Selecting the right validator can be challenging. Once the provider enters our Staking Rewards Verified Staking Provider (VSP) Program, you will be able to support your decision-making process. Through this program, we thoroughly evaluate factors such as security measures, on-chain reliability, provider setup, and value-added services for the whole ecosystem.

In addition, you can consider other metrics when selecting a provider to delegate to:

Commission: The commission rate represents the portion of your rewards that validators retain. A higher commission rate decreases your earnings, while a lower rate may affect the provider’s profitability and sustainability.

Network Share: Delegating to popular validators can raise centralization risks, while smaller providers may struggle with profitability. Supporting smaller providers helps decentralize the network but requires monitoring to ensure they stay active.

Number of Users: The number of delegators is a key factor in choosing a provider, as it affects rewards, network security, and reputation. Validators with more delegators contribute to stronger network security and are often seen as more trustworthy.

Performance: Make sure you pick a validator with the highest possible performance. Further, please check individual validators’ uptime, and our recommendation is only to pick those with a >=99% uptime and a long history of not getting slashed.

Namada rewards originate from its inflation system, where new NAM tokens are minted programmatically to fund various public goods and incentivize network participation. These rewards are distributed across three main areas:

Proof-of-Stake Rewards: Validators and delegators earn rewards for locking (or bonding) their NAM tokens to secure the network and participate in consensus. Namada uses a PD-controller mechanism to adjust inflation rates dynamically to maintain a target bonding ratio of 2/3 of NAM tokens. If the target bonding ratio is met, the inflation rate for proof-of-stake rewards can be up to 10% per annum.

Shielded Pool Rewards: These rewards incentivize users to store assets in Namada’s shielded pool, enhancing privacy and data protection via its Multi-Asset Shielded Pool (MASP). Inflation-based incentives (up to 10% per annum) are allocated per asset, targeting specific levels of participation using a PD-controller mechanism.

Public Goods Funding: Namada funds proactive and retroactive public goods initiatives by distributing rewards to a public goods distribution mechanism. This supports projects that benefit the ecosystem, both algorithmically measurable (like proof-of-stake and shielded pool usage) and out-of-band contributions.

We strive to make staking as safe and transparent as possible, however, it's important to consider factors that may influence whether a particular staking option is appropriate for you.

Blockchain and Technology Risks: Namada and its underlying technology, smart contracts, are still developing, potentially containing bugs or vulnerabilities. As Namada is an emerging protocol, unforeseen risks may arise, and the technology’s success is uncertain.

Unbonding Risk: When staking NAM tokens, there is a lockup period of 14 days. This means that investors will not be able to sell their tokens immediately, but instead need to wait 14 days after initiating unbonding before they can be traded again. This is something to keep in mind when deciding to stake, as crypto markets are highly volatile.

Slashing Risk: NAM delegated to a validator can be partially slashed if the validator misbehaves. On top of getting slashed, a validator can also be jailed, during which time you will not be earning any rewards. The minimum slashing penalty is 0.1%.

Please note that this is not an exhaustive list of all the risks related to staking.

Cubic Slashing in Namada is a mechanism where the penalty for validator infractions increases exponentially with their voting power and the frequency of infractions within a specific time window, deterring misbehavior and promoting network resilience. Slashes are computed after a delay to account for other potential misbehaviors, with penalties capped at 100% of the validator’s stake, and validators are jailed and frozen upon detection of misbehavior until penalties are processed.

The total supply of NAM was 1,000,000,000 tokens at genesis. The distribution of NAM tokens at genesis is presented as follows:

• Backers of the Anoma Foundation: 32%
• Early Core Contributors: 18.8%
• Protocol Maintenance, R&D, Ecosystem & Community Development: 17%
• Public Allocations (Completed RPGF Programs): 16.1%
• Public Allocations (Future RPGF Programs): 16.1%

The NAM token fulfills four key functions in the Namada ecosystem:

Staking: Validators use NAM as an economic bond to secure the network and deter malicious behavior.

Governance: NAM is required to propose and vote on governance decisions, with outcomes determined by the amount of NAM supporting each side.

Public Goods Funding: A portion of NAM’s annual inflation supports public goods, such as research, education, and other essential ecosystem contributions.

Fee Payment: NAM is used to pay all transaction fees within the network.

Shielding Rewards: Rewarding participation in the shielded set.