As Proof-of-Work consensus protocols proved their inefficiency due to resource consumption and slow transaction speeds, Proof-of-Stake became popular with next-generation blockchains. Polkadot develops a variant of Proof-of-Stake called Nominated Proof-of-Stake, in which stakeholders get to select which validators to support with tokens. Nominators receive staking rewards when their chosen validators act honestly, but have their collateral slashed when the validators exhibit malicious behaviors. This way, nominators have economic incentives to select trustworthy validators and contribute to the security of the Polkadot network.
In order to lower the staking entry barrier and further decentralize the network, Polkadot introduced nomination pools in November 2022. Nomination pools allow token holders to stake as low as 1 DOT and to entrust nomination management to the pool operators. As a result, there are currently four ways to stake DOT natively: running a validator, nominating directly, opening a nomination pool, and joining a nomination pool.
After seven months of nomination pools, this very first in-depth Polkadot Staking Report by SubWallet and Dotinsights will dive into the state of staking overall and at all four levels. We would like to thank the Parity Technologies, Subsquid, Polkaholic, and Polkawatch teams for their help and contribution to this report.
DOT total supply grew consistently from 1.25B on November 1, 2022 to 1.32B on May 31, 2023, with an average weekly increase rate of 0.19%.
Polkadot nomination pools officially surpassed 4M DOT in total stake and 10K in total pool members at the beginning of May. Daily pool rewards rose rapidly from 3.22 DOT on November 2, 2022 to a maximum of 2.83K DOT on May 22, 2023.
The recently implemented fast unstake feature observed initial usage. By May 31, 2023, a total of 122.23K DOT was withdrawn via fast unstake.
Polkadot minimum active nominator stake almost doubled from 187.35 DOT to 363.98 DOT within seven months from November 2022. On average, there was a noticeable increase of 15.01 DOT every 21 to 40 days.
The number of oversubscribed validators went through a remarkable 15-time decrease starting in mid-January, when the maximum number of rewardable nominators per active validator doubled from 256 to 512.
Validators’ self-stake and commission were among criteria that nominators used when choosing validators. Specifically, most nominators tended to back validators with lower self-stakes and lower commission rates.
Total validator count remained relatively stable between 917 and 990, yet total nominator count surged in November 2022 and reached a peak of 47,672 on December 5, 2022. Afterward, it gradually declined and settled at 44,241 on May 31, 2023.
Validator stake fluctuated in the range of 1.59M to 2.13M DOT. By contrast, nominator stake experienced larger changes, such as a major drop of 103.40M DOT on May 4.
Overall, DOT price correlated moderately with staking ratio (Pearson’s correlation coefficient r = 0.47). However, fluctuations in price sometimes preceded those in staking ratio, such as in late-November 2022, late-January 2023, and early May 2023. The drastic drop from 48.68% to 40.78% in staking ratio on May 4 led to DOT inflation rate falling from 7.37% to 6.58%, and reward rate rising from 15.14% to 16.13%. In theory, when staking ratio drops below the ideal threshold of 50%, inflation rate goes down and reward rate goes up to incentivize token holders to stake more.
By contrast, there was no apparent correlation between staking ratio and daily DOT rewards (Pearson’s correlation coefficient r = -0.003). The latter had four extreme peaks (on December 5, January 19, March 22, and April 27, respectively), which occurred because multiple validators with high total stake received rewards. Other than that, the reward patterns were relatively stable throughout the period.
DOT Staking Ratio, Inflation Rate & Price
Staking Ratio & Daily DOT Rewards
DOT total supply increased steadily from 1.25B on November 1, 2022 to 1.32B on May 31, 2023, with an average rate of 0.19% in weekly increments. Total DOT locked in parachain leases rose at a slower rate from 120.01M to 121.43M – that is, from 9.62% to 9.21% of the supply. The two metrics shared a highly similar pattern (Pearson’s correlation coefficient r = 0.95).
Unlike supply and total DOT locked in parachains, total stake experienced more fluctuations, starting at 638.13M (51.13% staking ratio) on November 1, 2022 and ending up at 569.13M (43.14% staking ratio) on May 31, 2023, with a few big changes in between. Most of the big changes (except for two declines in mid-March and in early May, respectively) occurred due to whale movements.
Total DOT Staked & Locked in Parachains Versus Total DOT Supply
The drops in total stake were particularly interesting. On November 25, 2022, a noticeable 35.51M DOT was unbonded by four whales, specifically 10.79M, 8.99M, 9.19M (this whale also unbonded 30.6M DOT on January 24, 2023) and 6.54M DOT. These funds were withdrawn and moved away after 28 days. Coincidentally, the four whale accounts shared one proxy account, which also acted as a proxy for one Kraken account.
On the contrary, the two declines in March and May were not due to unstaking but to validator rotation. Every day, a new active set of 297 out of 900+ validators is elected, meaning that some validators are removed and some are newly added. Usually, this rotation does not lead to big changes in total stake. However, on March 19 and May 4, the new active validator sets had significantly lower nominator stake backing them than the previous era’s sets, causing the amount of total stake to drop by 24.32M DOT and 103.30M DOT, respectively.
Total stake distribution among active validators On May 3, May 4 and May 31
The rotation on May 4, 2023 saw 48 validators being replaced. Whereas each of the removed validators had at least 1.81M DOT of total stake backing them, the newly active validators only had at most 2.10M DOT. As a result, the total stake distribution among active validators underwent a major shift. The number of validators with total stake less than 2.01M DOT rocketed from 92 on May 3 to 253 on May 4, while the number of validators with 2.01-2.61M DOT of total stake plummeted from 195 to 44. Noticeably, the removal of two validators each with 12.21M DOT of total stake greatly narrowed the distribution spread, as evidenced by the decrease in standard deviation from 867.29K DOT to 182.19K DOT.
Validators & Nominators
Validator Rotation & Network Vulnerability
Total Nominator count & Total Validator count
Nominator Stake & Validator Stake
While total validator count varied very little between 917 and 990, total nominator count experienced a significant rise in November 2022 and reached a peak of 47,672 on December 5, 2022, before gradually decreasing and ending up at 44,241 on May 31, 2023. In terms of stake amount, validator stake and nominator stake did not correlate. Validator stake mostly stayed between 1.59M and 1.90M DOT before March 17, and increased to the range of 1.91M-2.13M DOT afterward. On May 4, nominator stake lost 103.40M DOT whereas validator stake gained 102.46K DOT, pulling validators’ share of total stake from 0.31% to the maximum 0.39%.
As mentioned above, the active set of 297 validators change every day on the brink of a new era. A look at daily new active validators revealed an average count of 13. Even at its peak on May 4, there were only 48 new validators added to the active set, which makes up 16.16% of the total set. This points to a lack of diversity; in fact, since November 2022, the total number of unique active validators only increased from 297 to 591 whereas total validator count had reached 987 by May 31.
Note that from February 23, 2023 onward, the share among validators with unchanged, decreased, and increased total stake experienced much more volatility compared to that in the previous period, partly due to more dramatic fluctuations in new active validators.
Total Unique Active Validators & New Active Validators
Validators With Changes Versus With No Changes In Total Stake
In every era, the lowest total stake among active validators is indicative of how vulnerable the Polkadot network is. Since November 2022, the two most drastic drops in minimum total stake occurred on November 25, 2022 (from 1.79M to 1.53M DOT) and May 4, 2023 (from 1.78M to 1.41M DOT), which coincided with the two major declines in total stake. The network went through its most vulnerable point on December 27, 2022, when the minimum total stake came down to 1.24M DOT.
Total Stake distribution among active validators
It is worth noting that the number of validators with zero self-stake was comparatively high, accounting for 76.69% of all active validators in one era on average. Theoretically, if these validators behave dishonestly, the slashes are entirely on nominators, and data suggested that validators’ self-stake was a criterion to which nominators paid attention when choosing validators. On May 31, 2023, 200 active validators with zero self-stake received 8,552 nominations in total, an average of 42.55 nominations per validator, whereas the other 97 validators received 13,703 nominations, an average of 141.27 nominations per validator. Most nominators tended to back validators whose self-stakes were less than 10K DOT. This pattern is understandable considering that popular validators will get slashed more harshly than those with lower stake backing them.
Active Validators’ Nominator Counts Versus Self-Stakes
Active Validators’ nominator Counts Versus Self-Stakes
Only data for validators with less than 10K DOT in self-stake are shown.
Additionally, validator commission appeared to be another criterion for nominators to select validators. It came as no surprise that nominators were in favor of validators with low commission in order to receive rewards. On May 31, 2023, 167 validators with less than 15% commission received 21,299 out of 22,255 nominations, a notable 95.70%. On the other end, there were only 765 nominations for 120 validators with 100% commission, of which 113 validators had zero self-stake. Setting up a validator with both zero self-stake and 100% commission is a tactic commonly used by whales to deter other nominators and thus maximize staking rewards for themselves.
Active Validators’ Nominator Counts Versus Commission
Nominations Backing Validators With 100% Commission
The number of oversubscribed validators went on a downward trend in the last two months of 2022. A more dramatic reduction occurred in mid-January, when, through Polkadot’s upgrade to runtime 9340, the maximum number of rewardable nominators per active validator was changed from 256 to 512. Only 0-3 validators were considered oversubscribed each day since January 14, 2023, compared to 15-45 validators prior to the runtime upgrade, a remarkable 15-time decrease.
Earning Rewards & Fast Unstake
As there are limits on the number of nominators able to earn staking rewards (at most 22,500 nominators across all validators in one era, with a cap of 512 nominators per validator), the threshold to receive nominator staking rewards – called minimum active nominator stake – is dynamic. Within seven months from November 2022, this threshold almost doubled from 187.35 DOT to 363.98 DOT (the latter value had not changed since May 3, 2023). Every 21-40 days there was a noticeable jump of 15.01 DOT on average. It is thus recommended practice that token holders join active nomination pools to earn uninterrupted rewards.
Minimum Active Nominator Stake
For nominators who were not earning rewards, a new feature called fast unstake might be a solution. Implemented on Polkadot on March 28, 2023 with the passing of referendum 111, fast unstake allows nominators to withdraw immediately if their stake has been inactive for at least 28 days on Polkadot. An average of four unique accounts used this feature each day. Up to May 31, a total of 122.23K DOT was withdrawn via fast unstake, of which 20.25K DOT was associated with 10 unique accounts on May 12 alone.
Fast Unstake on Polkadot
Total Stake & Total Members in Polkadot Nomination Pools
Polkadot nomination pools officially surpassed 10K in total pool members on May 7, 2023, and 4M DOT in total stake the next day. On average, pools gained 52 new members and 22K DOT every day. Daily pool rewards observed a similarly rapid rise, from 3.22 DOT on November 2, 2022 to a maximum of 2.83K DOT on May 22, 2023. These values were still very little compared to individual nominator rewards, which mostly stayed between 87.78K and 178.50K DOT. However, the increase in pool rewards combined with the moderate stability of individual nominator rewards resulted in the gradual escalation of pools’ share of total rewards to the range of 1%-2%.
Daily Reward Distribution by Nominator Type
Pools’ Share of Total Rewards
A look at each pool revealed that Talisman Pool 1 was the clear winner with 106.44K DOT of reward since November 2022, averaging 504.46 DOT per day and taking up 49.09% of total rewards across all pools. These numbers were 6.03 times higher than those for the runner-up Amforc (83.72 DOT/day) and 9.15 times higher than those for the second runner-up decentraDOT.com (55.15 DOT/day). ParaNodes.io and SubWallet Official followed closely with 48.84 DOT/day and 36.91 DOT/day respectively. This came as no surprise considering that, as of May 31, 2023, Talisman Pool 1 had accumulated both the largest stake (2.40M DOT) and the highest member count (3,546) among all pools.
All-Time Reward Distribution by pool
- Talisman Pool 1
- Amforc / np-nominator
- 🌐 decentraDOT.com 🌐
- ParaNodes.io / Pool 🚀
- SubWallet Official
- Talisman Pool 2
- Staking4All 🥩 / pool
- POLKADOT BRASIL
- DOZENODES.COM / pool
Reward Share by five pools with the highest all-time total rewards
Overall, on the one hand, the past seven months witnessed the introduction and incredible growth of Polkadot nomination pools, a more affordable and more economically rewarding alternative to direct staking. Along with fast unstake, a new feature which allows stakers to bypass the 28-day unbonding period, pools help bring the concept of Nominated Proof-of-Stake (NPoS) in general and Polkadot staking in particular closer to token holders’ hearts. With several improvements planned for the near future, nomination pools are expected to flourish even more and to contribute significantly to the further development of staking on Polkadot.
On the other hand, due to a sudden drop of 103.40M in nominator stake in early May, attention was brought to a crucial concept in the NPoS scheme: validator election. The election process has two main goals: fair representation of the nominators and maximal security of the network. As a result, power and influence among validators should be as evenly distributed as possible. With these goals in mind, in the major stake drop incident, the removal of active validators with massive amounts of stake backing them appeared to be in line with the election process. Nonetheless, the incident raised the question of how to prevent such validators from entering the active set in the first place. Hopefully, this issue will soon be addressed in future extensions of the NPoS scheme.
Dotinsights is a research-focused initiative by SubWallet, the leading non-custodial Polkadot and Kusama wallet. By providing the most comprehensive and up-to-date Polkadot & Kusama Ecosystem Map, along with data-driven Polkadot Deep Dive reports on a quarterly basis, our vision at Dotinsights is to become the official and trusted research hub and data platform of Polkadot.
DJ Hà Trang
Head of Product
Head of Strategy