The Graph: Staking and Delegating GRT
The Graph staking rewards and transfers began when The Graph mainnet launched on December 17, 2020. If you are a GRT token holder, you are likely feeling lost. With good reason.
The Graph is, by far, the most complex staking network that we have encountered to date. We’ll start at the beginning, but you can jump ahead to understand more about staking-related things, like staking income. In particular you may be wondering how best to select an indexer to delegate your staked GRT to.
What is the problem that The Graph is going to solve?
The Graph is a decentralized solution to the problem of querying blockchains. If you want to use data on a blockchain, you’ll need to scan every transaction in every block to find the specific data that you need, and that’s slow and resource intensive. Indexing blockchain data, however, organizes and stores everything to reduce the time to query specific data. There are efficient indexing services that enable fast queries, but they are controlled by private, centralized entities. That means users must trust that there will be no critical failures, inaccuracies, or any other issues that may arise from one entity controlling access to critical information.
How will The Graph solve the blockchain data problem?
By incentivizing indexers to quickly, accurately and reliably answer blockchain data queries, The Graph will be a network protocol that indexes blockchain data in a redundant, decentralized way. Why is this important?
The Graph aims to be a blockchain infrastructure layer that enables apps to prioritize decentralization and still be performant. Perhaps most importantly, The Graph should be a powerful catalyst for composability, enabling two or more decentralized apps to integrate together. Composability means that decentralized apps can reliably operate in an interconnected way–working together and building upon one another to form a DeFi network, for example. Rather than DeFi apps remaining siloed or requiring developers to coordinate to integrate, these apps can work together quickly, easily and reliably using The Graph’s protocol.
Who will pay to use The Graph?
Decentralized apps (dapps) will likely pay for queries on The Graph, which could ultimately be paid for by the dapp users. Since the cost of each query will likely be very low (think somewhere around $0.00001/query), query fees should not put a burden on dapp users.
How are Indexers and stakers paid?
As Graph usage increases, query fees should accumulate to sustainably pay indexers to reliably provide indexing services. Currently there are not many queries happening, so Indexers are being paid with newly-minted GRT tokens. Indexers can be backed by stakers to increase their bond, which enables them to do more indexing work and capture more income.
What is the name of the asset being staked?
The Graph’s native token, GRT, is a staking token for indexing, curating, and to participate in on-chain governance. GRT is also used to pay for queries from The Graph protocol.
Which type(s) and what rate of rewards can I expect? Can I stake locked/vesting tokens?
Locked GRT tokens can be staked to earn more GRT.
If 50% of the network stakes, delegators may expect an average of 6% rewards rate, and if 75% of the networks stakes, expect an average of 4% annual rewards rate. This is an oversimplification, and the dynamics will likely change as the network scales up. Learn more about how new issuance GRT is distributed here.
Perhaps most importantly, we expect the fees earned by indexers to be greater than the value of the new issuance rewards as the network matures. The fee market will be difficult to predict, so we will need to experiment and record data points as new subgraphs launch and as usage begins to increase.
Is staking income liquid or automatically staked?
Income earned by delegators is automatically added to their existing stake, which means:
- Staking income will compound (ie. earning rewards on rewards).
- It will take 28 days to withdraw any staking income.
Note that you may not receive your staking income immediately, since your indexer will need to claim staking income periodically on your behalf. This could be daily, but could be as long as a four weeks.
Do I maintain custody of my GRT tokens? Who or what controls my staked GRT token?
You can self-custody The Graph’s GRT tokens, ideally using a Ledger hardware device together with the Metamask browser extension.
You can use the core team’s dashboard to explore and stake: https://network.thegraph.com
Figment’s Indexer IDs:
The Graph protocol takes control of your GRT tokens while you are staking. If you unbond your tokens, this process will take 28 days before the protocol returns your tokens to you.
While your GRT is staked, you may participate in on-chain governance by voting on different proposals.
If you don’t feel comfortable with self-custody, Figment has partnerships with a number of top-in-class custodians: email@example.com
How long does it take to unstake?
In short: 28 days.
From the moment you initiate the unbonding process, it takes 28 days to unstake. During this time you will not earn rewards. When the process is complete, you can transfer/trade your GRT tokens. You will need to unstake in order to delegate to a new indexer, so choose wisely.
How should I select which indexer to delegate to?
Making an informed decision about selecting an indexer at this point will be challenging for a number of reasons. In short we recommend selecting your indexer based on reputation–the bet here is that a reputable indexer will adapt to ensure the best outcomes for both the indexer and its delegators.
The most obvious issue is that the “cut rate” of different indexers varies wildly–why?
The cut rate is not intuitive because it tells you nothing directly about your earning potential or the indexer’s commission fee. Indexers must adjust their cut rate to ensure fair distribution of staking income, which is currently very volatile, depending on the ratio of the indexer’s stake to the total delegator stake.
Our understanding is that this is a design flaw, so Figment intends to 1) change its cut rate to ensure a fixed effective commission rate and 2) assist with the governance action to rectify the design faw.
Another issue is that there is a cost to redelegating, so if you make a mistake initially, you will need to spend 0.5% of your delegation and wait 28 days without income to select a new indexer.
While one indexer may boast of a low cut rate and guarantee it for a longer period of time than others, they can change the rate after the cooldown period ends, and delegators are stuck with this indexer until they pay the cost to redelegate.
We recommend using this explorer to check estimated APY when choosing an Indexer: https://ryabina.io/thegraph
Can my delegated GRT be slashed (seized or destroyed)?
No, your delegated GRT cannot be destroyed. However, when you initiate your delegation, 0.5% of the amount that you delegate will be burned. This is intended to discourage changing delegations, and it’s expected that your earnings will enable you to recover from this burn fairly quickly.
Can I lose potential staking rewards or fees?
Yes, if your indexer does not perform optimally, you will not earn fees.
There are two ways this can happen. If your Indexer fails to respond quickly or accurately to query requests, you will lose staking income opportunities. Similarly, indexers that price queries too high will not be competitive enough to be selected to do query work.
More broadly, an Indexer that does not index high-traffic subgraphs will not be an optimal earner.
What is the rate of new issuance (aka “annual inflation”) for The Graph? How does the GRT token supply change?
New GRT is being issued at an annual rate of 3% of the total supply. An estimated 1% of query fees will be burned, as well as any unclaimed rebate rewards, and the 0.5% delegator deposit tax will be burned as well. You can read more about token distribution here and about token economics here.