Cardana is a popular blockchain network that operates on Proof of Staking (PoS) consensus, allowing the network participants to earn rewards while staking on the platform. In this guide, we offer you information on how to stake Cardano.
What is Staking?
Crypto Staking is a process in which crypto tokens are staked on the blockchain network and received tokens as return rewards. The staking process is carried out using the Proof of Staking consensus mechanism.
What is Cardano?
Cardano is a blockchain network launched in 2015. Its cryptocurrency token, ADA is used for transactions in the platform. The decentralized application development platform operates using proof of stake consensus protocol and utilizes smart contracts for automating transactions.
Benefits of Cardano
- Intuitive Design
Cardano has an intuitive design interface, offering secure code execution and techniques for the optimation and correction of codes.
- Proof of Stake Consensus
The proof of stake consensus offers a secure transaction. Compared to proof of work, proof of stake consensus requires less energy consumption, allowing more seamless and efficient transactions.
- High Market Capitalization
Cardano has a market capitalization of $17.6 billion. The huge capitalization increases the liquidity of the coin increasing the utility.
What is Cardano Staking?
Cardano staking is the process in which cryptocurrency holders stake their coins as collateral to support the functioning and operation of the network, and are rewarded with the native token ADA in return.
When a person takes the crypto in the blockchain network, the currency is utilized to secure and validate the transaction in the network and the holders receive a portion of the stake pool as a reward.
How Does Cardano Staking Work?
To stake on Cardano, a user has to transfer the content of the account to a staking wallet. The tokens are transferred to the stake pool, allowing holders to stake their tokens without running large codes. The stake pool operator ensures the participation and operation of nodes in the Cardano blockchain. In return, the stake pool operators receive rewards which are then distributed among the delegators or the holders.
The holders are rewarded if they add a block successfully to the stake pool. The holders receive the reward according to the number of tokens they staked; the higher the token staked, the higher the rewards provided. The rewards distributed are added to the wallet, and a holder can either withdraw the rewards or stake them again on the pool to increase the amount of future rewards.
How to Stake Cardano?
Staking Cardano is easy and involves only a few steps. A user must have a wallet that supports Cardano staking to stake in the platform.
Step 1: Move the ADA to a Wallet That Supports Staking
To stake and manage ADA, a user needs to move their ADA tokens to a staking-compatible wallet.
Step 2: Select ADA
Select ADA to stake, which in turn delegates it to the staking pool. The stake pools are controlled by validators.
Step 3: Choose The Amount You Intend to Stake
A user can select the amount of tokens to stake in the blockchain.
Step 4: Select The Validator
Choose the validator you want to use. A validator is responsible for adding new blocks to the network.
Step 5: Confirm Stake
After selecting the validator and following the remaining instructions, press confirm. The ADA tokens get staked and rewards are gained in return after a certain period. The rewards are automatically added to your wallet.
Advantages of Staking Cardano
Staking in Cardano has many advantages, the main advantages include:
- Earn Rewards
Staking Cardano tokens allows users to earn rewards. The user gets a passive income, the higher the token staked, the higher the rewards earned. Re-staking ADA rewards increases the passive income further.
- ADA is Accessible
A user can stake, swap, send, receive, or sell ADA which means ADA is not locked in the blockchain. After every epoch, the rewards are calculated and credited to the user’s account.
- Self Custody
Cardano is a decentralized blockchain platform that allows users complete control over their assets. An ADA is staked through a self-custody wallet, giving complete ownership status to the person staking.
Disadvantages of Staking Cardano
- Corrupt Pool Operators
The security and functionality of the Cardano network depend on the participants of the platform. Though most participants are honest, some corrupt operators exist on the platform, stealing the rewards and manipulating the pool.
- Regulatory Compliance
Regulatory policies sometimes affect the staking in Cardano. However, being a decentralized platform the regulatory risks are less often compared to that of centralized staking exchanges.
- Market Volatility
Not only ADA, but all cryptocurrencies are prone to market volatility. A sudden decline in the value of the token sharply reduces the reward rates. Apart from market volatility, transaction fees, size of the stake, and performance of the stake pool, etc is considered while calculating the reward.
Final Thoughts
Cardano staking allows users to stake their tokens in the platform and earn rewards in return. This helps holders earn a passive income, however, the market volatility, transaction fees, and requirement of tax hinder the benefits