Steps

Step 1: Generate Stash and Controller accounts

This step can be done using a Ledger hardware wallet, or the Polkadot extension.

1. Stash Account is a cold wallet that holds funds. It decides how much funds are bonded and has its stored funds bonded to a Controller Account.
2. Controller Account acts on behalf of the Stash Account to nominate and validate. It also sets preferences such as payout accounts and commission and acts as signing accounts that dictate governance.

Step 2: Bond Tokens via Polkadot-JS UI

1. Selecting the amount you wish to bond.
2. Choose payment destinations for reward distribution, such process will be executed with the Controller Key while the tokens will be bonded in the Stash key:
   1. If choosing “Stash account (increase the amount at stake)”, the reward will be compounded, bonded, and hence subject to 28 day bonding period.
   2. If choosing “Stash account (do not increase the amount at stake)”, “Controller account” or “Specified payment account” for payment destination, the reward will not be bonded and will be liquid.
3. Once bonded, staked principal will be subject to 28 day bonding period.

Step 3: Nominate a validator via Polkadot-JS UI

1. A nominator can nominate up to 16 validators.
   1. If run your own validator, you need at least 1.804MM DOT (as of May 2021).
2. Once selected validators, nominations will be active in the next era (~24h), which will be the period when validators are elected for block production.
   1. Only the elected validator and its pool will receive rewards.

Step 4: Reward Distribution

1. The reward is distributed to validators in each era (~24h).
2. Equal block rewards are paid to validator pools regardless of the total amount staked in the individual validator pool, meaning pools with less stake will generally pay more to the nominators than pools with more stakes. A pool is a term for a validator and its nominators.
   1. A percentage of the total reward from Blockdaemon’s validator pool is paid to Blockdaemon as a commission.
   2. The remainder is paid proportional to the amount staked by nominators.
3. Reward compounds or not:
   1. If you choose payment destination as "Stash account (increase the amount at stake)", rewards are compounded and subject to a 28-day bonding period.
   2. If you choose payment destination as "Stash account (do not increase the amount at stake)", rewards are not automatically compounded, but such settings can change at any point and time.

Step 5: Claiming rewards via Polkadot-JS UI (manual reward trigger and unbond)

1. Rewards are claimed and distributed to nominators by the Blockdaemon team once a week.
   1. You will be able to self-claim your rewards more often by using the polkadot-js UI. You will be responsible for paying the transaction fees for the claim if done this way.
   2. If you choose to compound the reward in step 2, the selected amount of reward will be subject to a 28-day unbonding period, during which the unbonded DOTs cannot be transferred nor accrue staking rewards.

Key Management

“Controller” and “stash” keys are essential for nominating on the Polkadot network. Both act as different types of account keys with different uses.

Controller Key

The controller key has the power to start or stop participating in the staking process. The controller key always remains in control of the user, while being semi-online. Controller keys require some DOT to cover transaction fees, yet should not be vested with large amounts of funds due to their semi-exposure to the wider internet on a regular basis. Controller keys grant control over participating in Polkadot’s consensus mechanism on behalf of the user’s stash account.

Staking Proxy Account

With the controller account’s permission, a staking proxy account can sign for the controller account in staking and governance votes but not transfer funds. At any time the controller account can replace its staking proxy account.

Stash Key

The stash key is a cold wallet that should never be exposed to the internet. It represents a large number of users’ funds as it is security protected in this way. Anyone willing to participate in staking must bond their staking key to their controller. This means that the controller key will represent the full stake of the users’ stash when it comes to performing actions on the blockchain, such as nominating, staking, and voting. This separation is designed to protect users’ funds as they participate in on-chain activities. However, an attacker gaining access to the control key may still be able to slash, meaning this key should be changed regularly.

Validator Requirements

Becoming a validator requires upfront skills and knowledge. Both reputation and finances are at risk when becoming a validator, as a poor-performing validator can suffer slashing and no nominators. Blockdaemon’s validator staking services guarantee strong performance on a consistent basis. Furthermore, all funds are insured against slashing, meaning finances are never at risk. This means peace of mind and return on investment for participating in Polkadot’s decentralization.

A full list of the requirements for becoming a validator can be read here.