Polkadot staking: a guide for DOT Holders

What is Polkadot staking?

Decentralised networks aren’t controlled by a single authority, so they rely on systems called consensus mechanisms to make sure that all participants agree on the latest state of the ledger. These systems are responsible for enforcing the rules about how transactions are processed and preventing malicious actors from taking over the network.

The two most popular mechanisms are proof-of-work (PoW) and proof-of-stake (PoS). PoW, used by Bitcoin and Litecoin among others, involves participants called miners solving complex mathematical problems, requiring substantial computer power, for the right to process transactions. In PoS, validators fulfil the same role, although they have to deposit or ‘stake’ a certain amount of a network’s native token rather than solve puzzles, making it less energy-intensive and more scalable (picking validators is quicker). Participants in both mechanisms receive rewards in return for the service they provide in the form of the network’s native token, while PoS protocols can penalise those who fail to follow the rules.

There are several different types of PoS. The version used by Ethereum, which switched from PoW to PoS in 2022, is relatively straightforward. Validators deposit 32 ether, worth €127K (as of August 2025), and the network randomly selects which ones get to process transactions. Polkadot was the first major protocol to use a variation of this approach called nominated proof-of-stake (NPoS), which aims to be more democratic. NPoS allows holders of its native token, DOT, to register as nominators and vote for validators, who must deposit a minimum bond (as stakes are known in the Polkadot ecosystem) of 7,500 DOT, worth €24,562 (as of August 2025). The validators with the largest total stake (their own stake plus the amount committed by nominators) get elected to create new blocks. As of August 2025, the network has 1,270 validators and 29,457 nominators.

How does Polkadot staking work?

The first stage of the process is block production using an engine called BABE. Nominators elect a new set of validators for each era, which lasts 24 hours and breaks down into epochs of four hours and slots of six seconds. The network randomly selects validators to serve as block creators or ‘authors’ for each slot. Once a block is ready, the authors broadcast it to the network for verification by secondary checkers. Finality, when transactions become irreversible, is achieved using a mechanism known as GRANDPA, which requires a two-thirds majority of total staked DOT to confirm a block’s validity.

The nominator role, in contrast, is relatively passive: nominators vote for up to 16 validators, and the network divides their stake among those that get elected. They can also join nomination pools where an operator acts on their behalf and allocates rewards on a pro-rata basis. The process of researching validators, or choosing a pool, involves weighing up risk against reward, and Polkadot recommends comparing candidates based on the following criteria:

• The number of ‘era points’ they have accumulated for participating in the consensus mechanism (see rewards and penalties section)

• The size of the validator’s stake

• The total stake backing it

• The commission fees charged by the validator

• Whether or not its identity is verified

• Previous penalties it has incurred

Directly nominating validators requires a minimum stake of 250 DOT (€818 as of August 2025), while anyone can join a pool with one DOT (€3.62). The minimum stake to set up a pool is 500 DOT (€1,637).

Validators and nominators must lock up their tokens for 28 days to prevent malicious actors from exiting the network before getting penalised. However, nominators who haven’t backed a validator in the previous 28 eras can ‘fast unstake’, which takes a matter of minutes.

Getting started with DOT staking: step-by-step guide

The first step for a validator or nominator is to make sure they hold sufficient DOT in a digital wallet. These wallets are either hot, meaning they’re connected to the internet, or cold, which remain offline. Hot wallets are convenient but vulnerable to hacks, whereas cold wallets are considered more secure. Polkadot lists several hot wallets on its website that are suitable for staking, including Nova, Subwallet and Talisman. Ledger, one of the most popular cold wallets, can also hold DOT.

There are two types of accounts for Polkadot staking. The first, called a stash account, holds the staked tokens. Its private key, typically used to authorise transactions, is required to participate in staking and can be stored in a cold wallet, offering added security. All activities, such as setting commission rates, managing rewards and voting, take place from what’s known as a staking proxy account.   

Service providers also provide staking services, making it more accessible by lowering the technical barriers. But they charge fees, and they pose custodial risk because the funds are exposed to cyberattacks. Alternatively, liquid staking platforms, such as Bifrost, offer a similar service, but they issue tokens representing the staked DOT (vDOT in Bifrost’s case), which holders can use in decentralised finance applications like yield farming and lending.  

Another option is to invest in exchange-traded products (ETP) that provide exposure to Polkadot staking and trade on mainstream exchanges. Investors can hold these products in a portfolio alongside traditional assets, so they contribute to overall returns, and they’re liquid investments, which overcomes the issue of withdrawal periods when staking directly. For instance, the CoinShares Physical Polkadot Staked ETP is backed entirely by DOT held with institutional custodian Komainu and trades on Xetra. As of August 2025, it yields 5% per annum and doesn’t charge a management fee.   

Rewards and yields

In return for the service they provide, validators earn rewards in DOT. Rewards are variable, but according to Polkadot, the average annual rate is 13.08% as of August 2025.

When calculating rewards, the network doesn’t take into account the size of each validator’s stake to avoid centralisation caused by the presence of a few dominant participants. The main factor is the number of era points earned for activities, including block production, and good behaviour, such as connectivity. However, the network is designed to make sure responsible validators come out roughly even over the course of multiple eras. Tips, paid by users for prioritising transactions, provide another income stream.

Nominators also earn rewards for participating in the consensus mechanism, but the amount depends on the commission set by validators. For instance, if the reward is 200 DOT and the commission is 20%, the validator keeps 40 DOT, leaving a balance of 160 DOT. If the validator holds 50% of the overall stake and nominators hold the other half, the validator earns 120 DOT (40 + 80 DOT) and the nominators share the remaining 80 DOT.

Like many PoS consensus mechanisms, Polkadot penalises or slashes validators to discourage malicious behaviour. These penalties range from 2% for voting for an invalid block of transactions to 100% for backing an invalid block. Some offences can lead to ‘disabling’, which prevents the validator from participating for an era or longer.  

Benefits and risks of Polkadot staking

The primary benefit offered by staking is the opportunity to receive rewards. Validators tend to earn the most but require sizable financial resources and technical expertise, followed by nominators who need to conduct thorough research. Joining a pool or investing through an ETP may offer lower rewards, but they effectively represent a form of passive income. 

The funds Polkadot designates for rewards increase significantly on a yearly basis, boosting participants’ earning potential. DOT is an inflationary token: each year, the total supply expands by 120M, worth €392M (as of August 2025). The network allocates 85% of this amount to staking rewards.

The alternatives to registering as a validator also reduce the barriers to entry. The negligible minimum stake required to join a pool or use a staking service makes participation easily accessible. What’s more, nominators don’t need to invest in specialist hardware.   

Another benefit is boosting decentralisation. The greater a network’s decentralisation, the stronger its immunity to attacks that could lead to malicious parties taking control and censoring or reversing transactions. Many PoS protocols only allow participants to elect one validator, but Polkadot’s nominators can vote for up to 16, which helps to prevent a concentration of power. 

There are risks too, primarily financial loss due to penalties issued for malicious behaviour. In extreme cases, this could result in forfeiting an entire stake. To make matters worse for nominators, these penalties are beyond their control because they have limited influence over the validator’s actions once they have voted.  

Also, the withdrawal period is relatively long at 28 days. Not only does this keep participants waiting for their tokens, which would pose a problem if they have to sell at short notice, but the stake doesn’t earn rewards during this period. 

Finally, investors need to take into account custodial risk when using a service provider. Exchanges and liquid staking platforms are vulnerable to both cyberattacks, as experienced by Meta Pool in June 2025, and potential mismanagement of funds, which FTX customers learned about the hard way in November 2022. 

How Polkadot compares to Ethereum and Solana

Ethereum and Solana, two of the largest PoS networks by market capitalisation, serve as useful benchmarks against which to measure Polkadot. Before exploring how they stack up, let’s start with a brief overview of how their consensus mechanisms work.

As explained previously, Ethereum is a relatively straightforward PoS network, whereas Solana uses a variation called delegated proof-of-stake. In Solana’s version, holders of its native token, SOL, delegate their tokens to the validator they consider most trustworthy. Those with the highest backing have the greatest influence when voting for which blocks should be added to the chain. 

Here are some of the differences between these three protocols based on the features mentioned earlier in this article.

Minimum stake- Ethereum validators must deposit 32 ether, much higher than Polkadot. Ethereum doesn’t offer a cheaper option to stake directly, so participants with lower deposits have to use staking services. Solana doesn’t have a minimum stake.

Rewards- At 13% per year (as of August 2025), Polkadot’s rewards are the most generous, nearly double the upper limit of what Solana yields (5%-7%) and more than four times as much as Ethereum (3.1%). Ethereum’s rewards take into account a validator’s activities on the network and their balance compared with the total staked ether, whereas Solana bases its calculation on SOL’s inflation rate and validator uptime.

Penalties- Ethereum and Polkadot take similar approaches to discouraging malicious behaviour, issuing penalties that could lead to participants forfeiting their entire stake and temporary or permanent removal from the network. Solana, on the other hand, doesn’t automatically slash validators, although it plans to. 

Withdrawals- The withdrawal period on Polkadot is much longer than both Ethereum (seven days) and Solana (at the end of each epoch, lasting two days). Also worth noting, Solana only allows participants to remove 25% of the total active stake each epoch. 

Frequently asked questions (FAQ)

How much DOT do I need to stake?

It depends on the role. Validators must deposit 7,500 DOT, worth €24,562 or $28,230 (as of August 2025). The minimum stake for nominators, who delegate their tokens to validators, is 250 DOT (€818 or $960) or one DOT (€3.62 or $4,1) to join a nomination pool. Setting up a pool requires 500 DOT (€1,637 or $1,922).  

Can I unstake my DOT at any time?

No, unstaking DOT takes 28 days. The main reason for this delay is to prevent participants from leaving the network before they get penalised for malicious behaviour.  Nominators who haven’t delegated their tokens for 28 eras can ‘fast unstake’ in just a few minutes.

What happens if my validator goes offline?

If a validator goes offline for a prolonged period (more than four hours), they get ‘chilled’, which means the network switches their status to inactive, but they don’t get penalised. Penalties for unavailability start when 10% of active validators go offline at the same time, as this could lead to an attack on the network.

Is Polkadot staking suitable for beginners?

It depends on the level of participation. The process of setting up a validator is relatively complex, making it unsuitable for beginners. Even becoming a nominator involves understanding how to research the performance of each validator. The most appropriate options for those with experience of buying and storing crypto are to join a pool or use a staking service. Alternatively, investors can purchase ETPs on XETRA just like mainstream products. 

Learn more and invest

Learn more about the CoinShares Physical Polkadot Staked ETP, including where it trades in Germany.