[GUIDE]: How to calculate my staking rewards on Polygon?
Polygon is a Delegated Proof of Stake chain. In simple words, you delegate/lock up your Polygon (MATIC) tokens with any one of the 100 validators on Polygon. They run the chain/ mine and delegators get a larger portion of the rewards they earn in Polygon (MATIC) terms.
P.S: If you choose to delegate with any one of the validators, consider us at Girnaar Nodes. We are one of the top-performing validators offering really low to nil commissions. Find out more about us at the end of this post.
Now back to the rewards calculation.
On average, you earn between 9–10% annual rewards (as on the date of writing this post) for staking directly on Polygon.
You can check the live rate here.
These rewards are earned in Polygon (MATIC) token terms. Now, there are certain platforms such as Nexo that offer higher returns, say up to 18% currently but there are downsides too. Check out the complete analysis of whether you should stake directly on-chain or through platforms such as Nexo:
If you stake on Polygon, how much rewards you will earn depends on the following parameters:
Staking time frame
The longer you stake, the more you earn. This is a given.
Amount you stake
The larger your stake, the more you will earn. In percentage terms, it remains the same. The return only changes in absolute terms.
Validator performance
If the validator you delegate to performs poorly, you can not only loose your rewards but also some part of your principal tokens staked through a process called ‘slashing’.
Validator commission
For running the nodes and maintaining the tech infra, the validators charge a commission that comes out of your rewards. The average commission is 5%.
So say, you stake 1,000 MATIC tokens. The staking returns are 10% annually. At the end of the year, you earn 100 MATIC tokens. If the validator commission is 5%, the validator will get 5 MATIC tokens and you will get 95 MATIC tokens.
Currently, Girnaar Nodes is running at 0% commission. So take advantage of this time, stake now, and maximize your reward.
Network stake
This piece is outside your control and is what makes the network rewards dynamic. The more MATIC tokens people stake, the lower will be the reward everyone earns. Currently, 41% of the circulating supply is staked, and hence the return is 9.35%. Here is how the return changes by how much percentage of the circulating supply is staked.
Now, this looks like a horrible idea, right? The more people come into Polygon, the fewer returns everyone makes. But that is not true. Think about it. The more people stake, the less the liquid supply on exchanges for selling. The less the supply, the higher the price (assuming the same demand). The vice versa is also true. The more the selling pressure, the fewer people stake (and more they sell). Lower price but higher return. These 2 forces counteract to give you a long-term stable return in MATIC terms.
Restaking
This is the hidden secret to maximize your staking return on Polygon. This is because the 9–10% rate discussed above is a non-compounding rate. In other words, APR (annual percentage rate).
Say you deposit 1,000 MATIC on Jan 1. At 10% APR,
on March 31st, for one quarter, you would have earned: (10%/4 = 2.5%) *1,000 = 25 MATIC
If you leave it as is, on June 30th, you will earn an additional (10%/4 = 2.5%) *1,000 = 25 MATIC
Every quarter, you will earn 25 MATIC additionally only.
Whereas, if your returns compounded, on June 30th you would have earned, (10%/4 = 2.5%) *1,025 = 25.6 MATIC
Now imagine this compounding for years and years. That additional compounding return really starts adding up.
As Einstein says and Warren Buffett implements, Compounding is the eighth wonder of the world. To compound on Polygon, you have to restake.
In Summary
Here is how you calculate your staking rewards,
Go to https://wallet.polygon.technology/staking/rewards-calculator.
Enter your stake amount and time frame.
Adjust the slider to your mid to long-term assumption of staked supply to circulating supply.
Take the APR output shown by the calculator in the image above
Go to aprtoapy.com and input the APR thrown up the Polygon calculator and the restaking (compounding) frequency.
The output is your expected return in Polygon (MATIC) token terms.
One more thing to be mindful of is Ethereum network fees. Every time you stake/ restake/ unstake, Ethereum charges you network fees. Factor that into your calculations during these actions.
Disclaimer: This is not financial advice. The projected return is as per the Polygon network, its dynamic and will change the basis factors described above.
Girnaar Nodes
Final pitch. If you are convinced about staking directly on Polygon, consider Girnaar Nodes as your validator.
Girnaar Nodes is an Indian-origin VALIDATOR on POLYGON with top performance and currently offering 0% commission. Stake your MATIC tokens with us directly on the Polygon blockchain. See your Polygon (MATIC) bags grow while we work on the tech under the hood.
Check/ reach out to us here:
Website | Discord | Telegram | Polygon