The current report is the follow-up to ATOM Staking Report: On-chain Data Analysis 2020-2022 and aims to keep the community updated on the State of Staking in Cosmos Hub.
Introduction
Everstake is a responsible validator trusted by 625k users across 70+ blockchains. Apart from providing high-profile staking services, Everstake is a well-known contributor to different chains in the areas of development and building products, including explorers, dashboards, software development kits, API, RPC tools, and others. The Interactive Dashboard for on-chain data analysis is one of Everstake’s most recent products.
Everstake released the first ATOM Staking Report in February 2023, covering the 2020 - 2022 period of Cosmos Hub operation, discussing staking essentials, and offering analytic insights. This report resulted from the painstaking work of Everstake’s Data Science Department and their in-house tools, such as Slurp and Staking API. The data was further organized using Python and Power Bi.
Interactive Analytic Dashboard
The positive reception of the Report motivated Everstake to create a free interactive dashboard. This dashboard provides the Cosmos community with access to our analytical tools to create their own charts and make informed decisions on staking using historical data. Version 1 of the dashboard is integrated into the original article and is user-friendly. That said, the upcoming version 2 will have its dedicated page on everstake.one to provide a better user experience.
Essential definitions
Before engaging with the analytic data in this report, we suggest that you explore Cosmos Hub and ATOM essentials covered in our previous report. Those cosmonauts who have just joined the community may find reading our comprehensive Cosmos (ATOM) overview helpful for better understanding the basics.
The essential notions discussed below include:
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Stake (Voting Power): the number of staked ATOM;
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Validators: node operators in Cosmos Hub producing new blocks and confirming transactions
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Delegators: ATOM holders who delegated their tokens to validators performing staking to get staking rewards;
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APR: annual percentage revenue provided by the blockchain for staking;
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Inflation: the percentage of ATOM yearly supply.
The number of delegators grew by 8.75% over Q1
The year 2023 began with high expectations for Cosmos associated with the changes set to impact ATOM and the entire ecosystem. These include the implementation of Interchain Security into Cosmos Hub, Inter-Blockchain Communication moving beyond the ecosystem, the acceleration of DeFi, and Liquid Staking. As a result, there has been an increase in the number of delegators, with 800,860 unique staking addresses reflecting an 8.75% growth during Q1 and a total staked value increase of 27.2M ATOM (12.2%) to reach 222.63M ($2.5B on March 2023) in total.
Despite the bear market still reigning in the crypto world, the chart below suggests positive stake dynamics in Q1. The maximum increase of 23.6M occurred in March due to the start of the delegation program from Interchain Foundation and 13M brought by the Coinbase validator. Therefore, the Q1 Total stake change is about 50% of the 2022 yearly change.
Staked ratio fluctuations ranging from 59 to 66% made APR highly vibrant
Having started growing in September 2021, the ATOM inflation rate retained the rising trend during Q1 2023, reaching 16.16% (+2% growth) along with staked ratio hitting 62.49%.
Cosmos strictly depends on the staked ratio (staked ATOM / total supply) and APR. The chart clearly shows that when the staked ratio dramatically dropped in February to 59%, APR jumped by 2% to reach its ATH in March at 23.49%. By the end of March, the opposite movement drove APR to 21.96%, followed by 66.23% in the staked ratio.
Nonetheless, ATOM delegators stayed satisfied during Q1 2023, as their net earnings increased.
APR = inflation/staked ratio - 10% (Community Pool tax), where Community Pool tax stands for deductions made in favor of the treasury for Cosmos’ public goods development.
Users trust Cosmos
ATOM price reached local ATH in February at $15.14, decreasing to $11.18 by March 31.
Still, the total stake skyrocketed despite the price drop, which indicates the community's high expectations in the long run. This vision is additionally powered by the Q1 general price change of +$1.72. Notably, the brief staking downtrend in February revealed a correlation between the stake shortage and price. The biggest ups and downs in the total stake were caused by Interchain Foundation (IFC) and big custody validators like Coinbase, Binance, and Kraken moving vast amounts of ATOM. One custody staking provider, Paradigm, left the network in February with a total unstake of 6.5M ATOM.
Retail delegators’ stakes keep rising
The direct correlation between the total retail stake and APR lasting from Jan 2022 was broken in Q1 on 23 February and 29 March, respectively, demonstrating an explicit dependency on sharp jumps.
Filtering retail delegators as owners of stakes under 100k, we get a relatively cleaned-up picture of the impact from IFC and custody validators ($219M in March 2023). Thus, one can assume that a direct correlation between big jumps still prevails.
The TOP 20 validators attract the majority of delegators
As of March 2023, the 20 largest node operators accumulated 136.7M of staked ATOM(61%), adding +16.2M during Q1.
Retail validators are those handling over 5,000 unique delegators and having an average stake of under 500 ATOM per delegator. Comparing custodial and decentralized validators, the former demonstrated a more vibrant stake change in both directions, while the latter saw the growth rate of delegators overriding the total stake. In particular, this concerns Everstake, Provalidator, P2P, Informal Systems, StakeFish, and SG-1.
By the end of Q1 2023, the top 20 validators operated 136.77M ATOM, with 422.14K unique staking addresses referring to 59% of total stake growth and 20% of the number of delegators. Therefore, the top 20 performed as the leading stake suppliers. The new users’ distribution is more uniform among the entire active set.
52.71% of Cosmos users delegate to the 11 biggest validators
The twenty biggest validators handle 52.71% of all ATOM delegations, with Everstake leading the chart by the number of stakers.
The graph shows that almost all validators have expanded their pool of delegators, indicating the high level of trust and quality of their staking services.
Nearly 27% of delegators re-stake their rewards
While staking ATOM continues to gain popularity among the Cosmos community, nearly 27% of delegators re-stake rewards to earn compound interest. This index grew by 8.5% in Q1 2023 compared to its average value back in 2022. Notably, in March 2023, the re-staked rewards hit an ATH and amounted to 562.2k ATOM.
While some blockchains provide auto-compounding for rewards by default, Cosmos Hub is not among them, so delegators may lose potential profit. Re-staking allows one to increase the yield by up to 4% per annum, depending on re-stake frequency. With the release of the Authz module by Cosmos Hub last year, anyone can enable auto-compounding and get increased income with no manual redelegating. Currently, two public platforms provide re-stake services: yieldmos.com and restake.app. Visiting one of them via Keplr wallet, stakers can activate restaking with their selected validator if it is included in the list of available staking providers. Everstake supports both services, so its delegators can start auto-compounding anytime.
Meanwhile, as seen from the graph, only about 14% of staking rewards are subject to re-stake. That said, we expect it to rise as new solutions appear on the market.
Conclusions
Staking in Cosmos Hub remains in the uptrend in Q1 2023. Our findings suggest the following:
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The total staked value of ATOM, the main asset of the Cosmos ecosystem, has increased by 12.2% despite the ongoing market turbulence.
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The number of unique delegators increased by 8.75%, bringing the overall number to 800.86k and demonstrating the crypto community’s continuing interest in Cosmos.
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The inflation rate has reached its ATH (16.6%), yet the rising stake ratio caused the rebalancing of APR.
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While the ATOM price peaked at $15.17 in February 2023, it went down to $11.34 by 31 March, nonetheless showing an 18% growth in Q1. This suggests that all ATOM investors and delegators who joined the ecosystem in January 2023 gained significant income.
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The increase of the staked ratio to 66.23% suggests that Cosmos Hub is one of the most secure Cosmos-based blockchains with only a little room for malevolent exploitation.
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Data from early Q2 2023 suggest that the staked ratio exceeded 67%. The blockchain’s native mechanisms will therefore drive inflation and APR down. At the same time, a lower supply pace creates higher demand, which positively impacts ATOM price and volatility.
Summing up the current report, we can say that Cosmos Hub keeps growing by stake and delegators, which establishes the blockchain as healthy and attractive to validators, developers, and regular customers.
Everstake’s analytical tool allows one to fetch a wide range of data sets, get insights, and make weighted decisions regarding staking ATOM. So far as Interactive Dashboard is available, you can use it for free to generate your own data sets.
Autocompounding of staking rewards remains undervalued by the majority of delegators, even though re-staking rewards are beneficial not just for stakers but also positively affect the network's security and performance.
Everstake is a responsible validator creating some of the most powerful analytic tools in the industry. You can stake ATOM with us via Keplr here. If you prefer other Cosmos wallets, you can find more guides in the dedicated section of our website.
