If you are a new user to Terra and are confused with the whole delegation and re-delegation process, fret not! This article aims to clear all of your confusion by explaining:
- How to choose the right validator
- Factors to consider before you re-delegate
- Why you might want to re-delegate
- The 5 simple steps to re-delegate your precious $LUNA
If you are already an expert at choosing a validator but still unsure about the re-delegation process, you can skip the first section and jump straight into the next section about re-delegations.
How to choose the right validator
Firstly, who are validators?
Validators play an important part in securing Terra’s Delegated Proof-of-Stake (PoS) network. Validators are responsible for maintaining system efficiency through participating in the Oracle process, form new blocks in the blockchain and participate in Terra’ governance through voting on governance proposals.
The delegation process
You have probably heard of the concept of staking $LUNA to earn staking rewards. Delegating your $LUNA with a Validator will allow you to earn these staking rewards.
But there are so many validators, how should I decide who to delegate to?
There are numerous articles with in-depth explanations on the factors to look out for to select the right validator. I have included links to these articles below. As a summary, here are 6 key decision factors:
Metric #1: Validator Commission
How much commission (fees) that you will be paying to the Validator
Metric #2: Uptime
How along has the Validator’s server been up for the last 10,000 blocks
Metric #3: Self-delegation
How much skin in the game does the Validator have — potentially reduces your exposure to slashing risk
Metric #4: Potential Staking Rewards
How much staking reward would you be getting from the Validator
- Note 1: You can no longer see staking rewards on Terra Station but you can figure it out by using “Uptime” as a proxy (indication of % of max staking return).
- Note 2: A validator may provide bonus rewards, I will cover this in greater detail within the re-delegation section below.
Metric #5: Communication & Dedicated Support
How active is the Validator in communicating with its users over its social media channels (Telegram, Twitter, Discord, etc.)
Metric #6: Contributions to Terra
What are the additional value-adding services that the Validator performs for Terra
Now with this decision framework in mind, pick the top 2–3 factors that are of upmost importance to you and delegate to the validators that fulfil those criteria!
Factors to consider before you re-delegate
- Re-delegating to a new validator doesn't require you to unstake your Luna — you can still continue to earn staking rewards during the re-delegation process.
- Re-delegations have a 21 days cooldown period — which means once you have re-delegated your Luna, you will need to wait for 21 days before you can re-delegate this portion again. See the infographic below to understand better:
Why you might want to re-delegate
There might be scenarios that might result in you wanting to re-delegate your $LUNA holdings to a new validator.
Re-delegation Scenario 1: There has been a change in a certain metric for the validator that you have delegated your $LUNA to
- The validator increased commission to a rate that’s outside your comfort zone.
- The validator exhibited signs of misbehavior (Double-signing, downtime, non-voting), resulting in your delegated $LUNA getting slashed.
- The validator has been inactive in communications over social media, and you are not able to get any support you require.
If this happens to you, you should consider re-delegating your Luna to a new validator with metrics that you are comfortable with.
Re-delegation Scenario 2: A new protocol-specific validator announced that you will get bonus rewards (Airdrops) for delegating to them
- There has been a recent trend where certain new protocols on Terra launched their own validators. Users who delegate their Luna to these protocol-specific validators will get bonus Airdrops.
Some examples are:
- Orion Money Validator — Staking with the Orion Money validator will enable you to earn bonus Genesis Airdrops and future $ORION airdrops as well. This airdrop distribution process is covered in Orion’s Litepaper.
- Talis Validator — A similar model of bonus Genesis and future airdrops will be given to users who stake with the Talis Validator. They published a twitter thread explaining this bonus incentive.
- It is likely that moving forward we may see Validators providing value-adding incentives (Airdrops, promotions, freebies, etc.) and this might be a key reason for you to get comfortable with the re-delegation process.
In the spirit of maximizing staking yields, you can consider re-delegating your Luna to new protocol-specific validators. However, before you do so take note of Scenario 3!
Re-delegation Scenario 3: You want to maximize the amount of $NEB airdrops you would be getting
- This scenario is slightly different from scenario 2. To promote validator decentralization, Do Kwon recently introduced an incentivization mechanism that rewards users who stake with validators with smaller voting power. This mechanism is likely to be first introduced through the distribution algorithm of Nebula’s $NEB Airdrop.
If you delegate to validators with smaller voting power, you can get a greater amount of $NEB airdrops. However, please conduct thorough due diligence on whichever validator you are re-delegating to. The general rule of thumb is to make sure that the validator has a strong uptime metric, as you do not want to have your delegated Luna slashed due to validator misbehavior!
The 5 simple steps to re-delegate your precious $LUNA
Step 1: Open Terra Station’s “Staking” page.
Step 2: Scroll and select the new validator that you want to re-delegate to.
Step 3: Click “Delegate”.
Step 4: Click on the “source” drop-down list.
Step 5: Select the current validator that you want to re-delegate from, insert the amount you want to re-delegate and approve the transaction.
Once you approve the transaction, the re-delegation happens almost instantaneously.
If you get this Error Message
If you get this error message, it means you have to wait out the 21 day re-delegation period before you can re-delegate again. But fret not, your Luna is still bonded and is earning staking rewards.
That’s it, happy re-delegation!
Useful links:
