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Compound Staking

1 min read
Pronunciation
[kom-pound stay-king]
Analogy
Compound Staking is like reinvesting dividends from a stock back into buying more shares to accelerate your portfolio growth.
Definition
A staking strategy where earned staking rewards are automatically or periodically restaked to increase the total staked balance and compound returns.
Key Points Intro
Compound Staking boosts yield by:
Key Points

Automatic restaking: Rewards are added back to stake principal.

Exponential growth: Earn rewards on rewards over time.

Automation: Reduces manual intervention and transaction costs.

Protocol support: Requires smart‑contract or validator integration.

Example
A Polkadot nominator opts into auto-compound: each era’s DOT rewards are restaked, increasing the stake for the next era’s rewards calculation.
Technical Deep Dive
Compound staking leverages a scheduler or keeper bot that collects rewards from the staking contract, then calls a restake function. The smart contract updates the validator’s stake and recalculates reward distribution. Gas optimization techniques batch multiple restake operations into single transactions.
Security Warning
Automated restaking bots require wallet permissions; compromised keys can lead to unauthorized transactions.
Caveat
Frequent restaking may incur higher gas fees, offsetting compounding benefits on low-value stakes.
Related Terms
Restaking
Staking Rewards
Smart Contract

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