Tutorial: staking DOT on Acala

Before we get started, here’s a quick rundown of Acala, the Polkadot ecosystem and DOT/ LDOT.

What is Acala? 

Acala is a layer 1 Ethereum-compatible smart contract platform designed for DeFi and scaling decentralised apps (DApps) to Polkadot.

Polkadot & Parachains

If you’re not already familiar, Polkadot is a layer 1 blockchain that markets itself as a layer 0. Essentially, Polkadot allows projects to use its security system to build their own layer 1 ecosystem.

Each project that intends to build on Polkadot needs its own parachain slot. Polkadot came up with the parachain auction system as a way of fairly allocating these limited slots. In these auctions, the project that raises the most DOT (Polkadot’s native token) wins the slot. 

‘Crowdloans’ can be used by projects to raise DOT from the community (enable individuals to support projects through staking DOT). In November of last year, Acala won a parachain slot with a bid of 32 million DOT (worth approx. $1.3 billion at the time).

 If you’re interested in finding out more about how all of this works, check our simply explained article here.

What is LCDOT/LDOT?

The typical staking process involves users being rewarded with a percentage of tokens in exchange for locking up their tokens for a period of time. Because these tokens are ‘locked’, they cannot be used to take part in additional yield-generating activities (e.g. providing liquidity).

Participants who contributed to Acala’s Crowdloan  via their portal received LCDOT in a 1:1 ratio to their staked DOT. LCDOT is a derivative token that acts as a receipt of contribution, but also enables participants to access the underlying DOT liquidity. For example, users can trade LCDOT, use it as collateral to mint aUSD (Acala’s stablecoin) or provide liquidity.  

Although the crowdloan is now over, you can still opt into the same type of liquid staking on the Acala network. Instead of LCDOT, stakers will receive LDOT, another derivative token. LDOT has the same use-cases as LCDOT, which we’ll cover in a separate tutorial. 

This tutorial will go through how to set up a Polkadot wallet, bridge to Acala and take part in liquid staking on the Acala network.

 

Tutorial

Head to https://acala.network/ and click ‘apps’.

Connecting your wallet 

On the following screen, you’ll be prompted to connect a compatible wallet.

We’re going to go with Polkadot{js}. If you don’t already have this wallet, setting one up is very straightforward.

Start by downloading the wallet extension from here. Once your wallet is downloaded, you can pin it to your browser.

 

Next, you’ll need to create an account for your wallet. To do this, click on the wallet icon in your browser. In the pop-up screen that appears, click the ‘+’ icon.

You will then be presented with your 12-word mnemonic seed. It’s extremely important to store this phrase safely and securely. If you lose access to your wallet, you’ll need this seed phrase to regain access. If someone gets a hold of your seed phrase, they’ll be able to access your wallet’s funds. It is advised that you make at least two physical copies of your recovery phrase (i.e. do not store it online or on a hackable device).

Once you have this done, click ‘next step’. On the following page, you’ll need to enter a name and password for your account. After this, the account should be visible on your wallet’s homepage.

Next, you’ll need to fund your wallet with some DOT, which can be bought on popular centralised exchanges like Binance, Coinbase and Kucoin. Acala requires users to stake a minimum of 5 DOT, but people generally deposit a bit more than that to allow for gas and other fees.

Note: The majority of exchanges do not support the direct transfer of DOT to the Acala network. Therefore, once you send DOT to your wallet on the main Polkadot chain, you will need to bridge the DOT to the Acala network (see the next section for how to do this).

To send DOT to your wallet on the main chain, you will need to copy your wallet’s address, which can be done by clicking the icon outlined in red below.

An exception to this is Kucoin. We’ll have a full tutorial on Kucoin soon, so keep an eye out.

 

Bridging DOT to Acala 

DOT on the Polkadot main chain can be easily transferred to Acala using the network’s integrated bridge.

First, click on the bridge page and in the ‘bridge’ tab, select the network you are transferring from (i.e. Polkadot) and the network you are transferring to (i.e. Acala). 

Next, enter the amount of DOT you want to transfer; you can click ‘max’ to transfer your entire balance. Below this, you’ll see the estimated network fees that are payable in DOT.

Simply click ‘transfer’ to process the transaction. You will also need to approve the transaction in your wallet.

 

Staking DOT

Start by clicking on the liquid staking page.

Here you’ll be able to see some stats, like the total amount of DOT staked with Acala and the current liquid staking APY rate. Keep in mind that this rate is subject to change.

In the stake tab, simply the amount of DOT you would like to stake. Again you can click ‘max’ to stake your entire balance.

Below this, you’ll see how much LDOT you will receive in exchange for your stake. 

The fee for staking is ‘flexible,’ meaning that you can choose the token you would like to pay in. This will be set to ACA (Acala’s native token) by default which offers the best discount, but this will obviously require you to fund your wallet with some ACA. If you want to default to a different token, click on the settings gear icon near the top right of your screen, followed by ‘flexible fee’. You can choose the token you would like to pay fees in the following pop-up.

Back on the main staking page, you’ll see that you also have the option to ‘stake LDOT for rewards’. If you do this, you’ll earn additional yield in the form of aUSD, Acala’s native stablecoin (rate is represented by the ‘reward APY’ figure).

Once you click ‘stake’, you’ll be prompted to confirm the transaction in your wallet. You can view your DOT staking position by clicking the ‘my stats’ tab on the liquid staking page.

The ‘collateral staking’ tab on the earn page is where you can view your LDOT staking position.

Here you should see the amount of LDOT you have staked and the amount of aUSD you’ve earned. Note that your LDOT value won’t increase over time, but the amount of DOT it unstakes into will increase.

Unstaking 

Keep in mind that you’ll need to have LDOT unstaked before you can unstake DOT. 

LDOT

On the earn page, select the ‘collateral staking’ tab and click the ‘stake/unstake’ button for the position you want to unstake. In the pop-up screen that appears, enter the amount you want to unstake. 

Simply click ‘unstake’ and confirm the transaction in your wallet.

DOT

On the liquid staking page, select the ‘unstake’ tab.

Next, enter the amount of LDOT you want to return, and the corresponding amount of DOT you will receive in exchange will be displayed. Click ‘max’ to unstake your total LDOT balance.

You can toggle the switch button to ‘unstake immediately’ but note that this will require you to pay a 1% fee. You’ll pay a smaller fee if you’re happy to wait the 28 unbonding period.

Finally, click ‘unstake’ and confirm the transaction in your wallet.

  

Comment and share if you found this tutorial helpful! Also let us know what tutorials you’d like to see next!

 

Disclaimer: THIS IS NOT FINANCIAL OR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.