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Staking

How Fees Become Delegations

When ATOM arrives at the staking contract, it is added to a validator's pending balance. Once a validator has at least 0.5 ATOM pending, the contract delegates it to that validator on the Cosmos Hub.

Before each delegation, the contract checks the validator's status. If the validator has been jailed or left the active set, the pending fees are redistributed to other active validators instead.

Compounding Rewards

Staked ATOM earns staking rewards from the Cosmos Hub. These rewards are claimed and compounded approximately every 30 minutes.

How Compounding Works

  1. The contract claims staking rewards from all active delegations
  2. The claimed ATOM is split three ways:
    • 80% restaked - distributed to validators proportionally to their existing delegations (validators with more stake receive a larger share)
    • 10% to treasury - sent to the project treasury
    • 10% to operations - covers bot gas costs, infrastructure, and operational expenses
  3. Compounding only runs when it is economically sensible - the operations cut covers the gas costs of the compound transaction itself
  4. When many validators have delegations, the compound operation uses pagination to stay within block gas limits, processing validators in batches across multiple transactions

If there are no existing delegations, compound rewards go to the active validator with the smallest total staked amount in the contract, keeping the distribution balanced.

Rebalancing

The contract regularly checks whether any validators it has delegated to have been jailed or left the active set.

When a validator gets jailed:

  1. A 24-hour grace period begins
  2. If the validator unjails within the grace period, nothing changes
  3. If the validator is still jailed after the grace period (or leaves the active set entirely):
    • The full delegation is spread across the 3 smallest active validators using inverse-proportional weighting, avoiding concentration risk
    • Any pending fees for the jailed validator are redistributed
    • The validator's referral link is disabled

The targets for rebalanced stake are the smallest active validators. Since these targets rotate naturally as validators accumulate stake, the system stays balanced without manual intervention.

Reconciliation

If on-chain events like slashing cause a mismatch between the contract's records and actual delegation amounts, the contract can sync its records to match the real on-chain state. This runs automatically as part of regular maintenance.

Maintenance Schedule

All staking operations run approximately every 30 minutes as part of an automated cycle:

  1. Claim staking rewards
  2. Compound rewards (80% restaked, 10% to treasury, 10% to operations)
  3. Check for jailed or unbonded validators and rebalance if needed
  4. Sync records with on-chain state