The ULTIMATE Hex Staking Guide
Updated: Nov 4, 2022
The Ultimate Hex Staking Guide
When it comes to staking Hex, there are so many possibilities for how to stake your Hex. There are staking ladders, snowball ladders, max length stakes, staking your Hex for one set period and everything and anything in between.
To make matters more complicated, we have Pulsechain launching soon which will duplicate our Hex whether it is staked or un-staked. Now, many questions I have received around staking sound like this: Should I stake my Hex now or after the fork? Should I stake on both Ethereum and Pulsechain or just one chain?
The problem with these questions is that I cannot answer them for you. What I can do is lay out as many arguments as possible for the different scenarios. Let’s start with the easy questions and move forward from there.
What is a staking ladder? A staking ladder is a series of stakes that end year after year and require you to divide up your total hex by the number of stakes you wish to have in your ladder. You can stake evenly across the years you are staked for, or you can divide your hex up however you wish. The point of this Ladder is to provide a potentially increasing amount of income year after year for a given number of years. For example:
If I have 50,000 Hex and want to do a 5 year staking ladder evenly distributed across 5 years, I would simply create 5 different stakes, starting from one year and ending at the 5 year mark. Its really that simple. You do not have to do this starting at 1-5 years. You can start your ladder at any point in the future and do any number of consecutive yearly stakes afterword (5-7, 7-11, 5-15, and so on). Then, once your first stake has ended, you can then turn your staking ladders into Snowball ladders.
The only difference between a staking ladder and a snowball ladder is this: Once your stake has ended, instead of selling or keeping that Hex liquid you re-stake whatever amount of Hex from that stake you choose for one year after your last stake ends. Thus, continuing your ladder indefinitely and making your Hex portfolio consistently grow with a constant yearly stake coming out.
You can re-stake as much or as little of the ended stake as you like, but the point here is to continuously have stakes ending year after year and have yearly income potentially.
Now we come to single length staking, meaning you take the entirety of your Hex and stake it for a given period. There are many arguments as to why you may or may not want to stake any given length, but let’s start with the shorter stakes.
Short stakes (1-5 year)
Let’s consider 1–5-year stakes as “shorter” stakes. My logic for considering 1-5 shorter is due to the lower APY per stake, as well as just keeping the math simple by dividing the 15 possible years into 3 parts.
Why would you want to have shorter stakes? Well, the obvious reasons are:
- Lack of trust in Hex being around or crypto being around after that period
- Lack of trust in the investment itself
- Life circumstances
- Lack of knowledge as to the difference in payout between longer and shorter stakes.
- Wanting to benefit from Stakes in a shorter time horizon
By having shorter stakes, you are hedging your bets on the short-term Price Appreciation being the major catalyst for most of your profits in Hex. Of course, between 10 -30% APY will increase your gains, but most of your profits will need to come from price appreciation.
By staking shorter, you are also giving up your current T-share rate much sooner and will have to stake much more Hex to get the same payout that you were getting during that stake. When you stake, you get paid based on the T-share price at the time of staking for the entirety of the stake. So if you staked longer when the t-share price was 20,000 Hex and the T-share price in the future is 1,000,000 Hex(while you are still staked), you will still be getting paid the daily payout per T-share were credited for having. This means while it costs new stakers 1,000,000 Hex to get the daily payout, it only cost you 20,000 Hex per share. Once you have staked, you hold whatever amount of T-shares you have for the entirety of the stake regardless of the T-share price.
So, let’s measure a parameters for why you SHOULD do shorter term stakes. You should stake shorter term if:
- Your life circumstances require you to have a shorter time horizon
- You believe Hex will have a few good years in the future and then die
- You believe that accessing your or any crypto on a longer time horizon is highly unlikely and is too big of a risk for you
- You believe that price appreciation of the short term will be the highest we will see for Hex
- Possible starting point for a staking ladder
You should NOT do short term stakes if:
- You believe Hex will see a continuous rise in price over the long term
- If you do not need the short-term potential gains
- If you want the staking rewards to benefit you tremendously
- If you believe that due to Hex being Immutable, you will always have an access point to your assets
- If you want to maximise the capability of Hex staking
- If you do not have a plan for security in regards to a hardware wallet.
Medium Length Stakes (6-9 years)
Why you would WANT to do medium length stakes:
- Longer time horizon
- You want a Longer term staking ladders starting point
- APY is climbing higher, and the likely Payout will likely result in substantially higher gains
- You are not concerned about delaying gratification long term.
- You have a secure way to hold your funds over the long term
- You believe you will have access to your crypto long term
By Staking in this period, you are making a prediction that Hex will not only survive long term but will either pay a substantial amount more long term than short term, as well as that price will be at least what it is currently by the time your stake ends.
This period of staking is when APY is nearing the maximum possible amount currently. If waiting 9 years for a potentially massive payout is worth it to you, this may be your staking period. This could also be a great place to start a longer-term staking ladder so you are both delaying gratification and getting very close to maximizing APY.
Why you wouldn’t want to do medium length stakes:
- Time horizon is too long
- You only have a hot wallet (Metamask, etc.) and do not have a cold wallet, nor are willing to learn or invest in one
- You do not trust that Hex will increase in value long term
- You do not understand that the potential for very High rewards is possible in this period of staking beyond what shorter stakes can yield
- You do not trust in Hex enough to commit to that period
- You prefer either shorter or longer/ closer to max length stakes
Long term staking (10-15.2 Years)
Longer term stakes sound the most frightening, as they are more than a decade away, however the likelihood for incredible amounts of Yield over this period are at its peak. The amount of T-shares in existence will be constantly going down over time, as the T-share rate constantly goes up as stakes end. As T-shares become more scarce due to the cost increasing over time, there will be the highest payouts over time for those who are staked the longest. We can’t predict what the Payout per day will be, but we can predict it will be substantially bigger than what it is today.
At this level of staking, you are also getting the Maximum bonus for what the system calculates towards your “Effective HEX”, which is a bonus that the system gives you for staking based on the length of a stake. The Bonus is not what will be paid to you, but instead is the Hex that is counted towards the amount of T-shares that the system will lock you in as having staked. At the 10-year mark and up, if you staked 50,000 Hex, the system will lock in the amount of T-shares you will be credited for as if you staked 150,000 Hex for that period. Longer than 10-year stakes give a bonus of 200% effective Hex.
So, why would you want to stake for 10+ Years?
- You are willing to wait more than a decade for delayed gratification
- You have alternative income and are not reliant on the stake being a saving grace financially
- You understand that while there is risk in locking up anything in the crypto sphere for 15 Years due to several reasons, the rewards greatly outweigh the risk
- You have a plan and security configuration that will allow you to safely store your Hex and all seed phrases/ passcodes for 10+ years
- You think that not only will Hex’s price continue to increase on average, but the Payout over that timeframe will compound the increase in price in potentially unfathomable ways
Why would you NOT want to Stake for 10+ years?
- Your time horizon or lifespan does not align with stakes of that length
- You consider 10+ years too risky
- You do not have a security plan nor are willing to do the research to learn
- You do not think that Hex will increase much at all in price long term and will likely increase more in the short term instead
- You do not think that the long term rewards outweigh the risks
Minimum time required before ending a stake
When you are staking for any given period, you are making a promise to the Hex smart contract and in return the Hex smart contract makes a few promises back. If you make a 5-year stake, you are making the promise to lock up your principal Hex for half of that time. If you hold beyond that promise, you will earn some portion of the Yield generated over that time. This applies to any stake length.
The Hex smart contract makes three promises. The first promise is that if you hold for half of the stake length, your principal will not be penalized for ending the stake. The second promise is that if you make it to the end of the stake (Or any time after the halfway point), you will be rewarded with Yield on top of your principal. The third promise is for the case that you have ended your stake somewhere in between the halfway point and the end of your stake without completing it. In this case, the promise is to pay your yield you would have earned for completing the entirety of the stake to those who are still staked as well as the Origin Address.
If you break the first promise, you may lose a significant portion and possibly all your principal. This depends on how soon after starting a stake that you Emergency End Stake (EES).
While there are infinite factors as to why you may or may not want to use a specific staking strategy, use this a starting point to guide your logic to what makes the most sense for you. No two people will have the same reasons for staking the same length, nor should you feel pressured to stake for a given length. Even if mathematically a longer stake makes the most sense, for some, it may still be far too much time committed to something that lives in the most volatile asset class in the world.
Now we come to the most difficult part of all: Should you stake before or after the Pulsechain Fork, and should you stake on both chains or one?
As a caveat to this logic, we are making the assumption that you are planning on staking no matter what and holding hex long term, however you are unsure of what makes the most sense for you.
Pre-Pulsechain Fork
Let’s try and weigh this out is objectively as possible here and first look at why you would want to stake now instead of after the Fork.
We do not know when Pulsechain will launch; it could launch within the next few weeks or it could possibly take many more months, up to a year. We cannot say. Because of this, if you are staked you are going to be continuously earning yield the entire time. By staking now, you will not only be earning yield before the fork, but you will likely earn even more rewards due to user’s emergency end staking to migrate to Pulsechain. All yield that you have earned prior to the fork will get copied over with the copied Hex stakes you will get on the Pulsechain.
If you believe that Ethereum will survive long term and you will be able to access and end your stakes at whatever length you choose, then it may be best to stake sooner. Everything from the previous paragraph also applies to this logic.
Finally, if you want to have an equal amount of Hex on Both Ethereum and Pulsechain and are not interested in migrating to Pulsechain solely, then staking sooner may be best for you.
Post Pulsechain Fork
The most pressing reason as to why you may want to wait until after the Pulsechain fork to stake, is to migrate funds over to the Pulsechain network. If you wish to only have Hex on the new Network, then waiting for Pulsechain may be the best bet for you.
Drawbacks
By staking Pre-Fork or on Ethereum in general, you are likely to pay more in gas fees with an increasing amount due from longer or max length stakes. Fortunately, there is a workaround for this though.
Because you are getting a free copy of this stake on Pulsechain and the Gas Fees are likely to be substantially lower to end the stake, you have the option to use some of the profits from the stake to pay off the Gas Fees due on Ethereum. By using this strategy, you will not pay anything out of pocket and will still likely have the majority of your profits from the free copy on Pulsechain plus the profits from you Ethereum stake.
By staking Post fork, you are betting on Pulsechain and Pulsechain Hex being a much less risky investment nest over the long term. Again, the main drawbacks to this are having to forfeit the opportunity to earn yield in the short term before the fork, as well as the increased payout when users EES to migrate over to the Pulsechain.
Again, this is not the be all end all, however it should serve as a guide for logical starting points when assessing what to do with your Hex. There are no right or wrong ways to stake, but there is a right way for you.
- CRYPTOGRFX
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