Everything you need to know about staking ADA.
You can stake ADA by moving your tokens into a wallet that supports staking such as Yoroi Wallet, AdaLite, or Daedalus Wallet.
When you delegate your ADA, you are not giving anyone access or control of your coins. Delegation is facilitated using the Ouroboros protocol, the very first provably secure proof of stake blockchain protocol. The protocol protects your ADA from being accessed by any stake pool operator or team member.
By staking your ADA, you help secure the network and earn rewards while doing so.
Here are some terms that you should make yourself familiar with:
- Epochs – Term for the five-day time periods that Cardano uses
- Stake Pools – Epoch slot leaders
- Epoch Slot Leaders – Selected Stake Pools during the epoch
What is ADA Staking?
With the Proof of Stake (PoS) concept, a validator can become entitled to the right to validate block transactions according to how many coins they hold in combination with coins being delegated towards them. This means that the more coins owned by a validator, the more mining power they have. Conversely, with Bitcoin (BTC), Bitcoin mining relies on the Proof of Work (PoW), a method by which BTC transactions are validated based on computing power. Bitcoin mining can take tremendous processing power and consume excessive amounts of electricity, this can also undermine its “decentralized” nature by giving all the validation control to few centralized organizations that can afford to purchase the most ASIC cards. In this scenario, it is often felt that the small participants cannot fairly compete.
With Cardano, a PoS (Proof of Stake) cryptocurrency, PoW mining is not used. Instead, blockchain transactions are validated by epoch slot leaders. These are the stake pools that are selected for the given epochs and they derive their power from everyone in the community who has delegated their ADA to them. These epoch slot leaders are responsible for creating new Cardano blocks and validating them. In return for the validation work, the stake pool is awarded ADA coins to distribute to their stake pool members.
As a reward for delegating your ADA, participants involved in staking Cardano ADA will earn passive income in the form of more ADA whenever their delegate pool validates a block. To be eligible for staking rewards you must delegate your ADA to any of the authorized Cardano stake pools you find in your wallet’s delegation center. You can also review a full list of Cardano Stake Pools on the Staking Rewards Cardano Asset Page.
It is important to note that Cardano staking rewards are granted in the form of more Cardano ADA tokens, this keeps incentives aligned for those looking to increase network power. The ADA Cardano staking model allows everyone who owns ADA to contribute and benefit.
There is no need to claim your Cardano staking rewards as they are distributed automatically. Rewards are earned at the end of each epoch, so expect to see your balance update around every 5 days. Keep in mind there will be some initial delay until you will start seeing the rewards appear.
How to choose the best Stake Pool
Something unique to Cardano Stake Pools is that they charge a Fixed Cost (ADA fee) on initial delegations along with a Margin (%fee) on staking rewards.
Another point is that the more self-stake(pledge) a Stake Pool has the higher rewards it will produce.
The highest reward scenario happens if the staking pool can maintain a total balance of 1 / 500 of the total eligible ADA tokens being staked (Engaged Balance). Anything less that 1 / 500th of this balance in the Stake Pool means that there will be less rewards for delegators.
The number of “desired validators” is 500 and this represents this omnious parameter “k” that a lot of people in the ecosystem are talking about. As you dig deeper into reward formulas you will encounter this parameter.
Knowing the above two points regarding desired validators and optimal balances show how the Cardano network is trying to balance out the number of validators by outlining this optimal network condition.
For all details on Cardano Stake Pools please visit the Cardano Staking Rewards Asset Profile.
For starters, you need to own some ADA. You can buy these from a variety of centralized exchanges.
Secondly, you should download or work with a supported Wallet from the below list, we recommend using Yoroi Wallet as we will use this for our tutorial.
Staking operations are supported by the following wallet solutions:
- Daedalus Wallet (Desktop) – Hardware Wallet Integration – Full Node Wallet
- Yoroi Wallet (Browser extension, Mobile)
- AdaLite (Web Wallet)
- Ledger Nano S (Hardware wallet)
How to Stake ADA
First, go to Yoroi Wallet and download the wallet extension. Install the application, set your preferences, and agree to terms and conditions.
Now that you have the wallet open you can pair it to a hardware device or restore a wallet.
Below I have connected a wallet using a seed phrase – always keep your seed phrase in a secure location as this is the key to access your wallet.
Add some ADA to your wallet and wait for the balance to appear.
Once you have a balance in the wallet navigate to the Delegation List tab.
From the Delegation List tab you will be able to use the search bar to search for specific Stake Pools or you can arrange them with the “sort by” function. They have a nice Score sorting feature that presents Stake Pools with open Pledge space and low to high costs.
For more information on Cardano Stake Pools you can visit the Cardano Staking Rewards Asset Page.
Once you decide on the Stake Pool, hit DELEGATE on the right side next to that pool.
Now that you have chosen your Stake Pool and hit DELEGATE, a prompt will appear.
Notice how fixed fees appear and are deducted from your total amount.
Once satisfied enter your wallet password which you set earlier (not your private keys or seed phrase).
Congratulations, you are now successfully delegating!
Head back to the dashboard and once the transaction has confirmed you will see you total delegated balance.
Here you can also view all statistics regarding upcoming and pending rewards.
You can also review the Stake Pool that you are delegated to.
When withdrawing rewards, you also have the option to deregister the staking key.
Keeping the staking key will allow you to withdraw the rewards, but continue delegating to the same pool.
Deregistering the staking key will give you back your deposit and undelegate the key from any pool, this is how you undelegate your stake.
The process for Staking ADA is extremely easy to understand for anyone new to cryptocurrency and similarly for those cryptocurrency natives. Staking rewards automatically accrue and are visable from the dashboard. At the beginning of each subsequent epoch and are automatically re-delegated so you get the benefit of a compounding effect automatically. It is straightforward to monitor and manage your staking rewards by visiting the dashboard and viewing the details for each upcoming epoch. Something that was unique to cardano was the fixed fees that the Stake Pool operators charge. These fixed fees can make it irrational to stake with a small amount of ADA as shown in our example. The extremely low fees on Cardano combined with the reasonably fast confirmation times make this process thoroughly enjoyable. It is important to be aware of the epoch timeframes to estimate when you can expect to recieve your next stakng reward. For more information on Cardano and to calculate your Staking Rewards visit the Cardano Asset Profile!