Staking is one of the most fundamental functions of the Cardano ecosystem. Staking means that you are locking up ADA within the Cardano Network. Since Cardano is a decentralized network, all decision-making and general governance are done via votes by the staker. By delegating your stake to an ADA staking pool, you can earn attractive staking rewards on autopilot.
The more ADA you stake, the more your corresponding voting power. Cardano’s Ouroboros staking algorithm allows you to participate in the governance process directly or delegate your stake to someone else or a pool and participate indirectly.
So, before we get into the details, let’s understand what staking pools are.
What is a staking pool?
Originally, Bitcoin miners used their home PCs and systems to mine BTC. However, as the network difficulty increased, it became impossible for miners to operate solo. So, miners teamed up and created “pools,” wherein they poured their mining resources into one entity, aka the pool, and the pool gathered enough hash power to mine Bitcoins.
ADA staking pools operate similarly. A group of tokenholders merges their stakes to increase their chances of validating blocks as a group. Stake pool operators run the staking pools. These operators are Cardano network participants who have demonstrated that they can continually run their node 24/7.
Reward mechanism in ADA staking pools
Here are some points to keep in mind when it comes to the reward mechanism in ADA staking pools:
- The chances of a pool successfully validating more blocks in the Cardano network are directly proportional to the number of ADA tokens staked in it.
- Every time a pool validates a block, it gets a block reward shared among the pool members.
- The more the percentage of your delegated stake in the pool, the more your share of the pool reward.
How to stake Cardano?
Staking Cardano is very simple. While multiple wallets allow you to stake Cardano, we recommend Yoroi since:
- Yoroi and Daedalus are the two official Cardano wallets.
- Yoroi is a light wallet and doesn’t take a long time to set up – unlike Daedalus.
- Yoroi allows you to see a list of ADA staking pools. You can manually choose which ones you wish to delegate your ADA in.
So, let’s go through the steps of staking:
- Buy your ADA from a reputable exchange like CoinSmart.
- Send your ADA from CoinSmart to your Yoroi wallet.
- Once you have received your ADA, go to your Yoroi dashboard and select “Delegation List.”
This is what the delegation list looks like:
Now, you can sort the pools via numerous metrics, such as:
- The ROA or Return of ADA – Basically your ROI.
- How much ADA is already locked up in the pool (Pledge).
- What will be your share in the pool if you stake your coins (higher your share, higher your rewards).
- For how many blocks will your stake be locked up in the pool (1 block = ~20 seconds).
Depending on your preferences, delegate your ADA in the staking pool of your choice. It is advisable that you break up your stake and delegate them to multiple pools to maximize your rewards. You may go to adapools.org and get a bird’s eye view of some of the hottest pools in the Cardano ecosystem. Here are some good pools to checkout while doing your research:
- HoskPool (@HoskPool)
- Cardano Canucks (@CanadaCardano)
- QCPOLstakepool (@QCPOLstakepool)
- Cardanistas (@cardanistas)
- HuskyPool (@huskypool)
- Valhalla Pool (@valhallapool)
- Hermes Stakepool (@Wiiinnie)
How much can I earn from an ADA staking pool?
Cardano’s website has a very helpful staking rewards calculator. As per the tool, if you choose to delegate your stake, you could potentially earn 4.6% per annum. Specifically, if you delegate 100,000 ADA for a year, you will get around 4,608 ADA reward @4.6% reward rate.
Cardano has one of the most interesting ecosystems, and staking allows you to participate in it both directly and indirectly. Delegating your stake in these ADA staking pools will enable you to earn very attractive rewards with minimal effort.
Oh, and before you leave, make sure that you have read our other Cardano related articles here:
Up next, we have one more blog coming up on CNFTs – Cardano NFTs.
After the CNFT blog, we will have a mega quiz on Cardano. Registered users who score 100% on the mega quiz will enter our lucky draw with $4,000 of total prizes, distributed like this:
- 20 users will get $50 CAD of ADA credited to their account.
- 10 users will get $100 CAD of ADA credited to their account.
- 4 users will get $250 CAD of ADA credited to their account.
- 2 users will get $500 CAD of ADA credited to their account.