Happy New Year! Today, we are excited to announce the launch of our The Graph mainnet indexer node. Find us e.g. on the official dashboard (chorusone.eth). This post will focus on our journey so far and what you can expect when considering to delegate GRT tokens.
Why We Are Supporting The Graph
We have experienced ourselves what it means to write custom code to retrieve blockchain data, to store it, and to service it for our staking platform Anthem. One of the reasons that makes us excited about The Graph is the potential to make extracting valuable information from any blockchain much easier, while at the same time not relying on a centralized party to maintain availability and to ensure integrity of the data.
The Graph is a core piece to enable truly trustless applications. By providing our infrastructure and expertise to the community, we hope to accelerate the growth of this ecosystem!
What You Need To Know About Delegating
The Graph is one of the most complex decentralized protocols with various, highly interconnected elements. The intricate economic design that features multiple roles (check out a primer here) is designed to optimally provide indexing and querying capabilities through a decentralized network of participants.
As a GRT holder, one option to participate in the system is by delegating to indexer nodes that are storing and servicing data. By delegating, GRT holders essentially increase the power of their chosen indexer operator in the protocol. Indexers need to allocate stake to subgraphs and are required to service queries from data consumers, the volume of which is determined by their relative stake allocated to a specific subgraph. To compensate delegators for putting up their capital to back indexing nodes, they receive a portion of the query and inflation rewards earned by the indexer. Indexers can determine their reward cut (the commission taken on newly minted GRT from the protocol) and their query cut (the commission taken on fees from queries served).
The rest of this post will focus on the inflation and reward cut dynamics, since these are expected to have the majority impact on the staking rewards received, especially in this early bootstrapping phase of the network.
If you are seeking to find out how much you will earn at the start, when queries fees are still low, these are the things you need to consider:
- Inflation and Staked Supply: 90% of the annual GRT issuance of 3%, so 2.7% are distributed to indexers and their delegators. Depending on how much of the total supply is staked, those staking will receive a higher APR per GRT staked. E.g. if 10% of the total GRT supply are delegated, the APR for staking GRT (disregarding commission and other factors that will be covered in the following) is 27% (2.7%/10%).
- Indexer Reward Cut: Every indexer can set a query and reward cut percentage. The reward cut is one factor that determines how the above mentioned inflation rewards are distributed between the indexer and its delegators. It describes the percentage of the total reward (both from the indexer itself and from outside delegations) that is kept by the indexer for offering its services.
- Indexer Stake-To-Delegation Ratio: Indexers need to stake GRT themselves and there is a limit to how much stake can be delegated to them before rewards don’t increase any longer. This is currently 16x of self-staked tokens. This self-stake portion can be slashed by 2.5% if the indexer provides incorrect data. Delegated balances cannot be slashed. Since in The Graph’s staking design all rewards (also the self-stake portion) are shared with delegators, the effective commission rate that delegators pay depends on both the ratio of indexer’s self-stake to delegated stake and the reward cut. As an example, if an indexer stakes 1 million GRT and has 6 million GRT delegated with a reward cut of 20%, its delegates actually pay an effective commission of 6.67%. Note that in cases with low Stake-To-Delegation Ratios the effective commission can actually turn negative meaning the indexer is essentially sharing more of his rewards with delegators than what he is earning in commissions. You can use this tool provided by The Graph Portal to estimate the effective commission rate. Future dashboards will likely incorporate this information and display effective commission rates or expected APRs on a per-indexer basis.
- Unbonding Period: When you want to stop staking, there is a 28 day delay until delegated GRT tokens become liquid again. This means that you need to carefully choose the indexer you delegate to, since if you want to switch you will need to wait out that unbonding period.
There’s also a one-time 0.5% fee when delegating GRT that is burned lowering the circulating GRT supply. At the time of writing there is around 9% of the GRT supply staking meaning the APR for staking GRT is 30% (before commission). Since our indexer does not have many delegations yet, our effective commission rate is actually negative meaning you’ll earn an even higher APR until delegations fill up!
How To Delegate
Fellow indexers and community members have already written delegation guides and built dashboards that are helpful if you want to put your GRT to work, here is a selection:
Official The Graph Dashboard: https://network.thegraph.com/
Staking Facilities Guide for Ledger + Metamask: https://stakingfac.medium.com/the-graph-staking-guide-5ec1455f4783
Graphlets Dashboard: https://graphlets.io/
The Graph Portal: https://thegraphportal.com/
Cover background image by Arash Ashgari on Unsplash.