There’s more to staking than most people think. There are some strategies that can help you to maximize your staking rewards if you understand the underlying technology a bit. You can also just fire up your Divi Desktop wallet and start staking, and it will do a reasonable job. Or, just skip to the bottom of this article and read the “Best Practices” section.
What are UTXOs?
What most people don’t know is that the blockchain doesn’t have account balances on it. For any give account address, every transaction ever made is kept there, and the wallet calculates a current balance of each account. Every transaction creates new “outputs” that are not yet spent. Those are the UTXOs, “Unspent Transaction Outputs” Every UTXO for the entire blockchain is held in the RAM of every node on the network. It sounds crazy to do this, but computers have so much RAM now that this can be done on most laptops.
When your wallet is staking, the amount it stakes is going to be made up of a sum of all the UTXOs that are associated with that address. You don’t see these UTXOs because we hide them from you to avoid confusion. Instead, you only see your balances in each address. But there’s more to the story...
What is Coin Age?
The first thing to understand is about Coin Age. It really should be called UTXO Age. Every UTXO has an age, which starts at zero when it’s first created. After an hour, that particular UTXO starts to stake. After 7 days, it’s set to 100% staking. That means that at 3 ½ days, that particular UTXO is only staking 50%.
PIVX removed coin age, but we put it back in. The reason is that it helps with “coin velocity,” which is a problem that affects many cryptocurrencies. Since staking rewards don’t kick in immediately, it’s better not to spend or move your DIVI. If you’re not spending them, you’re holding them, and that’s good for all of us. Coin velocity is improved when a cryptocurrency ecosystem has incentives for people to hold onto them longer because it helps keep the value higher. For the first few years, while we build Divi’s ecosystem, we want holders, not spenders. That’s why we have a 5-layer masternode system, lottery blocks, and coin age to help counter inflation.
Why is this important to understand?
Here’s an example of why you should know this. Let’s say you have a million DIVI in a single UTXO, which would happen if someone just sent it to you. When you first receive the transaction, it won’t have a chance of receiving any staking rewards right away. So you wait patiently for a week and then it’s staking at 100%. If at any time someone asks you to send them 100 DIVI, and you send it from that address, it’s going to break off a 100 DIVI chunk from the 1 million, and create a new UTXO with 999,900 DIVI, and in doing so, it will reset the coin age to ZERO. Now you’re going to have to wait another week before it’s fully staking again. You’re not going to see any of this but what happens is that you are just very unlikely to win any staking awards while that UTXO is aging to 100% over seven days.
The way to avoid this problem is keep the DIVI that you’re actively using, trading, moving, spending, etc, in a separate account in your wallet. So don’t ever touch the bulk of your DIVI unless you really must. If you add more DIVI to the account that you’ve designated as your staking one, it won’t affect the coin age of what’s already in there.
Automatic UTXO break-up
When you win a staking award, the UTXO that actually won the block for you will have its coin age reset to zero. What that means is that having a lot of large UTXOs is bad because they get their staking reset. Divi has a built-in remedy for this to help you, which is that when one of your UTXOs wins a stake, it will automatically break up a big UTXO of more than 100,000 DIVI into two equal halves, and it does it without a transaction fee. That way, if one of the two halves wins a block, the other half keeps its coin age at 100%. This is similar to our UTXO cleanup technology, but works in reverse. Both algorithms are running at the same time to better manage UTXOs for you and the network.
A Future Advanced UTXO Panel?
For staking nerds, we may add a staking panel that advanced users can open up to show all of their UTXOs, what the coin age of each is, what percentage staked each is, and what your total chance to win is for your entire UTXO set. Most Divi fans are focused on their masternodes, but we think when people understand staking better they’ll get interested in this. This data is already there. Your wallet knows it and the network knows it. It’s just not available, so it’s just a matter of displaying it in a pretty way.
Staking Best Practices
Don’t keep DIVI on exchanges. If you do that, you won’t be staking. You’ll be losing potential money and the exchange may win for you and they’ll keep them.
Keep your wallet up and running at all times. You can only win when your wallet is open and supporting the network.
Keep your staked funds in a separate account and try not to touch it.
Try to move your funds around as little as possible to avoid coin age resets.
Set up a Masternode instead using MOCCI and you’ll probably make even more money.
How do I get my wallet to start staking?
It will do it automatically. You don’t have to do anything except that make sure it's "unlocked." Just keep it running and connected to the internet. Make sure your hard drive has enough space for the Divi blockchain copy.
Which of my accounts shown in the wallet will be staking?
All of them except the ones that are for masternodes. Masternodes do NOT stake.
**If my staking is only at 50% then does that mean the rewards I receive will be 50% the size?"
No, the 50% staking refers to the chance of receiving a reward every minute. It's like you are only receiving 50% of the tickets to a lottery that you normally would. If you win during this time, you still get the full reward.
How do I maximize my staking earnings?
Don’t touch your coins and don’t put them on an exchange. Moving your coins between accounts resets their staking power to zero and it takes a week to build it to 100% again.
Can I take my DIVI out of my masternodes and stake them on lottery day to make more money?
Technically you can do that but in the end you’ll be losing money overall. Your chance of winning the lottery is small but you’ll be guaranteed to lose rewards when your masternode is getting re-verified by the network. Mathematically, it isn’t worth it.
If I turn off my computer, or lose internet connection, does my coin age reset to zero?
No, that won't change the UTXOs. The UTXOs are part of the blockchain and its the age of each UTXO that matters.
Why does coin age reach 100% in 7 days?
Other cryptos have different amounts. Peercoin’s UTXOs don’t start staking for 30 days, and get to 100% in 90 days! That just seemed to harsh to us so we made it a lot shorter timeframe.
Are there any other secrets to maximizing staking?
Yes, there’s one trick that will help a little bit. I’m not going to tell you so that our Divi community can have fun trying to figure out what it is. If you read what’s written here and think about it all carefully, you should be able to logically deduce what it is. What’s crypto without an occasional puzzle, right?