Understand Staking in Cardano

Understand Staking in Cardano

Blockchain
September 25, 2021 by CS Admin
1463
Cardano (ADA) is one of the most prominent crypto coins today. Last month Cardano hit 150% return (and 1600% in a year!) and became the 3rd largest crypto coin in terms of market cap, only Ethereum and Bitcoin have a bigger market than ADA. Most crypto investors focus on buying and holding, buying low and
stephen-dawson-qwtCeJ5cLYs-unsplash

Cardano (ADA) is one of the most prominent crypto coins today. Last month Cardano hit 150% return (and 1600% in a year!) and became the 3rd largest crypto coin in terms of market cap, only Ethereum and Bitcoin have a bigger market than ADA.

Most crypto investors focus on buying and holding, buying low and selling high approaches. More long term investors look for alternatives that can boost even more these gains like staking.

Staking in Cardano is safe. I mean, by safe is that Cardano never leaves your wallet. Investing in crypto is a high risk investment and even when you have your investment staked, it still fluctuates based on Cardano’s market value. Don’t invest in crypto money that you cannot afford to lose.

Now back to staking. Staking is like putting your money in “an investment fund” together with several other investors, improving chances of return because together you will have a higher stake.

In Cardano, “an investment fund” is called pool. A pool can have multiple “investors”, called delegators. When you delegate to a pool, you allow the pool to mine (generate) blocks in Cardano chain using the ADA you delegate. The more ADA a pool has, the better the chances a pool is selected to “mine” a block (and be rewarded by the chain). Rewards collected by the pool are distributed to all delegators.

In order for a pool to function, the pool operator usually charges a small percentage of the rewards to pay for machines (servers) that are responsible for “mining” the blocks. I put mining between quotes because Cardano doesn’t actually allow mining. Mining is a concept used in Bitcoin and Ethereum for instance because they rely on a different type of consensus algorithm, which is called Proof of Work and it demands computational power (and lots of electricity) to solve a cryptographic puzzle for a block to be mined (now without quotes).

Cardano in the other hand uses a Proof of Stake algorithm where the chain uses the stakes of the delegators to generate a block (the stakes serve as a kind of bet, where you are incentivized to bet at valid blocks and when you try to cheat, the stake is penalized). Since Pools are a decentralized way to ensure Cardano chain works as expected, it is really rare to have Pools not betting at valid blocks.

Now that you understand how staking works, you may be asking how you can stake in Cardano right? Well, first you need to download a Cardano wallet. The most used ones are Yoroi and Daedalus.

Yoroi is a light wallet, which means it doesn’t download the entire Cardano chain to function properly. On the other hand, Daedalus is a heavy wallet, and it will download the entire Cardano chain in your computer and only after that, it will work properly (and it will take some time, usually some hours).

We recommend Yoroi because it is faster to sync and it has a mobile app as well. After the wallet is installed, you generate your wallet address (and also your private key, which consists of a set of works that you need to write down and store offline if possible, to be able to restore your wallet — and funds — in case of damage in your computer for instance).

In Yoroi, you select Delegation List, and type CSTKN to find our pool and hit DELEGATE. You can select other pools, if you want but since we are helping you, we hope you can help us too!

We are a small pool, crypto enthusiasts that found in crypto a way to change and improve our lives.

This is all. Your ADA will never leave your wallet. * We’re not financial advisors. Please do your own research.

Add a comment

This website uses cookies and asks your personal data to enhance your browsing experience.