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Polkadot (DOT) Wallet & Staking Guide for CoolWallet Pro

CoolWallet Pro now supports storing and staking Polkadot (DOT) in secure cold storage. Here’s how and what you need to know about this groundbreaking blockchain network that is ushering in the era of Web 3.0

Introduction

One of the features most requested and anticipated by our CoolWallet community has finally been realized on the new CoolWallet Pro- the ability to store, trade and of course stake Polkadot (DOT), one of the most ambitious crypto projects ever, on our DeFi-focused hardware wallet

In our Polkadot Wallet & Staking Guide, we’ll look at the expansive DOT universe, what the project is and how it works, key concepts like parachains, Kusama and Web 3.0 to understand, and of course, how to stake your DOT on the CoolWallet Pro and earn a healthy APY in DOT as reward. 

(Read our CoolWallet Pro step-by-step crypto staking guide here)
(Read how to stake Cosmos, or ATOM, on the CoolWallet Pro)

What is Polkadot (DOT)?

Polkadot: Decentralized Web 3.0 Blockchain Interoperability Platform

Polkadot (DOT) is a blockchain network that aims to create an interconnected web of distributed ledger platforms that unite independent blockchains into a single, unified structure. Dubbed the “Ethereum-killer”, Polkadot is expected to solve Ethereum’s scalability issues, as well as other problems that plague the crypto space including interoperability and governance.

The protocol is built on a unique technological framework called Substrate, which is designed to support scalable cross-chain applications, empowering developers to build independent projects on the network with ease. The accessibility of Polkadot’s consensus algorithm also helps builders launch their projects with the security provided by the main network without incurring expensive mining costs. Polkadot’s protocol can also be upgraded so hard forks are therefore not needed. 

Polkadot has a grand vision that is well-described on their website:

“Polkadot will enable a completely decentralized web where users are in control.

Polkadot is built to connect private and consortium chains, public and permissionless networks, oracles, and future technologies that are yet to be created. Polkadot facilitates an internet where independent blockchains can exchange information and transactions in a trustless way via the Polkadot relay chain.

Polkadot makes it easier than ever to create and connect decentralized applications, services, and institutions. By empowering innovators to build better solutions, we seek to free society from its reliance on a broken web where its large institutions can’t violate our trust.”

Polkadot website

How does Polkadot work?

The Launch of Parachains. The staged launch of Polkadot is about… | by  Gavin Wood | Polkadot Network | May, 2021 | Medium

Polkadot uses a “hub-and-spoke” architecture, employing two kinds of networks that compose the whole ecosystem: the relay chain and parachains. The relay chain serves as the network’s central blockchain platform, while parachains, or “parallelizable chains,” function as independent blockchain networks running in parallel with each other.

Parachains

Parachains can connect to the relay chain to access Polkadot’s hybrid proof-of-stake (PoS) system, which consists of a network of validators that ensure its integrity and security. 

Relay Chain

The relay chain’s function is to streamline blockchain data from each parachain, enabling them to interpret the data and interact with other components of the system such as the governance mechanism, an attribute that is essential for interoperability.

Inside Polkadot

The Polkadot universe is full of overly technical terms and concepts. Let’s try to keep it simple and look at the essential terms and concepts you should understand.

polkadotvalidators

Parachains

Parachains are application-specific and independent networks that run in parallel with the main Polkadot chain. It is where developers build DApps powered by Polkadot-based smart contracts or other blockchain frameworks. Parachains can choose to implement the same consensus model from Polkadot’s relay chain to share its transaction throughput and scalability. However, they also have the freedom to implement their own economic models, allowing developers to build virtually any token with its own corresponding tokenomics. Polkadot will only support an estimated total of 100 parachains, making the awarding of them extremely sought after. How are parachain slots awarded to projects? Simply put, through community auctions where projects stake DOT. In June 2021, the Polkadot Foundation indicated that these auctions would start very soon.

There are two stakeholders responsible for ensuring the synergy between the relay chain and parachains: validators and collators.

Validators

Validators are individuals or entities delegated by the network’s stakers to create each incoming block for the whole chain. They ensure the whole network’s security by verifying the accuracy and consistency of transactions to be stored in each block. In return, the network rewards them for their contribution via DOT cryptocurrency payments. However, they will also be penalized if they approve invalid transactions through a process called “slashing.”

Collators

Collators also work with validators in ensuring the network’s security by performing network maintenance functions for specific parachains. Collators’ main tasks include keeping a copy of all data coming from parachains, finalizing a list of transactions and other relevant parachain information for block creation, and checking the integrity of each parachain.

Launchpad

Polkastarter is Polkadot’s primary decentralized exchange (DEX) platform designed to connect multiple blockchain token pools and auctions frictionlessly. It is similar to Binance’s Launchpad as it allows new projects to raise funding from public investors through token launches.

Polkastarter also has its own token known as POLS, which allows holders to vote on important governance decisions such as future listings. POLS is also used for staking, paying for transaction fees, and accessing exclusive token pools.

What is Kusama?

Announcing the Kusama Network

Kusama is an interesting parachain whose main function is to act as Polkadot’s “canary network”, a designated sandbox for developers and builders to test their concepts. In other words, Kusama is a Polkadot testnet but with real, economic consequences.

Kusama, described as Polkadot’s “cousin”, and named after the polkadot-loving contemporary artist Yayoi Kusama, allows developers to perform realistic tests of their projects before they are eventually launched on the mainnet (Polkadot). The project has its own governance model, allowing community members to vote on important protocol decisions and upgrades, which makes it a phenomenal high-risk experimentation ground for Polkadot proposals.

What is Substrate?

Substrate is a web development framework used by developers to create blockchains. The Substrate framework is primarily being used to create the scalable blockchain logic implemented throughout the Polkadot network.

The framework is enabled by a modular, peer-to-peer networking stack that allows developers to implement high-speed database processes, which means that even interactions between different parachains can enjoy high transaction capacity.


Substrate serves as the backbone of the Polkadot network, with several parachain projects using it to build their protocol. It is also the recommended framework for developers that want to implement a governance model that achieves consensus and finality.

What is Web 3.0?

Substrate and Polkadot were envisioned to help give rise to Web 3.0, the forthcoming decentralized generation of the Internet, powered by artificial intelligence (AI) and open networks, making it more efficient and interconnected. Ultimately, Web 3.0 aims to take away corporations’ power to commercialize their consumers’ data, empowering users to take control.

Web 3.0 integrates machine learning technology to enhance web search algorithms and data analytics, allowing users to take advantage of the vast amount of information stored online with ease.

Notably, Web 3.0 tremendously impacts technologies that depend on the peer-to-peer exchange of information. Blockchain, open-source software, the Internet of Things (IoT), and other initiatives that push for decentralization will be some of the biggest beneficiaries. 

Who are the founders of Polkadot?

Polkadot was founded by Dr. Gavin Wood, Robert Habermeier, and Peter Czaban in 2016 as a way to solve Ethereum’s PoW headaches and move it to Ethereum 2.0. Wood happens to be one of the co-founders of the Ethereum project, as well as Parity Technologies, which was initially aimed to build the core infrastructure for Ethereum but is now focusing on Polkadot’s ecosystem.

Another major backer for Polkadot is the Web3 Foundation, an organization that leads efforts towards building out the Web 3.0 decentralized Internet.

Which Ethereum Problems does Polkadot Solve?

Ethereum’s primary problem right now while it transitions to Proof of Stake Ethereum 2.0 in 2022 is scalability, which has led to slow transaction speeds and outrageous gas fees. As the number of Ethereum users grows, so does the network traffic, which is why the network is increasingly becoming more congested. Despite Ethereum’s popularity among DeFi projects, it won’t take long before users are discouraged from using Ethereum-based DApps since it is becoming increasingly difficult to break even while DeFi staking on these platforms.

Polkadot offers a more scalable network through its independent parachains working within the whole ecosystem. Parachains have their own blockchains, which means that the likelihood of congestion on Polkadot-based DApps is significantly lower, allowing them to charge ultra-low fees to facilitate network transactions.

Moreover, Ethereum doesn’t natively support other blockchains, making it a siloed network. Polkadot solves the interoperability issue by natively enabling cross-chain transfers of data and assets, allowing various projects to work together despite being built on different frameworks and networks.

How Do I Stake DOT? 

One of the benefits of being a Polkadot holder is the ability to stake your DOT. This means that you lock your DOT for a specific amount of time and earn interest on it. 

Staking your DOT prevents you from being able to transact with it but it also allows your stake to validate new transactions on the Polkadot blockchain, which you get rewarded for in more DOT. When you stake your DOT, you will get an Annual Percentage Yield (APY) on the amount that you stake. However, the APY on DOT is variable, so it’s important to do due diligence and find out what it is before staking

Let’s look at 3 ways to stake Polkadot:

  1. Delegating (hard)
  2. Staking via an exchange (easy)
  3. Staking on CoolWallet Pro (easy)

1. Delegating Your DOT 

Polkadot uses NPoS (Nominated Proof-of-Stake) as its consensus mechanism for choosing the validator set and is designed with the roles of validators and nominators, to provide optimal chain security. Parties interested in helping to maintain the network can run a validator node.

The first and most complicated method of staking Polkadot is to set up a validator node. Validators are responsible for creating new blockchains on the Polkadot network. Validating is a complicated procedure with a high technical barrier so it won’t be the correct option for some Polkadot stakers.

Most DOT holders will want to delegate their DOT by giving a validator the right to use it to validate transactions instead. This doesn’t mean you are giving away your DOT; it remains yours. 

However, if a delegator acts maliciously, their total stake, including that of delegating users, will be “hard-slashed” and destroyed. So, it is prudent to share your stake across several validators to distribute your risk. 

Once you delegate your DOT, you can unbond it anytime. However, the unbonding process takes 28 day until it’s finished. Only then can you withdraw your unbonded DOT.

Comparing Validators

There are two types of participants on the Polkadot staking system: validators and nominators. Nominators are responsible for appointing their stake to the validator. In Polkadot, there is a limit of 256 nominators that a validator is allowed to pay rewards to at one time. A validator with over 256 nominators is considered oversubscribed and only the first 256 nominators will be paid out. This number will be expanded as the network grows. 

It is important to do due diligence on the validator you select, since you do share their risk. Consider the following factors: 

  • Validator’s moniker: The name of the validator candidate.
  • Validator’s description: Description provided by the validator operator.
  • Validator’s website: Link to the validator’s website.
  • Initial commission rate: The commission rate on revenue charged to any delegator by the validator. 
  • Commission max change rate: The maximum daily increase of the validator’s commission. This parameter cannot be changed by the validator operator.
  • Maximum commission: The maximum commission rate this validator candidate can charge. This parameter cannot be changed by the validator operator.
  • Minimum self-bond amount: Minimum number of DOTs the validator candidate needs to have bonded at all times. If the validator’s self-bonded stake falls below this number, the staking pool will collapse. This protects delegators from the validator pulling the rug out from under them. 
  • Governance voting: Delegators can vote on governance issues. This vote is independent of your validator but if you elect not to vote then your voting power goes to your validator. 

How to Delegate

After choosing a validator, the easiest way to delegate your DOT is through your chosen app. If you’re using PolkaWallet, from your Polkadot wallet, you will need to select “Staking” on the bottom bar and select “Bond +” in the middle right screen, under “Available”. Then, choose your bond amount and submit it. Next, go back to the staking tab on the bottom of the screen and select “Validators” on the top right and select “+ Set Nominees”and pick anywhere from 1-16 validators. After choosing validators, press “submit transaction”, input your password and confirm. Once you’ve delegated your assets to your selected validator, just sit back and watch the interest roll in after about 3-20 days. 

2. Staking Via an Exchange

If delegating sounds a little complicated, there is a simpler option. Many crypto exchanges, including Coinbase and Binance, offer to stake DOT on behalf of their clients. Although the benefit of this approach lies in its simplicity, users should be aware that you are trusting the exchange with your DOT, potentially over a long period. They will also charge a larger fee than if you were staking yourself. 

Before staking with an exchange, you should make sure that you trust the exchange and that you accept the long-term losses that can be incurred by increased fees.

3. Staking on CoolWallet Pro

Looking for an easier solution to staking whilst keeping things non-custodial and in cold storage on an easy-to-use hardware wallet. CoolWallet Pro’s got you covered. Once you have set up your CoolWallet Pro, follow the below steps to start staking DOT. 

STEP 1: GO TO STAKING IN YOUR APP 

From the Marketplace page of the app, select ‘Staking’

STEP 2: CHOOSE COINS TO STAKE

Now, proceed with the next steps:

  1. Select the amount of DOT coins you would like to stake (you can then view the estimated APY, or Annual Percentage Yield, which reflects the real return on investment by adding compound interest). The DOT APY is variable so it’s important to check up-to-date staking rewards
  2. Press ‘Stake’

STEP 3: VERIFY WITH CARD

Next, you will need to complete a series of card verification steps in order to complete the staking process. Please review the details of your stake and press ‘Verify with card’ to proceed to the next step.

You will then be prompted to turn on your wallet. Please ensure that Bluetooth is enabled on your phone and press the wallet button until you see the “Hello” message. 

STEP 4: CONFIRM THE STAKE

Staking Wallet Confirmation. Once you have paired your wallet with the app, you will need to press the wallet button to confirm the stake:

Confirmations:

  1. Coin type
  2. Transaction type
  3. Staking address (optional, you need to turn on the “Show Full Address” feature in the Settings page of the app)
  4. Stake amount

*CoolWallet Pro will not not show the staked address on your card for DOT. Since we nominate 14 validators in one transaction, it would be too long to display.

STEP 5: VIEW DETAILS ABOUT COMPLETED STAKE

Once you have confirmed the stake amount and the authorization for the Staking Validator’s address, you will see the “Stake Completed” message. 

You can then press ‘Staking Management’ to see more details about the stake.

For more on how to claim stake rewards and Unstake, take a look at our comprehensive step-by-step guide

Go to previous article

Cosmos (ATOM) Wallet & Staking Guide

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