Traditional Nomination vs Nomination Pools on Polkadot
The Polkadot Nomination Pools allows users with as little as 1 DOT to participate in staking and earn rewards by pooling their tokens with others. This article explores the key differences between traditional nominating of validators and joining a nomination pool, providing a clear understanding of the options available to Polkadot users.
Traditional Nominating of Validators
Nominating validators is a core aspect of Polkadot’s Nominated Proof-of-Stake (NPoS) system. In this system, nominators select validators who are responsible for securing the network, validating transactions, and producing new blocks. Here are some of the key aspects of traditional nominating:
- Minimum Stake Requirement: To become an active nominator, users must stake a minimum of 250 DOT. Additionally, to earn rewards, the staked amount must exceed the dynamic minimum active bond (right now more than 500 DOT), which can fluctuate based on network conditions.
- Active Participation: Nominating requires active participation, meaning that users must regularly monitor their selected validators to ensure they are performing well and not at risk of slashing. If a validator is slashed, all nominators backing that validator will lose a portion of their staked funds.
- Governance Participation: One of the advantages of traditional nominating is that staked tokens remain in the user’s account, allowing them to participate in Polkadot’s governance activities, such as voting in referenda and council elections.
- Bonding and Unbonding: Users can bond and stake their DOT tokens indefinitely. If they wish to switch validators, they can do so without unbonding their tokens. However, unbonding requires a 28-day waiting period before the funds become transferable.
Joining a Polkadot Nomination Pool
Nomination pools offer a more accessible and less demanding way to participate in Polkadot’s staking system. With the introduction of nomination pools, users can pool their funds together and act as a single nominator. This approach has several unique features:
- Low Entry Barrier: The most significant advantage of joining a nomination pool is the low entry requirement. Users can participate with as little as 1 DOT, making staking accessible to a broader audience.
- Simplified Process: Unlike traditional nominating, joining a pool is more of a “set-and-forget” approach. The pool operator handles the selection of validators, reducing the need for constant monitoring and active management by individual members.
- Rewards and Slashing: Just like traditional nominators, pool members earn rewards based on their proportion of the pooled funds. However, if a validator supported by the pool is slashed, all members of the pool are subject to proportional slashing based on their stake.
- Governance Participation: Previously, one of the main drawbacks of joining a nomination pool was the inability to participate in governance activities with staked funds. However, a recent update has introduced the “Delegate and Stake” strategy, allowing nomination pool members to participate in Polkadot’s OpenGov while keeping their funds in the pool. This update marks a significant enhancement in the utility of nomination pools, empowering a larger segment of the Polkadot community to have a say in governance decisions.
- Bonding and Unbonding: Similar to traditional nominating, unbonding from a nomination pool requires a 28-day waiting period. Additionally, users must unbond all their staked funds before switching to a different pool.
The New “Delegate and Stake” Strategy
The introduction of the “Delegate and Stake” strategy represents a pivotal advancement in the Polkadot ecosystem. Under this new approach, funds staked in a nomination pool remain in the member’s account, allowing them to delegate their staking rights to the pool while retaining ownership of their funds. This strategy not only preserves the user’s ability to participate in Polkadot governance but also simplifies the staking process, making it more user-friendly and secure.
This update is currently being tested on Westend, Polkadot’s test network, with plans for deployment on the main network in early August 2024. The transition to this new system is expected to be seamless for most users, with detailed guides available for those who need to take additional steps to ensure a successful migration.
How to Join a Polkadot Nomination Pool
To join a nomination pool on Polkadot, several tools can streamline the process and enhance your experience. The Polkadot Staking Dashboard offers a user-friendly interface, allowing you to easily manage your staking activities, track rewards, and join pools with just a few clicks. For mobile users, the Nova Wallet provides a secure and convenient way to interact with Polkadot’s staking system, including the ability to join nomination pools on the go. Additionally, Polkadot.js offers a more advanced, web-based interface for users who prefer a granular level of control over their staking operations, including joining pools, managing proxy accounts, and configuring staking preferences. These tools collectively make participating in Polkadot’s staking system more accessible and efficient, catering to both novice and experienced users.
Conclusion
Polkadot’s staking system offers flexibility through traditional nominating and nomination pools, each with its own set of advantages. Traditional nominating is ideal for users with a significant amount of DOT who are willing to actively manage their stakes and participate in governance. On the other hand, nomination pools provide an easier and more accessible way to earn staking rewards with a lower entry barrier, now with the added benefit of participating in governance activities.
As the Polkadot ecosystem continues to evolve, the introduction of the “Delegate and Stake” strategy underscores the platform’s commitment to decentralization and community involvement, ensuring that all members have the opportunity to contribute to the network’s future.