How to Stake Cardano

How to Stake the Cardano Cryptocurrency

Want to grow your crypto assets without risking them? You want to stake your Cardano!

Or maybe you don’t even know what staking is, but you have that one friend who won’t shut up about Cardano and keeps saying you’ve just got to do it.

Either way, we’ve got you covered. Keep reading and you’ll know what you’re doing in no time.

What is Cardano staking?

How does a cryptocurrency keep someone from spending their money twice? There are two methods.. Proof of Work and Proof of Stake. Cardano is a Proof-of-Stake coin. This is different from coins like Bitcoin & Dogecoin which are utilizing Proof-of-Work for consensus.

PoW vs PoS

Proof of Work (PoW)

In Proof-of-Work, miners are competing to solve an intense computational problem using high-power processors (think graphics cards and special ASICs). Miners who mint blocks are rewarded for their service in newly created coins plus coins collected in fees. While this method was a genius development in the early days of cryptocurrencies, at scale it comes with some major drawbacks:

First, the ecological impact of all that wasted electricity on the one and only planet we have to live on.

Second, it’s the reason all those poor gamers can’t upgrade their graphics cards and it’s contributing to the massive global processor shortage.

And third, this system also creates too high of a barrier (both financially and technically) for most average users to be able to participate in supporting the network and earning rewards.

There’s just got to be a better way than this…

Proof of Stake (PoS)

Proof-of-Stake is a modern solution to all of the issues with Proof-of-Work.

This approach gives nodes operational power based on the number of coins the node operator and pool participants collectively hold. The node operator and all delegators earn rewards based on the amount they “stake”. The pool operator earns a small fee from all the delegators for their services in operating the stake pool.

The amount of power consumed by the Cardano network is a tiny fraction of that of Bitcoin or Ethereum. The amount of e-waste created by Cardano node operators is also a tiny fraction by comparison. And last but not least, any wallet holding Cardano can delegate to a stake pool and start earning rewards – with no technical knowledge or additional investment required.

Why should I stake Cardano?

You should stake your ADA, first, for the simple reason that you will get more ADA. Just holding Cardano earns you more – nothing to argue with there! But also you should stake Cardano to support the node operators that keep the network alive. The small fees they charge on your rewards is what keeps them funded to operate and keep Cardano strong.

In the future, Cardano will move to a built-in governance system where upgrades to the network will happen by vote. This prevents “forks” when there is a disagreement in the community about the development of the network. In this scenario more coins delegated to a pool will equal more votes. So choosing a pool operator you align with philosophically will allow your voice to be heard on the network. If your pool operator votes in directions you find disapproving, you can switch to a stake pool that votes the way you see fit.

Are there risks to staking?

When you delegate to a stake pool you are at no risk of losing your ADA. Node operators do not have access to your wallet’s funds and you are free to send, receive, or re-delegate your Cardano at any time.

How to choose a pool

Choosing a pool is an important decision. While you might be inclined to choose the biggest, most popular pool that you can find, there are some powerful reasons you should not do this. First, a pool can become “oversaturated” meaning there is a limit to how many coins can be delegated to one pool and the rewards will cap at that limit – lowering take-home rewards for all delegators. This cap is currently around 63.6 million ADA. Second, it is better to support decentralization by spreading stake power amongst many pools. The best thing you can do to support the Cardano network is to support a small pool.

But how small is too small? Here’s some things to look for when choosing a small pool:

  • Has minted blocks – Unless you want to be a really early supporter of a young pool, you should choose a pool that has minted blocks in the past. This is a good indicator that the pool’s nodes are configured correctly and that enough ADA is staked to earn rewards.
  • Good pledge amount – Having some of their own ADA on the line ensures an operator is serious about earning rewards. Avoid pools with little to no pledge.
  • Enough staked to realistically mint blocks – Minting blocks is required to generate rewards. Currently it works out that 1 million ADA should average about 1 block minted per epoch. Staking to a pool with 1 million ADA total staked or more will ensure you will receive rewards at least semi-regularly.
  • Fair fixed cost & margin – all pools must have a fixed cost of at least 340 ADA. This is the minimum reward a pool is guaranteed when successfully minting blocks in an epoch. Most do not go above the 340 standard, but some do. The margin is a % charged to the delegators after the fixed cost. Typical is anywhere from 0-10%.

Does this mean you shouldn’t support pools that don’t perfectly meet the above criteria? Absolutely not. We encourage helpful holders to support the pools they like – just sometimes this choice needs to come with the trade-off of patience. A tiny pool with say 100k ADA won’t mint blocks often, but when they do it’s a sweet payday for everybody in the pool. Many ultra-small pools also support specific causes by donating their rewards – and we think that’s pretty dang cool and worthy of support.

To find lists of pools to compare and choose from, CardanoScanPoolTool, and AdaPools are all fantastic resources.

Delegating your coins

Delegating your coins is pretty straight-forward and most average tech users should be able to handle it fine. First thing – if your Cardano is stored on an exchange like Coinbase or Kraken – you need to move your coins to your own wallet that you control. Here’s some good wallet choices. The first two are listed on Cardano.org:

  • Daedalus – I like this wallet, but it has large resource requirements on your PC. (It downloads the full blockchain to your computer, like 6 gigs)
  • Yoroi – A great wallet with a mobile app and browser plugins. Very simple to set up.
  • AdaLite – Another lightweight wallet.

The interfaces on each are somewhat different but the process is going to be similar on all. For the sake of simplicity, we are going to focus on our favorite wallet, Yoroi.

1. Get your Wallet and move your ADA

This is an important step if your coins are located on an exchange. First, install Yoroi wallet or whatever other wallet you choose.

Next, open Yoroi. You will be prompted to create a wallet the first time you launch. You can create a new wallet or connect a hardware wallet to read from. Once you have added your wallet you should see it in your wallet list.

Staking Tutorial 1
Create your wallet

Click on the wallet to view the wallet’s details. Click the “Receive” tab to view & copy your address.

Staking Tutorial 2
Copy your wallet address

Send your ADA from your exchange wallet to this wallet address and wait for the funds to appear. It’s very important you send to the right address so it’s helpful to first send a small amount and confirm all goes through before sending a large amount of funds.

Here is the process I go through on Coinbase.com. I use coinbase as my primary exchange. If you want to try them, you can use my affiliate link: https://www.coinbase.com/join/GreaterVisions

Step 1 – Paste address and choose amount to send
Step 2 – Confirm Transaction
Step 3 – Get Confirmation

Confirm the funds arrived at your address. This can take anywhere from 30 seconds to 10 minutes.

Funded Wallet with Cardano ready to stake

2. Find a Cardano stake pool

In Yoroi, from your wallet click the “Delegation List” tab. Browse stake pools or search for your preferred pool by ID or ticker. If you want to delegate to Third Power Life Crypto, search our ticker THIRD.

Search for THIRD in the pool search

Click on the “Delegate” button.

You will then need to confirm on your hardware wallet or enter the spending password you created when you setup your wallet (or type the wrong password like 3 times like I did…). And, no, even though it looks like it you do not get to alter the Amount box. Hit “Delegate” again in the modal window.

Confirm the transaction

Success! If you see the screen below, you have successfully delegated your Cardano in the stake pool. It will take a few epochs (5 day blocks) to start seeing rewards, but check your wallet each epoch and you will see rewards coming in.

Confirm it was successful

3. Watch the rewards grow

In the very center of your wallet dashboard is a place for your total rewards.

Dashboard now shows delegated and rewards.

Withdrawing Rewards

To withdraw your rewards, simply click the big green “Withdraw” button on your wallet’s dashboard. It will ask for confirmation and if you want to deregister from the pool. You should not deregister when withdrawing your rewards.

Conclusion

Staking Cardano can sound confusing, but it’s a pretty straightforward process that most average crypto users can achieve. Staking your coins not only earns you more ADA, but also supports the node operators that keep the Cardano network alive. The best way that you can support Cardano and decentralization is by picking a small pool.

If you still have questions or need help delegating your Cardano, please feel free to reach out to us at info@thirdpowerperformance.com, or by chatting with us in our Telegram Channel

Also keep up with our latest news on the Third Power Life Crypto page!

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