What is Staking?
This page gives a high level overview of the staking process on Cardano
Proof of Stake (POS) is the mechanism by which the Cardano Blockchain is kept secure and free from fraudulent transactions. Cardano's unique POS protocol 'Ouroboros' allows anyone who holds ADA in their own, custodial wallet to Delegate their Cardano to this process without ever losing control of it. In return, those that stake their ADA are rewarded with additional ADA roughly equivalent to 4.5% APY.
This is very important and is a clear distinction from other blockchains that use POS based protocols. On Cardano, the ADA is only Delegated, with absolutely ZERO lock-in periods meaning the user is able to spend their ADA at any time they want, but for the time it is held, it is earning them rewards.
As mentioned above, the rewards for most Stake Pools sit at around 4.5% APY and are paid in ADA every 5 days in what is known as an Epoch. The exact amount paid per Epoch will vary based on how many blocks the Pool Validated during the 5 day period, but the average amount over the course of a year should average out over time to reward that 4.5% APY.
Without going deep into the maths, the more ADA that is Staked to a given pool, the more likely that pool is to validate a block and thus get a reward. However, as more ADA is staked, they get relatively the same as a smaller pool that validates less blocks but also shares the reward across fewer delegations.
Because of that average 4.5% APY reward, Stake Pools are now competing for delegators through offering other incentives. Overtime, we have seen the space innovate, initially by coupling rewards with giving to charity, some pools have also moved to ‘bare-metal’ implementations over using Cloud instances offered by large corporations.
These are great methods for making the pool unique but only offer indirect benefits to their delegators. Already we are seeing how DEXs are launching with Stake Pool partners to form ISOs (which as been met with a mixed reception).
At NFT MAKER, we want to push this even further with absolute focus on the CNFT space, by offering the best possible rewards for people who are interested in CNFTs.
If you are on this page, there is a good chance you are interested in NFTs, why not Stake to our Pool?
One of the unique elements about Cardano's POS protocol 'Ouroboros' is how the Staking is actually Delegating. Delegating in this sense is where you are able to 'align' your ADA to a given Stake Pool.
You DO NOT EVER need to 'Lock' or send your ADA another wallet to stake your ADA.
Note - many other POS blockchains DO require you to 'Lock-in' your tokens for set time periods and can even invoke 'slashing' where some of your tokens get taken in the event of a bad actor.
Whilst Staking on Cardano, your ADA remains in your wallet until the time when you decide to use it in a transaction. You can spend, move or un-delegate your ADA at any time.
From the user point of view, there is essentially no difference in the experience between Staking and not staking.
The total amount of ADA that is Staked with a given Stake Pool is then used to calculate their rate of being selected as a block producer.
Blockchains are largely defined by their consensus protocol, Bitcoin most famously uses Proof of Work, which was then implemented by most of the early ‘alt’ coins such as Ethereum. Proof of Work seeks to pick the next transaction validator by allowing all potential validators to attempt to solve very difficult computational problems. The first to solve the problem ‘wins’ the right to become the validator and thus is rewarded with Bitcoins.