Earning passive income when delegating $AKT tokens (Staking & Take Income)

Last Update: 2021/04/18

This short guide analyses the terrific reward opportunities Akash Network offers to token holders that delegate their $AKT to a validator and receive staking rewards in return. Staking $AKT currently provides the highest staking APY among main net chains within the Cosmos ecosystem i.e. 55% APY before validator’s commission. If you compound your rewards you can earn just over 70%+ APY at the current inflation/reward rates! Furthermore, within 2022, token holders will receive rewards from the income generated from use/rental of the cloud infrastructure!!!

Please Note: Delegating your tokens does not mean that your tokens leave your possession. They in fact remain in your possession and are just locked for staking.

A few words about AKASH Network

Akash Network is a sovereign Byzantine Fault Tolerance delegated proof-of-stake (PoS) blockchain, that leverages Akash Token ($AKT), a native utility token, as the primary means to govern, secure the blockchain, and provide a default mechanism to store and exchange value. $AKT will act as the reserve currency in Akash’s multi-currency and multi-chain ecosystem, while ensuring economic security of the platform’s public blockchain by means of Staking.

Akash Network are currently boasting a ratio of 84% of the holders’ tokens locked into staking and a current 55%+ APY on staking rewards.

Akash Network utilises breakthrough technologies: Cøsmos SDK/Tendermint Core/IBC . The Stargate upgrade and recent launch of IBC ( Inter-Blockchain Communication protocol), marks the completion of the three layers of the Cøsmos stack.

Through the implementation of IBC, $AKT holders will interact through Cosmos as well as heterogeneous DeXs such as Ethereum, exchanging data and value. IBC transactions are being enabled at the time of updating this article.

For more information on the technology and the upgrade (AKASH Network is one of the core contributors) please see:

For the author’s take on IBC please see:

Purpose of AKASH Network

With 70% market share, four centralised cloud service providers (CSPs) namely: AWS, Microsoft Azure, Google Cloud & Alibaba Cloud dominate the cloud computing market today. With the centralised CSPs, services are inflexible and come at a high recurring cost.

The market is currently in a state of oligopoly.

Akash Network saw an opportunity in the field and is currently building the necessary infrastructure so that companies and developers are offered with an attractive alternative.

The principle behind The Unstoppable Cloud is a fully sovereign cloud infrastructure that cannot be challenged or taken down by adversaries and hackers.

Advantages of AKASH Network over centralised CSPs

  • Akash claims to be the world’s first decentralised cloud computing marketplace, leveraging 85% of under-utilised cloud capacity in 8.4 million data centres. Akash enables anyone to buy and sell unused compute;
  • Akash DeCloud claims to accelerate scale and price performance for DeFi, decentralised organisations, and high-growth industries like machine learning/AI;
  • Efficiency: With Akash you shall pay for what you need, when you need it;
  • Flexibility: Akash’s technology is compatible with all existing cloud applications;
  • Price Advantage: 10x lower in cost for developers; up to 4x more earnings for compute providers;
  • Security: Encryption at rest, run time, transit; web of trust model (PGP) through accreditation.

AKASH envisions a world where cloud computing is permissionless, sovereign, and open, where builders of the internet have greater freedom to improve the human experience.

Transparency/Token Economics/Token Release Schedule

  • Transparency

Through fully transparent token economics Akash Network provides complete peace of mind to investors and token holders.

  • Token Economics/Model

According to the claim from the AKASH network: ..we’re building a virtual marketplace where individuals and organisations can meet to participate in the frictionless buying and selling of cloud compute. An analog for what we’re doing in the cloud compute space is Airbnb. For this comparison, we’ll focus on the similarities between Akash’s Supercloud platform and Airbnb’s rental platform.

Another source of income will be the Supermini where individuals will be able to generate passive income at home or at the office by becoming a cloud provider on Akash’s DeCloud, the world’s first decentralised peer-to-peer cloud marketplace

The Airbnb platform, though nuanced and complex in its own right, can be distilled down to something quite simple: it’s a short-term rental marketplace that enables any excess or underutilized living space to be rented. Similarly distilled, the Akash platform is a marketplace that enables any excess or underutilized compute capacity to be rented. Each marketplace effectively leverages existing, but previously unavailable inventory (property for Airbnb, and compute for Akash).

  • Token Release Schedule

The token unlocking schedule is fair and ensures a gradual release of genesis tokens (100 million) over the course of 3 years!

Partnerships

Where to buy $AKT

- Centralised Exchanges

$AKT can (currently) be purchased on the following exchanges:

  1. BitMax
https://bitmax.io/en/basic/cashtrade-spottrading/usdt/akt

2. BitMart

https://www.bitmart.com/trade/en?symbol=AKT_USDT

3. Bithumb Global

https://www.bithumb.pro/en-us/spot/trade?q=AKT-USDT

4. Gate.io

https://www.gate.io/trade/AKT_USDT

5. Digifinex

https://www.digifinex.com/en-ww/trade/USDT/AKT

- DeXs within Cosmos

Please note as IBC is still being implemented and development of exchanges is undergoing the following DeXs are not available yet. But all of the below should be in the coming weeks/Months

1. Cosmos Hub AMM/DEX (2nd Quarter 2021)

https://swap.bharvest.io/

2. Osmosis AMM

https://osmosis.zone/

3. Sifchain

https://dex.sifchain.finance/#/peg

Sifchain (Sif) has a working bridge to Ethereum already trading ethereum assets and will soon have a working IBC relayer allowing assets that are IBC ready such as $AKT to be traded there.

- Bridges to heterogeneous chains such as Ethereum, Polkadot, Bitcoin, BSC

There are are several bridges currently being developed to heterogeneous blockchains. Upon completion it should be a breeze trading pegged $AKT tokens to Uniswap, Sushiswap or pegging e.g. ETH assets and trading on the Cosmos native Dexs.

Where to Store/Stake $AKT

Keplr

Keplr is an ambitious project and a wallet (currently available in the form of a Chrome browser extension) developed by Chainapsis. It is anticipated that Keplr will be central to the Cosmos ecosystem post IBC protocol’s implementation. We can safely assume that Keplr will be to Cosmos what Metamask is to the Ethereum ecosystem.

Keplr is also the first decentralized wallet with access recovery available in the Cosmos ecosystem, marking a milestone for the entire Cosmos community!

Cosmostation

Cosmostation is another great wallet with a second to none interface available also on iOS and Android. It is fully featured too and was the first decentralized mobile wallet for the Cosmos hub. For more info and guides on Cosmostation please visit: https://medium.com/cosmostation

Ledger

For full staking guides please see:

Benefits & Advantages of Staking $AKT

$AKT holders stake $AKT in order to:

a. secure the Akash PoS network and

b. earn staking rewards in exchange.

Early adopters gain higher rewards (inflation gradually drops) which currently amount to a staggering 50%+ APY or 70%+ if rewards are compounded. Compounding rewards means that one reinvests rewards on a daily/weekly/monthly basis thus achieving higher yields.

Rewards comprise of 2 types:

  1. inflationary rewards;
  2. in the future (2022), rewards will include a share of the total network spend (Take Income) users pay!!

AKASH Network’s users will thus be directly benefited from real world adoption of the network. The rewards will not merely be inflationary but — on top — delegators will earn rewards from the income made from providing cloud services!!!

Inflationary rewards Current model

In the early days of the network, when meaningful income is not yet realised from network cloud spend, Akash stakers/delegators earn from inflation rewards and transaction fees. To learn more about Akash Economics, check out Akash’s white paper.

Staking Rewards as of 04/07/2021: 55% APR

Future Model: Inflationary Rewards & Take Income

Akash’s value, in the near future, will — additionally to inflationary rewards — be backed by the total value of transactions in the marketplace made possible by a take rate where a percentage of transactions is paid to the marketplace owner. The concept of a take rate is not unique; Apple, Google, Uber, DoorDash, Amazon, and many others all feature take rates in their respective marketplaces. In the case of Apple’s App Store, Apple takes 30% of all transaction revenues (take rate) in their marketplace, and uses the proceeds for building, maintaining, and improving their marketplace.

Akash’s proposed take income rate is 20% and all of those proceeds go back to all $AKT token holders who delegate their tokens in order to secure the network.

Take Income Scenario A

Here is a scenario provided by the author using data from post-pandemic forecasts on cloud computing spending, demonstrating $AKT’s potential.

Please Note: Below follows an oversimplified example, but the simplicity of this exercise helps illustrate the source and nature of AKT’s intrinsic value and by extension, the earning potential that AKT represents.

Let’s use some real-world numbers to illustrate what this might look like for Akash:

  1. Total number of AKT tokens circulating by EOY 2023: 230 million
  2. Projected Cloud Services Spending by 2023 according to IDC post-pandemic forecasts: $500 billion
  3. Proposed Take Rate: 20%
  4. Assume income generated within the Akash marketplace represents 3% of total cloud computing spending by 2023
  • 3% x $500 billion = $15 billion (annual GMV)

5. With a take rate of 20% on a GMV of $15 billion

  • 20% x $15 billion = $3 Billion

6. Based on a 1 year snapshot of this hypothetical year of 2023 and if we assume that a whopping 200 million tokens (over 85% of tokens) will be staked →

7. holders of $AKT (who delegate/stake their tokens) in 2023 will earn/share $3 billion in the form of a network dividend where each AKT token would earn $3 billion/200 million = $15 per token.

Take Income Scenario B

Here is another more bullish scenario provided by the author using data from post-pandemic forecasts on cloud computing spending, demonstrating $AKT’s potential ahead of a projected cloud computing market set to surpass 1 trillion in 2024!

  1. Total number of AKT tokens circulating by EOY 2024: 260 million
  2. Projected Cloud Services Spending by 2024 according to IDC post-pandemic forecasts: $1 trillion
  3. Proposed Take Rate: 20%
  4. Assume income generated within the Akash marketplace represents 3% of total cloud computing spending by 2024
  • 3% x $1 trillion= $30 billion (annual GMV)

5. With a take rate of 20% on a GMV of $30 billion

  • 20% x $30 billion = $6 Billion

6. Based on a 1 year snapshot of this hypothetical year of 2024 and if we assume that a whopping 200 million tokens (over 75% of tokens) will be staked →

7. holders of $AKT (who delegate/stake their tokens) in 2024 will earn/share $6 billion in the form of a network dividend where each AKT token would earn $6 billion/200 million = $30 per token.

A few words about how Take Income will be shared between holders

According to the data that has been disclosed so far, payment of the dividend will be made in $AKT on every block like with staking rewards.

This means that even if someone — in the future — pays for compute with e.g. USDT, an internal transaction will take place to convert to $AKT, then 20% of this will be withheld and distributed proportionally to holders who stake their tokens.

According to the last updates Take Income will go live in 2022.

To learn more about the earning potential of Akash Token, please read the following article although the example calculation above may be more up-to-date:

Staking Rules and Guide

We — as delegators — are often presented with compelling and overwhelming questions such as whom should i delegate to, which wallet should i use, how should i choose between so many different validators, how long are my coins bonded for, what are the associated risks when staking and how do i mitigate those risks, and more.

The guide quoted below, provides advice in respect to 3 main areas related to staking on Cosmos:

  1. Universal Rules/Risks that apply when Staking in the Cosmos ecosystem;
  2. How to Choose between different Validators in order to mitigate risks associated with staking;
  3. Ideal Wallets on the Cosmos ecosystem;

For more information on the staking mechanism on Cosmos ecosystem’s blockchains, staking rules and guidance as to how to choose a validator, please check the following staking guide made specifically for token holders staking on the Cosmos ecosystem:

Inflation

At Genesis of AKASH network, the initial inflation was set to 54%. Annualised APR per month gradually decreases each month and halves every 3.75 years. This model maximises reward for early delegators as an incentive to secure the Akash network in its nascency.

Currently inflation is 49.1%. APY depends on how many tokens are delegated, the more that are delegated the less the rewards but at no times lower than the inflation.

Currently (with 84% of tokens locked in staking) the APY of rewards amounts to 55%. Compounding rewards means that at the above rates, rewards can get up to over 70%+ APY.

Supply of tokens

There were 100,000,000 $AKT pre-mined at Genesis with a maximum supply of 388,539,008 $AKT.

Below follows a table with estimated inflation, locked token releases and supply until EOY 2025.

It is important to mention that Akash Network’s model is similar to Bitcoin in the sense that inflation rewards are halving every 3,75 years (in a similar fashion, on BTC block mining rewards are halving every 4 years, but please remember BTC is a PoW chain not PoS like AKASH Network).

The incentives for staking early in the project are thus strong and the rewards extremely high for a PoS project. It seems like a really well thought-out token inflation/distribution scheme that is not common to other Cosmos projects.

It is anticipated that by year 2030 inflation will be as low as 2.44% but it should be borne in mind that holders will possibly be further incentivised to delegate as they will earn a percentage of the revenues generated from bandwidth use (Take Income seen above). Incentives for securing the network are thus anticipated to remain strong at this future point in time!

Examples of inflationary rewards (current model)

If you buy 1,000 $AKT tokens and stake them today, you get 55% APR; that is before any validator commission, hence:

a. your daily yields would be 1.53 $AKT; that is 11 USD per day at current $AKT prices

b. your monthly yields would be 46 $AKT; that is 330 USD per month at current $AKT prices

Amounts above are before validator’s commission (between 0–12% depending on the validator). If you compound these rewards weekly or monthly you APR would climb at 75%!

Please Note: A better calculation on a month-per-month basis can be made if the correct Inflation co-efficient is used for calculating rewards. Please remember inflation is dropping every day so an idea of the inflation rate on a future date can be drawn from the table on the Inflation section above.

Even if the correct inflation is calculated, rewards also depend on the percentage of tokens staked in the network. The fewer bonded the higher the rewards as the inflationary rewards are distributed to the token holders who stake only!

Please use the link below so that you query your rewards according to the amount of tokens bonded/delegated:

Further Reading

Blockchain advocate & sceptic | Cøsmos denizen & degenerate ⚛️ | Organic grower & physiolater 🍃

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store