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How do Tezos rewards work?
How do Tezos rewards work?
Ouriel Ohayon avatar
Written by Ouriel Ohayon
Updated over a week ago

As a Zengo customer, you can earn staking rewards simply by holding your Tezos (XTZ), similar to earning interest in a savings account. 

What is Tezos staking?

Staking lets crypto asset holders earn extra income by contributing to the network security of a proof-of-stake (PoS) asset. By contributing (delegating) the voting rights associated with your Tezos to a validator node (baker), you increase the chances of the baker to validate transaction blocks and in return earn rewards which they then share with their delegators.  

How do I start earning Tezos rewards?

Earning rewards with your Tezos is easy. Simply: 

  1. Make sure you have some Tezos (you can purchase in Zengo or send to yourself from another wallet or exchange)

  2. Tap on Tezos from the Home screen

  3. Tap on Actions

  4. Tap on the Earn button

  5. Tap on the Activate button

Or, you can:

  1. Tap on Actions

  2. Tap on Earn

  3. Select Tezos

  4. Tap on the Activate button

That's it! You're now earning Tezos staking rewards.

How and when do I get paid my rewards?

In Tezos there's an initial waiting period of approximately 36 days before receiving your first reward payment. After that, you should receive a reward payment from the baker every few days. These few-day periods are called "reward cycles" and may vary between bakers. To know exactly where your rewards are in the cycle, we recommend visiting the website of your baker rather than a data aggregator website. 

What does "Variable APR" mean?

For Tezos staking, "Variable APR" is the current annual reward rate (similar to an annual interest rate) for that point in time. This rate may vary with every reward cycle.
Zengo gets up-to-date APR information from Baking Bad.

What does "Annual Reward" mean?

The annual reward is simply a calculation of your current balance multiplied by the current APR. Since your balance and the current APR can fluctuate, this is just an estimate (if nothing changes) of how much you would earn in rewards on an annual basis from any given point in time. 

Do I have to pay a fee to earn staking rewards?

There are two fees that you should be aware of:

  1. Transaction fee: A small fee, usually a few cents, to activate your Tezos staking address. After that, your address will remain activated for staking and you won't have to pay any additional fees.

  2. Baking fee: Allocated to bakers for running the infrastructure to sign and publish new blocks on the blockchain. This in effect is what generates the staking rewards that are then paid back to you directly. 

Who does the baking?

Currently we've partnered with Chorus One as the default option for all of our Tezos baking. This partnership enables us to identify when rewards are paid out to our customers and label them as such in the app. 

You also have the option to pick your own baker from within the app. You can choose from any baker listed on Baking Bad. Please be aware that since Zengo does not have formal partnerships with these bakers, we don't have the ability to label your rewards as such in the app. They will appear as regular incoming transactions. 

A few notes on Chorus One:

  1. Regarding bond: Chorus One will ensure that its Tezos baker has enough bond to cover incoming delegations. If you're already delegated to Chorus One’s baker, you will continue to receive your rewards regardless of additional Tezos that are delegated after capacity has been reached.

  2. Regarding payouts: Chorus One will pay Tezos rewards at the end of each cycle. In the case of Tezos updates or technical issues that delay rewards, Chorus One guarantees that rewards will be paid upon resolution, usually within a few days of issue identification. Under no circumstances will Chorus One withhold rewards intentionally.

How does switching bakers affect my reward payments?

When switching to a new baker, your previous baker should continue paying your rewards until the new baker’s rewards kick in (approximately 36 days from switching). So in theory you should not miss out on any payments. We can verify that this is the case with Chorus One, the default baker option in the app. For other bakers, we recommend verifying regarding each individual case.

Note that when switching to a new baker you will pay a Transaction Fee, usually low, to the network.

Are there any risks in staking?

Since you don't need to part with your assets in order to delegate them, your funds always remain in the safety of your Zengo wallet. This means that validators do not have access to your funds, and you earn the rewards with no counterparty risk.

I don't own any Tezos. How can I participate in staking?

You can purchase Tezos directly in the Zengo app, or receive Tezos to your Zengo address from another wallet.

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