be a boon if the ecosystem ends up thriving. As more economic activity occurs, the more value the polkadot coins itself obtains. As of right now, it is far behind in development in where it needs to be. However, this is not end of my research into the Polkadot Ecosystem.