How to Auto-Compound Polkadot Staking Rewards

Understanding Compounding

Auto-compounding is a strategy that involves reinvesting earned rewards back into the initial investment, thereby generating additional rewards over time. In the context of Polkadot staking, it means automatically reinvesting staking rewards to compound future earnings, thereby accelerating the growth of your staked position.

Traditionally, staking rewards are claimed manually by token holders and then reinvested if desired. However, auto-compounding streamlines this process by automating the reinvestment of rewards, ensuring that earnings are continuously put to work to generate even more rewards.

How Compounding Works with Polkadot Staking

With the introduction of staking pools back in 2023, it is now possible to automatically compound your staking rewards on Polkadot by joining a staking pool which supports auto-compounding (such as our staking pool).

Pools offer users the opportunity to lock in DOT and earn staking rewards, akin to traditional staking through nominations. However, staking via pools presents distinct advantages: it requires only a small amount of DOT compared to the 500 DOT requirement for direct nominations. Moreover, staking pools handle the management of nominees on behalf of users, streamlining the staking process.

In order to enable staking pools that offer auto-compounding to compound your rewards, you have to activate a feature called 'permissionless claiming.' By enabling permissionless claiming, you authorize others to claim pending staking rewards on your behalf, which are then reinvested into your staking bond.

Our system for example periodically checks if pool member's accumulated rewards have surpassed a minimum threshold of 2.5 DOT every ERA, and automatically claims those pending rewards and reinvests them into the user's staking bond.

Joining the decentraDOT Staking Pool

Our staking pool is designed to help users maximize their staking rewards while minimizing the effort required to manage their stakes effectively. By joining the decentraDOT pool, users benefit from automatically compounded rewards, and up-to-date nominations to maximize returns.

Here's how you can join the decentraDOT pool and enable auto-compounding:

1. 1. Connect to the Polkadot Staking Dashboard:
   Access the Polkadot Staking Dashboard and connect your wallet to the platform.
2. 2. Navigate to the Pools Tab:
   Once connected, navigate to the "Pools" tab within the dashboard interface.
3. 3. Join Pool:
   Using the search bar, locate the DecentraDOT pool and click on the "Join Pool" button.
4. 4. Specify the Staking Amount:
   Enter the amount of DOT tokens you wish to stake in the pool.
5. 5. Enable Permissionless Claiming (Optional):
   You have the option to enable 'Permissionless Claiming,' which allows us to automatically claim pending rewards on your behalf.
6. 6. Submit Your Staking Transaction:
   Review your staking details and click "Submit" to confirm.