Algorand Staking Rewards FAQ

Algorand Staking Rewards

Answers to frequently asked questions about staking on Algorand, ways to participate and get rewards, node running, and more.

About consensus on Algorand

Consensus is a process that ensures the Algorand network is secure and resilient. Users stake their Algo into consensus through nodes – thousands of which are currently run by independent operators across the globe. The more Algo that is staked, the stronger the security of the network becomes.

Algorand leverages the pure proof-of-stake (PPoS) mechanism to achieve consensus. Unlike other proof-of-stake approaches, PPoS enables the user to maintain control of their Algo at all times.

Sophisticated cryptography including Verifiable Random Functions (VRF) and cryptographic sortition enable PPoS to maintain fairness and high security, and prevent collusion. A new block proposer and a new validator committee – both randomly selected in a private and non-interactive method out of all online users, with probability based on the users’ stake – are elected for each block.

Algorand’s PPoS approach achieves agreement on every block in under 3 seconds:

  1. A VRF identifies potential block proposers, resulting in multiple “valid” block proposals from different proposers.
  2. Each node that observed the block proposals propagates the “best” block – that is, the block with the lowest hash of the VRF proof.
  3. Another VRF identifies a soft vote committee; that committee votes to reach agreement that the proposed block is indeed “best.”
  4. Another VRF identifies a committee for certification votes; that committee votes to certify that the proposed block does not contain any violation of the protocol (i.e. double-spending, overspending, etc.)
  5. The block is then written to the blockchain.

Learn more about Pure Proof-of-Stake and consensus on Algorand.

Yes. The total Algorand stake that is online and participating in consensus forms the denominator of the fraction of online stake which must agree to produce blocks. If someone has stake marked as online, but the node participating in consensus is performing badly (such as missing votes by being too slow or disconnected from the internet) the account effectively reduces the economic security of the protocol.

Any time a node is not able to participate continuously, all accounts for which the node is participating should be marked offline.

About Algorand Staking Rewards

Algorand’s staking rewards are given to users who actively contribute to network security by bringing their Algo online to participate in consensus. When an account’s proposed block is written to the chain, if the proposing account has at least 30,000 Algo then it will then be given an amount of Algo as a reward.

Rewarding block proposers is beneficial for the broader network as it incentivizes participation in consensus, driving greater decentralization and thus greater network security.

Algorand is designed to guarantee security through advanced cryptography and does not rely on economic disincentives to secure the network, unlike other blockchains.

In other proof-of-stake (PoS) approaches, a user often locks up their tokens for a given period of time. The lockup period on Ethereum, for example, is highly variable ranging from hours to days; on Solana the minimum lockup period is one epoch (roughly two days); etc. Instead, on Algorand, the user maintains control of their Algo at all times, since the tokens remain in the user’s wallet while securing the network as part of consensus.

Put simply, the word “stake” is sometimes used by other networks to mean “lock up” or putting tokens “at stake.” On Algorand, to stake simply means to bring your Algo online in consensus, and there is no period of lost access to your tokens for independent validators.

That said, Algorand is similar to all proof-of-stake blockchains because ownership of stake incentivizes participants to act honestly in consensus, as any harm done to the network would devalue their stake.

Additional factors that make participating in consensus on Algorand particularly user-friendly and inclusive are:

  1. No slashing risk: staked Algo is not subject to slashing (that is: confiscating a staker’s tokens as a penalty for behavior that could cause harm to the network). Instead, on Algorand, ineffective nodes are simply algorithmically removed from consensus, forgo rewards, and face minor costs to re-join the network.
  2. Low cost: running a node on Algorand is extremely cheap. You only need a computer with at least 8vCPU, 16GB of RAM, a fast SSD, and a low-latency internet connection with bandwidth of at least 100 Mbps and ideally 1 Gbps. You can find a complete list of node-running best practices here, as well as more information about how to run a node here.
  3. No lockup period: On Algorand, independent validators maintain control of their Algo at all times. Staked tokens remain in their wallet while securing the network as part of consensus.
  4. Security: On Algorand, the consensus operations running on the node never expose the wallet’s key. Algorand consensus decouples the keys used to propose and vote on blocks from the main spending keys that control the Algo. This means that users can join consensus while their Algo are kept safe, even on hardware wallets.

Anyone with as little as 1 Algo can participate in consensus and help keep the network secure. However, to be eligible for staking rewards, an account must commit a minimum of 30,000 Algo to consensus.

Users with fewer than 30,000 Algo can do their part to secure the network, and get rewarded, by participating in staking pools or utilizing other delegator services.

Learn more about Algo staking options.

In the initial phase, staking rewards will be comprised of two components:

  1. Block fees– 50% of transaction fees will be paid out as block reward
  2. Algorand Foundation-funded supplementary bonus– Starting at 10 Algo per block, this bonus will decay by 1% every millionth block. The Foundation has committed to providing bonus rewards for a period of approximately 24 months.

The rewards funding will come from transaction fees paid by users of the network. In addition, for a period of approximately 24 months, a fixed pool of Algo from the Algorand Foundation treasury will be allocated toward per-block bonus rewards. The bonus rewards will start at 10 Algo per block and will decay by 1% every millionth block. The Algo supply will remain capped at 10 billion.

Just as rewards are given to the proposing account of blocks added to the chain, a share of transaction fees paid in the block will also be given to the block proposer. These fees are paid into the global Fee Sink account on all transactions, and these Algo are then available to compensate accounts participating in consensus by assembling and proposing blocks on a participation node.

Algorand is inherently designed for decentralization, and its Pure Proof-of-Stake consensus mechanism makes participation extremely accessible. To date, there are over 1,300 nodes across the globe helping to maintain Algorand’s network security. Staking rewards have now been introduced to drive up the number of consensus nodes in the network, thereby further increasing network security, decentralization, and ultimately, resilience.

For a period of time in the past, Algorand offered “Participation Rewards” to any user who held Algo in an account, with no further action required. As of April 2022, these rewards dropped to 0 and were replaced by governance rewards. With the launch of staking rewards, Algorand governance rewards–and the programs associated with them such as DeFi rewards and Targeted DeFi rewards–will wind down.

Yes. With the launch of staking rewards, Algorand governance rewards will wind down. The programs associated with governance rewards, such as DeFi rewards and Targeted DeFi rewards, will also wind down. Some governance measures may still be proposed for a community vote, but this mechanism will likely only be utilized for referendums when needed.

Going forward, the xGov program will remain a community funding mechanism focused on retroactive grants for ecosystem builders. This program will not fund meetup events, educational content, or marketing campaigns. The release date for this new phase of xGov is pending.

How to participate in Algorand Staking Rewards

You can independently participate in Algorand's consensus by running your own node. In order to be eligible for rewards, your participating account must have a minimum balance of 30K Algo staked in consensus.

By running an Algorand node you become an active contributor to this decentralized system. Your node, acting as an independent validator, helps prevent fraudulent activity and ensures only valid transactions are added to the blockchain. Node runners contribute to ensuring the robustness of Algorand infrastructure which benefits developers, applications, and users across the ecosystem.

Participating nodes also have voting rights on network proposals, allowing you to have a direct say in Algorand’s future development.

To run a participation node you need a system with at least 16GB of RAM, 8 vCPU, a fast SSD (100 GB NVMe or equivalent), and a good internet connection (ideally 1 Gbps). Learn more about running a node on Algorand and get started running your node with NodeKit for Algorand, a simple-to-use terminal for installing, managing, and monitoring your own node.

Liquid staking applications allow users to stake their Algo while maintaining liquidity. While each platform is unique, the typical process asks users to deposit Algo and mint new tokens that represent the ownership and value of the staked Algo and can be used across the DeFi ecosystem.

Explore liquid staking solutions on Algorand.

Staking pools enable groups of individuals to participate in consensus together. Users are able to trustlessly stake their Algo to a validator and get rewarded based on the rewards the validator receives.

Explore staking pool solutions on Algorand.

Delegated staking involves utilizing a third-party to run a node on your behalf while your Algo remains in your wallet at all times. This provides an option for users who want to help secure the network and collect rewards, but don’t have the knowledge or resources to run their own node.

Explore delegated staking solutions on Algorand.

A user may select a certain staking or pooling option for a variety of reasons. The protocols each offer further information on what their services enable.

Anyone with an Algorand account with an account balance of at least 0.1 Algo can run a node. To run a participation node you need a system with at least 16GB of RAM, 8 vCPU, a fast SSD (100 GB NVMe or equivalent), and a good internet connection (ideally 1 Gbps). Learn more about running a node on Algorand, and get started today with NodeKit for Algorand.

While anyone can run a node as described above, there is a minimum of 30,000 Algo for a participating account to be eligible for staking rewards.

No, rewards require opt-in. You must declare your intent to receive rewards for block production. You do this by setting a 2 ALGO transaction fee when you register your participation keys online. This marks your account as “incentive-eligible,” and it will start receiving rewards for every block produced.

Accounts participating in Algorand consensus are expected to always be online on a node. If you want to stop participating, the proper procedure is to send a “key registration offline” transaction.

If your node goes offline unexpectedly for a non-trivial amount of time, the protocol will detect your absence and evict your account from consensus.

Every block on Algorand contains the address of the account that proposed it. Block explorers such as allo.info display this information on blocks as well as the address information page.

There is a minimum of 30,000 Algo for a participating account to be eligible for staking rewards.

Yes, the consensus protocol will not reward participants who have more than 70,000,000 Algo in their account.

Running a node on Algorand

While running a node on Algorand is more accessible compared to many other blockchain network node requirements, it is still a responsibility similar to running a server that needs 24/7 uptime. This involves some technical know-how, dedicated hardware, and a commitment to keeping up with software upgrades over time.

Running a participation node requires a computer with at least 8vCPU, 16GB of RAM, a fast SSD, and a low-latency internet connection.

Running a node on Algorand is extremely affordable. All you need is a computer that meets the recommended system requirements.

The Algorand Discord server has a #node-runners channel where the Algorand Foundation as well as community node runners help answer technical questions related to running Algorand nodes.

Algorand's staking rewards vs. other blockchains

By running an Algorand node or staking Algo in consensus you become an active contributor to this decentralized system and play a key part in network security.

Algorand is designed to guarantee security through advanced cryptography and does not rely on economic disincentives to secure the network, unlike other blockchains.

Algorand Foundation's participation in consensus

The Algorand Foundation will continue to participate in consensus and secure the network. Reward payments to block producers will be delivered by the protocol out of funds collected in the Fee Sink.