Compound interest, also known as restaking, is the fastest and most efficient way to generate a higher profit from the rewards received from staking assets. Technological advances and the optimization of repetitive processes are advancing by leaps and bounds, and the result of this has been the arrival of restaking in the Cosmos ecosystem.
What is restaking?
There are certain strategies, such as staking, which help us to generate passive income by just blocking our assets. What would happen if we decided to reinvest the profits obtained instead of simply claiming and holding them? It would be then when we would generate a compound interest, an accumulation of interest that generates optimal results at the investment level, since what you could get with an initial investment, increases with each reinvestment that is made.
In order to maximize compound interest's benefits, the interest earned must be reinvested continuously. This is a variable which cannot be programmed: patience.
Consequently, Eco Stake developed REStake, an open source tool that any validator has access to through Github that would come up with the perfect solution in the Cosmos ecosystem: the autocompound.
Advantages of restaking in Cosmos
One of the main advantages of compound interest is the increase in profits thanks to the APY generated. Let's look at a case study:
If you decide to stake OSMO, you will get an annual interest rate (APR) of 64.55%. However, if you restake OSMO and automatically reinvest the rewards you receive for your staking, that 64.55% will become 90.59%.
On the other hand, you will gain in convenience on the one hand, and save on the other hand, since the payment of the 'Claim' transaction will correspond to the validator as you will not be the one claiming the rewards.
Authz, the key to autocompound in REStake
A relevant fact to highlight is that autocompound is possible in REStake thanks to Authz, an authorization characteristic of Tendermint networks that grants permissions to other wallets to perform certain transactions on behalf of whoever authorizes it. In this case, it is the delegator who must give permission to his validator to be able to claim the rewards on his behalf. Note that claim commissions run at the expense of the validator.
REStake allows validators to perform WithdrawDelegatorReward and Delegate transactions to claim rewards from their delegators and delegate them to the validator's own wallet. With this feature, the validator has no access to either transact with your wallet or your funds, beyond claiming your rewards and delegating them back.
Validators can either set a fixed reward claiming time or claiming frequency, or set a minimum number of accumulated rewards for the automatic claiming and delegating action to be executed.
How to autocompound with REStake: the complete restaking process
To start getting the most out of your staking, just follow the steps below:
Go to REStake.
Connect your Keplr wallet and approve the wallet connection with REStake.
- Select the network you want from the drop-down menu at the top right. Pay close attention, as only those with 'Authz' highlighted in green will be available for autocompound.
- Delegate to the validator of your choice by clicking on 'Delegate' in case you want to make a new delegation. If you want to enable the autocompound of an already active delegation, just click on 'Enable'.
That's all! Now all you have to do is wait for the claim time to arrive and watch how it will be executed automatically. Your rewards will be reinvested effortlessly to ensure you a higher profit.