Learn what Cardano staking truly is. How to stake ADA (₳) and get rewarded an additional ADA (₳) in return!
What is Cardano (ADA) staking?
Holders of the Cardano’s native cryptocurrency ADA (₳) are rewarded additional ADA by taking part in the network consensus.
Cardano staking stands for delegating your ADA (₳) to a stake pool and earning additional ADA as a reward proportional to your stake and the pools overall ability to produce blocks in that Epoch.
Stake pools are nodes on the Cardano network, run by a reliable operators: an individual or business with the knowledge and resources to run the node, that are set up to perform the essential functions of staking and creating blocks for the blockchain.
Cardano blockchain continuously grows and new blocks are created every 20 seconds. Blocks are grouped together in Epochs which are 5 days long.
You get rewards after each Epoch (5 days) proportional to your stake and the pools performance. The rewards are paid out automatically to your wallet.
You can re-delegate your ADA to a new stake pool if you are not happy with the performance and leadership of the current one.
Delegation changes take effect at the end of the current epoch plus one full epoch.
Why Cardano encourages and rewards staking?
First and foremost, the overall objective of staking is to provide security to the network of transactions. The more staking pools is online and producing blocks, the more secure the network becomes.
Rewards work as an incentive for ADA holders to participate in the network protocol of producing and validating blocks.
Hardly anyone wants to miss the opportunity to earn passive income by just delegating ADA, so participation is already very high which additionally boosts the growth of the Cardano blockchain and the price of ADA!
How much you can earn through staking?
The total amount of stake delegated to the stake pool is the primary way the Cardano protocol called Ouroboros chooses which pool should add the next block to the blockchain, and get a reward for doing so.
The more stake is delegated to a stake pool (up to a certain point of saturation), the more likely it is to make the next block — and then the rewards are shared between everyone who delegated their stake to that stake pool proportional to their investment.
The amount of rewards ( ADA) the stake pool and it’s delegators get depends on other factors along with the already mentioned amount of stake delegated to the stake pool: the stake pool operator’s pledge, the amount of blocks the stake pool has successfully validated/produced and the fixed pool fee.
The pools where the operators contribute or pledge more stake will get higher rewards. This is to discourage pool owners for splitting their stake in order to operate several pools, and Sybil attacks where attacker with a low stake, opening a lot of pools with low costs could try to gain control over majority of the stake. Remember Cardano is aiming to be a fully decentralized proof of stake blockchain with thousands of nodes — stake pools providing that state of security.
Stake pool fee is a % of the total ADA rewards pool made in that Epoch paid to a pool operator. It’s used to keep the stake pool operable and optimized so that rewards are received in full after all dedicated blocks are successfully minted.
Cardano staking calculators
These are the 3 best Cardano staking calculators you can use to get a rough estimate on how much ADA you can earn by just delegating or running your own stake pool. The results should not be used as a financial advise.
What happens with my ADA when I am staking it?
When staking, your ADA stays in your wallet, and nobody can access it (not even stake pool operators).
Your staked ADA never leaves your personal possession. It’s not “locked up” in any sense either, you are free to un-delegate, spend and send your ADA at any time.
The ADA rewards you receive will be automatically delegated to your current pool, while ADA you spend will be deducted from your stake!
How to stake ADA?
You can stake ADA easily from your Cardano wallet.
Stake ADA using your wallet
Cardano stake pool saturation point!
The Cardano stake pool will reach the point of saturation when it’s total amount of stake or % of total stake in the network becomes too big. When it happens stake pool starts receiving less block assignments from the network and proportionally — the less rewards.
Why does it makes sense? In order to have a fully safe decentralized blockchain network that can’t be compromised you can’t allow any participant (stake pool) to have for let’s say 10% of a total network stake or a “vote” in the system.
Other factors to consider when choosing the Cardano stake pool
Except saturation, the stake pool or a node need to be fully functional and safely running 24/7 in order to produce all blocks dedicated by the protocol for the given epoch and not miss on rewards.
If you are fully into Cardano staking and maximizing your revenue you should consider delegating to a stake pools with the strong social presence (many pools are being run by the Cardano ambassadors) where you are able to communicate with the operators and community and get all updates but also participate in their vision for the future.
Stake pools will use their revenue to build better server infrastructure, incentivize it’s delegators, but also to support other projects and causes — such as charities.
With the Shelley and Voltaire era features now being implemented every ADA holder has a vote in the system, deciding on the Cardano blockchain future, proposals and funding.
What is the best Cardano stake pool?
Considering all things said, if a stake pool operated good in the past or this epoch it doesn’t mean it will produce the most income for you in the long run. Some bad actors in the Cardano network, stake pool operators, will ask of you to send ADA directly to their address in order for them to be able to increase pledge. You should never do this, you should only delegate from your wallet safely to a reliable Cardano stake pool.
The stake pool I can recommend with pleasure is called GINKGO (Ticker: GINKG) run by a long time Cardano ambassador Vasil St. Dabov.
Other Cardano pools recommendations:
Can I stake using my Cardano hardware wallet?
Cardano staking on the exchanges
Cardano is the future. And everyone wants to be the part of it, and so does the exchanges. These are the exchanges that offer Cardano staking rewards for its users.
eToro Cardano Staking Rewards
eToro offers the Cardano staking rewards (first staking rewards to be distributed in November). eToro does the staking process on behalf of their users. You just need to buy Cardano (ADA) hold it on your account watch it multiply.
Expected yearly return is 5% which seems to increase based on the membership level, you can find more about eToro staking here.
Coinbase Cardano Staking Rewards
From Q4 2020, users will be able to stake Cardano (ADA) from inside Coinbase ‘s cold storage.
As we are seeing exchanges rapidly adding staking option for it’s users — traders and investors. We can expect Cardano staking to be available on Binance, Kraken and other exchanges very soon.
Staking on exchanges can be viewed as similar to investing in fixed income securities, such as bonds or money market funds. The exchanges are doing the staking process on your behalf so this might be the easiest option for the new crypto users.
However there’s an old saying “If you don’t own the private keys to your coins, you don’t own them”. I use the exchanges for trading but doing Cardano staking from my own Cardano highly secure hardware wallet.
Thanks for reading. The hardware wallet link contains my referral link.
This is one of the 2 articles I decided to save and move to my Medium account when I closed my Cardano website (Cada.news).
The other one is the list of the reviewed best Cardano wallets in 2020.