Why Buy Tezos?
We are 6 months into the bear market of 2018 and a basic problem with cryptoassets in revealed: they do not pay a yield in the same way as traditional assets like real estate, equities and bonds. This is anathema to conventional investors. It was not a problem in 2017 when prices were rising and investors could sell off slices of their portfolio to obtain income. But it is now.
Looking at the Top 20 there are four coins pay an income: DASH, NEO, BNB and Tezos. DASH pays it to owners of masternodes but you need 1,000 DASH for a masternode which costs $240,000. Owners of NEO receive GAS for each block processed. BNB owners are entitled to a 20% share of Binance profits but they receive that indirectly in the form of Quarterly BNB buy-backs, not as straight income. And Tezos: with its unique baking model, all XTZ holders can participate in the consensus mechanisms that keep the chain functioning, and can receive rewards for doing so. This is Delegating.
There are other cryptoassets with yield outside the Top 20 as mentioned in the replies to this Tweet:
Where Can I Buy Tezos?
The only place you can buy Tezos is at Gate Exchange. Buy Tezos at Gate Exchange. Do not buy at HitBTC — these are Tezos IOUs, not genuine Tezos. You can withdraw your Tezos from Gate and stake them to earn income immediately. That is not true for purchases at HitBTC. Gate have announced that they will pay staking income to Holders of XTZ. But best practice is to buy at the exchange, withdraw to your own wallet, and delegate independently, as explained further below.
How Much do Tezos Pay?
The current figures are shown below. These values will be out of date as soon as I publish this for two reasons: they are affected by the price of Tezos and by the Tezos Active Baking %. So check the live sheet for current data.
You can check the results of this spreadsheet at the calculator at Tezos Community. They show a result of 3,050 XTZ against my calculation of 2,709.
A standard unit of Tezos for Baking is a roll of 10,000 coins. But you can Delegate as little or as much as you like. For a roll the current annualised yield net of the Baker’s Fee is 27%, giving an annual income of 2,709 XTZ, or $6,290 at the current price of $2.32. (That is a monthly income of $524.)
So those who participated in the ICO and paid $4,600 for a roll of Tezos are receiving an annualised yield of 137% if they have activated their XTZ and are delegating.
But note that the yield is likely to fall towards 5% or 6% as more participants in the ICO activate their XTZ and figure out how to delegate them. This will increase the Tezos Active Baking %.
Five Factors Effecting Tezos Yield
The payment depends on
- Number of XTZs you delegate. This is set to 10,000 in our worked example above.
- Percentage of all XTZs that are staking. This is around 17% at time of writing but will rise towards 70%.
- Average Time Between Blocks. This is currently 60 seconds.
- What bond coverage your Delegate has compared to the number of XTZs delegated to it. This is assumed to be 100% in our worked example. i.e. No over-delegation, &/or priority in payments given to clients who stake before over-delegation.
- Baker Fee. Typically 10 - 15%.
There is great interest to participate in this process with the result that stresses from excess demand are already showing:
Additionally the largest Delegator, Tezos Community, announced that it is hiking fees from 10% to 15% to reduce demand.
Bakers are going out into the market to buy more Tezos to increase their delegation capacity. This should drive up the price of Tezos.
How to Delegate Tezos?
- Read this Guide: Tezos Is Live! Instructions for Claiming ICO and Delegating to Earn Rewards
- Activate your Tezos at stephenandrews.github.io/activatez
- Create a wallet at Tezbox
- Watch this video by Stephen Andrews on the use of the Wallet and how to delegate.
These resources are all written with reference to participants in the ICO. If you did not participate the first thing to do is Buy Tezos at Gate Exchange. Then go to Step 3, create a wallet at Tezbox. Then withdraw you XTZ from Gate to your Tz1 address at Tezbox.
These are great resources but they stopped short of choosing a delegate baker so I am adding a section on that.
Choosing a Delegate
First, check out the Bakers List at MyTezosBaker.
You need a baker that applies Dynamic Fees and not Fixed Fees. That is clear from this graphic:
This rules out CryptoDelegate and XTez who charge unreasonable fees. Read about that on Reddit. Screenshot from MyTezosBaker:
You need to find a delegate that is not over-delegated and is open to new delegations. Check their individual websites / Twitter feeds for current status on this.
How to identify if a Tezos Delegate is Over-Delegated from TZScan data
- Go to Delegation Services on TZScan.
- Click on the link for the Tz1 address of the Delegate
- Baking Capacity (a.k.a. Bond Coverage)= 12.12 x “Balance”. [Because a security deposit or bond of 8.25% of Baking volume is required. 1/0.0825 = 12.12]
- If “Staking Balance”> Baking Capacity then Over-Delegated
Example: Tezos Community
Baking Capacity = 12.12 x Balance of 231,820 = 2,809,658 XTZ
The Staking Balance of 6,658,875 is greater than the Baking Capacity so, Houston, we have a problem. Tezos Community have made a statement how they are solving the over-delegation problem.
When do I Get Paid? Two Months
Cycle 1 — You delegate to baker
Cycle 8 — The Tezos Blockchain assigns your delegation rights to your baker.
Cycle 15 — Rewards from cycle 8 start to accumulate for you.
Cycle 22 — Baker pays out your rewards for cycles 8–15 back to the address you are delegating from.
A cycle is 4,096 blocks. A block is about 1 minute. So a cycle is about 68 hours. We are presently just about to start Cycle 3. (Cycle 0 was the first cycle.) So you need to wait 22 Cycles from when you delegated to get paid, which is about 2 months. Subsequent payments are made every seven cycles (about 20 days).
Where Can I Buy Tezos?
The only place you can buy Tezos is at Gate Exchange. Buy Tezos at Gate Exchange. Do not buy at HitBTC — these are Tezos IOUs, not genuine Tezos. You can withdraw your Tezos from Gate and stake them. That is not true for purchases at HitBTC.