Cardano Staking Explained

Cardano Staking Explained

In this week's outpost, we explain Cardano staking and key things to consider when choosing an operator

By: GregSchneider

Cardano is a blockchain platform that uses a proof-of-stake (PoS) consensus algorithm called Ouroboros. Unlike proof-of-work (PoW) algorithms, which rely on miners solving complex mathematical problems to validate transactions, Ouroboros relies on stakeholders who hold and “stake” ADA, the native token of the Cardano network, to validate transactions.

There are several methods for staking ADA in Cardano, each with advantages and disadvantages.

  1. Delegation: This is by far the most popular method; it allows ADA holders to delegate their stake to a stake pool, a group of stakeholders who pool their resources to validate transactions and earn rewards. This method enables ADA holders to earn rewards without running their node or being involved in the technical aspects of staking. Staking can be done through most centralized exchanges and individual stake pool providers. Delegating through an independent party is preferred over staking with a centralized exchange, as it supports further network decentralization. Stake pool operators will usually keep a small fee as compensation for running the pool; it is worth checking what the proposed fee is before staking to any pool, 0% to 0.35% is the standard fee range.
  2. Cold Staking: This method is similar to delegation, but it allows ADA holders to keep their tokens in a cold storage wallet, such as a hardware wallet, and still earn rewards by delegating their stake to a stake pool. This method provides added security as the tokens are stored offline, reducing the risk of hacking or theft.
  3. Solo Staking: This method allows ADA holders to run their node and validate transactions independently. This method requires a significant amount of technical knowledge and resources, as the staker must maintain their node and ensure it is always online and synced with the network. However, this method also allows for a greater potential reward, as the staker does not have to share rewards with other stakeholders in a stake pool.

Cardano staking has no lock-up period and usually returns between 3 and 5%, depending on how frequently the stake pool wins the right to mint blocks. There is no risk of slashing with Cardano staking. Stake pools with more ADA have a greater chance of minting blocks and therefore earning fees, improving the return; however, pools that are too big are penalized and mint fewer blocks. So do try to find a popular pool but not yet over-subscribed. Most pool operators will create a second pool to move some of their delegations across before the pool is saturated and their ability to mint blocks is affected.

Cardano ISPOs staking

A Cardano initial stake pool offering (ISPO) is a unique version of staking and is typically used as a fundraising event for individuals or organizations. During an ISPO, participants can stake in the new pool, which gives them a share of the rewards generated by the pool; however, instead of receiving all the ADA rewards, the operator will retain the ADA and, in turn, return another asset, usually the projects token, at a fixed conversion rate. This approach is popular within the Cardano ecosystem as it allows individuals to gain exposure to new projects by forfeiting their staking rewards while still holding on to the original ADA capital. In the coming weeks, we'll be featuring promising ISPOs in our outposts.

The different Cardano staking methods provide different levels of control, security, and potential rewards for ADA holders. Of course, it is up to the individual to weigh these factors and choose the staking method that best suits their needs and preferences, but staking is a great way to earn yield while you HODL your ADA during the bear market.

Disclaimer: Nothing on this site should be construed as a financial investment recommendation. It’s important to understand that investing is a high-risk activity. Investments expose money to potential loss.


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