- Exchange staking offers an easy path to yields but you’ll have to keep your ADA on the exchange.
- Staking to a validator pool lets you support the network or support a cause.
- When staking to a pool, you’re free to use your tokens as needed, without lock-ups.
With three-quarters of the supply Cardano’s native token (ADA) staked, enthusiasm for staking Cardano surpasses even well-known projects like Ethereum.
Because Cardano has no lockup period, ADA holders can stake at will, while maintaining the freedom to use their tokens to make payments and transfers or even venture into Cardano’s DeFi ecosystem.
Staked balances typically earn up to 5% APY, but some staking methods may be a better fit for your goals than others.
Here’s what you should know about staking Cardano.
What Is Cardano (ADA) Staking?
Cardano staking refers to a popular way to earn rewards, paid in ADA, for helping to support network validation of blockchain transactions. Staking helps the network to remain decentralized by spreading the consensus (agreement on transactions) to thousands of validators, which are computers that ensure transactions adhere to Cardano requirements.
In effect, a stake is a vote for that validator. ADA holders who stake to a validator join a pool made up of hundreds or thousands of other stakers. The process is called delegating, in which ADA holders delegate their ADA to a pool of their choosing. Together, the pool can reach a higher level of staked ADA, helping everyone to earn a higher yield. Pools with higher staked amounts are more likely to be chosen to build a block and earn rewards.
Learn More About Cardano Staking
In Cardano’s blockchain, Ouroboros is the delegated proof-of-stake (DPoS) protocol that helps ensure decentralization. Ouroboros divides time into defined periods called epochs, which last about five days. It then divides epochs into slots, with each slot containing a block. Within each slot, the consensus protocol selects a stake pool randomly.
But pools with a larger stake increase their odds, much like joining a lottery pool increases odds compared to buying a single ticket. The winning stake pool builds the block for that slot, earning a block reward. These rewards are then passed to the delegators for the pool, minus fees used to support the pool’s operation.
Cardano’s staking model brings a nearly risk-free experience because the consensus protocol does not use slashing, a common way to punish bad actors. In addition, your ADA is always liquid when staking to a pool, meaning you can sell or spend your ADA whenever you want. This removes market risk related to locked-staking found on other blockchains like Ethereum.
How Much Can I Earn by Staking Cardano?
[LIVE DATA FEED]
Staking Cardano – What To Know
|ADA Staking Minimum||~10 ADA|
|Staking Lockup Period||None (pool staking)|
|Staking Options Available||Exchange, delegating, running a validator|
|Staking fee (refundable)||2 ADA|
|Epoch fee (per pool with block rewards)||340 ADA deducted before distributing rewards|
|Pool margin (fee)||Commonly 0% to 3.5%|
|Number Of Pools||3,200+|
How Does ADA Allocate Staking Rewards?
If staking through an exchange, the exchange determines when you’ll earn rewards. For example, Uphold pays rewards weekly on Thursdays. On Uphold, rewards automatically compound to your Cardano staking account.
However, when staking to a validator pool, the process looks quite different.
Cardano pays rewards once per epoch, a measurement of time used with many blockchains. For Cardano’s blockchain, an epoch is five days. However, when you first choose a staking pool, expect a delay of three to four epochs before you start earning rewards due to the process Cardano uses to register stakers for each pool.
Once past the initial wait, you can view the countdown to the next epoch when rewards are paid from within the Yoroi wallet extension, which we’ll use to demonstrate staking later in this article.
When staking to a validator pool, rewards automatically compound, staking your rewards in addition to your initial staked amount. If you transfer more ADA to the same wallet at some point in the future, that amount is automatically staked as well.
Staking rewards come from network fees and newly minted coins distributed from Cardano’s reserve. With a current inflation rate that rivals the yields from top-paying validators (about 5%), Cardano holders benefit from staking, which offsets the dilution from new issuance. Over time, new issuance (and rewards) diminish, but this is a slow process that will likely take decades before Cardano reaches its maximum circulating supply of 45 billion ADA.
How To Stake Cardano (ADA)
Similar to other delegated proof-of-stake blockchains, like Ethereum, ADA holders can stake in multiple ways. In Cardano’s case, you can stake in three ways, whereas ETH holders can also use liquid staking, giving ETH a fourth way to stake tokens.
Cardano’s ADA is always liquid when staking to a validator pool, removing the need for liquid staking. This means you can transfer or spend your tokens at will.
Choose from the following staking methods:
- Staking via a centralized exchange: Some well-known exchanges, such as Gemini, offer staking directly through the exchange. This hands-off method is easier but comes with one key tradeoff: You’ll have to keep your ADA on the exchange.
- Delegate directly to a validator: You can stake to a staking pool, hosted by a validator, which is a computer running specialized software to validate transactions on the network. In this case, you keep control of your ADA, holding your tokens in a self-custody wallet.
- Run your own validator node: Advanced users can also run a validator node themselves. Running a validator becomes a business enterprise, with ongoing expenses and the potential for long-term profits.
Staking Via A Centralized Exchange [Easy]
You’ll have to send your tokens to the exchange or move newly purchased tokens to the staking platform for the exchange you choose. Typically, the process only requires a few clicks, making exchange staking the easiest choice by far.
Easier transactions can have a cost, however, because you lose control of your tokens. Rather than keep your tokens in a self-custody wallet, you send them to a proprietary exchange wallet.
If the exchange freezes withdrawals (which can happen if the exchange becomes insolvent or gets hacked) you can’t access your ADA. In addition, exchanges may require you to commit to staking for a fixed time period or make you wait to withdraw. In either case, your ADA might be tied up for days.
Unlike staking through a validator pool, where you can see transactions on a blockchain explorer, there isn’t always much transparency with exchange staking.
Before choosing this method, consider the financial strength of the exchange and compare the yield to other options. Current yields from exchanges compare closely with staking to a validator pool, ranging from about 4% to 5%.
Editor’s Pick: Uphold.com
How To Pick A Centralized Exchange
You’ll find plenty of options when choosing an exchange for staking ADA, including several well-established choices.
But choosing between these options and others brings some additional considerations. Weigh your choices carefully because there may be a staking commitment that prevents access to your tokens.
- Lockup period: Check to see if you need to make a commitment to stake for a fixed amount of time. Some platforms with longer commitments, such as Crypto.com which has commitments of up to three months with its Earn program, might be using your ADA for lending rather than staking.
- Unstaking period: Investigate unstaking requirements. For example, Uphold advises users that unstaking can take up to 72 hours. You won’t able to sell or use your tokens during the unstaking period.
- Yield: Compare the rewards you’ll earn within the context of other considerations, such as lock-up commitments. If you need to lock up your tokens, you might want a higher yield for that risk.
- Transparency: Research how your tokens are used. Exchanges often use the label “Earn,” which might refer to staking or to lending. The former benefits the network while the latter does not.
- Financial strength: Recent exchange events, like the FTX collapse, make it more important than ever to choose carefully. Exchanges might freeze withdrawals or close up shop without warning.
- Staking fees: Exchanges might charge a staking fee that can reduce returns.
- Blockchain transfers: Research whether the exchange allows transfers on the Cardano blockchain. If not, you’ll have to trade or sell your ADA to get your assets off the exchange.
Pros And Cons Of Staking ADA Via A Centralized Exchange
- Set up staking with a few clicks
- No need to choose a staking pool
- Competitive yields
- Must keep your ADA on the exchange
- Reduced transparency
- Possible lock-up or unstaking periods
How To Stake Your ADA On A Centralized Exchange
In this example, we’ll use Uphold, which currently pays a 5% estimated APY and makes the process easy.
Note: Uphold no longer supports staking in the US.
Step 1: Open your Uphold account.
Head to Uphold to open an account if you don’t have one already. Uphold requires identity verification.
Once you open your account, you can buy Cardano through Uphold. The exchange also provides a way to transfer ADA from an outside wallet if you already have some ADA in another wallet.
Step 2: Select “Earn” to view staking options.
On the left menu (desktop), click on the Earn icon that looks like stacked coins. Search for Cardano.
Step 3: Select “Start staking.”
Click on the green button to open a new column on the right that lets you choose how much ADA you want to stake.
Step 4: Choose how much ADA you want to stake.
Click on the green button to open a new column on the right that lets you choose how much ADA you want to stake. We chose the entire ADA account balance in this example.
Step 5: Review and confirm.
Check your work and click the checkbox at the bottom, acknowledging that you understand the unstaking period. If it all looks good, click on the green button to confirm staking.
Step 6: Agree to Uphold’s staking terms and conditions.
Click on the green button to open a new column on the right that lets you choose how much ADA you want to stake. We chose the entire ADA account balance in this example.
In some cases, you may need to restart the transaction if it times out. But if all went well, you can find your staked balance in the center column.
Delegating Your ADA To An Existing Network Validator [Intermediate]
Staking your ADA to an existing validator means joining a staking pool with other stakers that are using that same validator. You’re pooling your collective resources and sharing in the rewards.
But rather than just transfer your ADA to an exchange, this method of staking lets you keep your tokens in a self-custody wallet. Using a wallet that supports staking, such as the Yoroi wallet or Daedalus wallet, you can delegate your ADA tokens to a validator pool of your choosing. Currently, over 3,200 stake pools are operating.
Staking to a validator pool unleashes your freedom to transfer your ADA at will. There’s no staking commitment and you can spend or transfer your ADA as needed. You can also switch validators or unstake without restriction.
As another benefit, if you add more ADA to an already-staked wallet address, the amount you add is automatically staked, increasing your rewards.
The flexibility afforded by Cardano’s unique staking structure removes the need for liquid staking, one method of staking used with other blockchains, like Ethereum, to maintain the use of your tokens while staked.
How To Choose A Network Validator
With over 3,000 staking pools at work across the Cardano network, you’re nearly certain to find a pool that closely matches your goals. Look for pools that offer the highest yields, if that’s your preference, or choose from pools dedicated to supporting causes that align with your values. In 2021, Cardano reported over $500 million in ADA staked to mission-driven stake pools, which include charities, development, and other initiatives.
These two sites offer comprehensive data on pools to help you choose.
Factors to consider when choosing a Cardano staking pool:
- Size: Smaller pools with fewer than about 500,000 ADA delegated won’t produce blocks. Think of these as pools with growth potential. As the amount of ADA grows above that 500,000 ADA threshold, yields increase. But there’s also a point of diminishing returns. Cardano’s commitment to decentralization comes into play here. A formula runs in the background, which uses what Cardano calls the k-parameter. This number, currently set at 500, becomes part of an equation to determine if a pool is oversaturated. Pools that reach 100% saturation begin to see rewards reduced.
- Yield: You may see this measurement expressed as Return of ADA (ROA), which represents the current rewards earnings for a given pool.
- Decentralization: The Cardano community prides itself on having reached 100% decentralization, with no validation done by the network’s genesis validators anymore. However, to help support ongoing decentralization efforts, you may wish to support a smaller pool with a lesser share of staked ADA.
- Pool margin (fees): The pool margin is the fee charged by the pool operator and can be as high as 3.5% for public pools. If you encounter a stake pool with a 100% pool margin, it’s a private pool and the pool operator gets all the rewards. In addition, each pool operator earns an epoch fee set at 340 ADA for each block in which the validator earns a block reward. While the 340 ADA is standard, the pool margin fee is set by each pool operator independently.
- Saturation: Possibly the most important statistic, saturation refers to the amount of ADA staked to that validator. A built-in mechanism in Cardano reduces staking rewards for validators that reach a saturation level of 100%. The most popular pool may not be the best choice.
- Supported cause: Causes or mission-driven pools are a big part of Cardano culture. If you want to support a cause or a developer, you can usually find a Cardano staking pool that matches your goals.
Note: You can experiment with the effects of staking factors that may affect yields on Cardano’s site.
Pros And Cons Of Staking ADA Via A Network Validator
- Maintain self-custody of ADA
- Verify pool earnings on the blockchain
- No lock-up period
- Extra setup steps
- Pools can become oversaturated
- High fees with some pools
How To Stake Your ADA Directly With A Network Validator
To stake to a validator (staking pool), you’ll need a wallet that supports staking ADA. We’ll use Yoroi wallet for this example.
Step 1: Install the Yoroi wallet Chrome extension.
Visit Yoroi’s site to get the download link. Yoroi also offers a mobile wallet. We’ll use the Chrome extension for this how-to.
Install the wallet and agree to the terms and conditions.
Step 2: Allow payment URLs.
Payment URLs allow you to request payments easily using shareable links. Feel free to skip this step if you don’t expect to use payment URLs.
Step 3: Create a wallet.
You can connect to a hardware wallet, like Ledger, or restore an existing wallet. In this example, we’ll make a new wallet. Click on Create Wallet.
Choose Cardano for your currency.
Give your wallet a name and choose a spending password. The password must be at least 10 characters long. Be sure to write down your password.
Step 4: Copy down your recovery phrase.
Yoroi wallet will generate a 15-word recovery phrase. Write down this recovery phrase and store it securely. You’ll be asked to confirm the words in order.
Step 5: Fund your wallet.
Click on Receive to generate a new wallet address. Then, send some ADA from another wallet or an exchange that supports transfers on the Cardano network, such as Coinbase, or Uphold.
You can see your balance in the Dashboard.
Step 6: Choose a staking pool.
Once you’ve picked your favorite, click on Delegate to select your pool.
We chose a smaller pool that supports cat fostering and animal shelters. Cardano has something for everyone.
Step 7: Confirm your delegation choice.
Enter your spending password and click on Delegate. Your entire wallet balance will be staked, but you can still spend or send ADA normally.
Note the staking fees. In this example, we’ll pay 2.188 ADA, which includes a 2 ADA staking deposit (returned when unstaked) and a 0.188 ADA network fee (not refundable).
Congrats! You’re staking ADA to your selected staking pool. Remember, it can take 15 to 20+ days before you start seeing rewards.
Liquid Staking ADA
With Cardano, liquid staking is a built-in feature of the blockchain. There’s no need to exchange your ADA for a staked-token equivalent as you need to do with ETH liquid staking, for example.
Run Your Own Validator Node [Advanced]
Cardano encourages wide participation in both staking and running staking pools. As a stake pool operator, you have the option of creating a public pool that shares the rewards with delegators or making a private pool by setting the pool margin to 100%. With a private pool, you keep all the rewards, whereas a public pool allows you to earn additional income from pool margin fees.
It’s worth noting that a pool with more ADA stands a higher chance of earning rewards, which makes a public pool more attractive for some operators. A pool with less than ~500,000 ADA is much less likely to earn rewards, with odds increasing as staked ADA for the pool grows.
If operating a public pool, a pledge of ADA helps attract new delegators. However, be sure the pledge amount is there. Cardano will not pay block rewards if the pool owners delegate less than the amount declared when registering the pool.
What You Need To Run Your Own Network Validator Node
You’ll need more than one computer for the project. Typically, you’ll need to start with two to three Linux servers, with one dedicated to producing blocks and one or two serving as relay nodes.
Hardware and software requirements:
- Linux OS (Debian 10, Linux Mint 19, or Ubuntu 20.04 LTS)
- 16GB RAM
- 100GB SSD
- 10Mbps internet connection
You can also choose to build on Windows or macOS. However, Cardano’s stake pool training course focuses on Linux builds.
Also, consider a hardware wallet like Ledger to protect the ADA you delegate to your server.
Pros And Cons Of Staking ADA via Your Own Validator Node
- Self-custody your ADA
- Earn epoch fee (340 ADA) plus pool margin when you build a block
- Use your earnings to support a cause
- Complicated to set up
- Must maintain pledged amount
- Ongoing operating expenses
How To Stake Your ADA On Your Own Network Validator Node
When you set up your Cardano validator, you’ll need to make a pledge, which is the amount the pool owners will stake collectively. A pledge isn’t required, but it helps attract delegators who may be reluctant to stake with a brand-new pool.
The rest of the setup gets a bit technical compared to exchange staking or staking to a pool, but Cardano offers a great guide on getting started.
Step 1: Learn the basics directly from Cardano.
Visit the Cardano developer’s site for a walkthrough on getting your server set up.
Step 2: Take a training course.
Cardano does a great job of helping pool operators get started. Take the Stake Pool Course to practice running a validator on Cardano’s TESTNET.
To Sum It Up
Cardano offers an investor-friendly approach to staking that lets you use your staked tokens just as if they weren’t staked. Yields vary depending on which staking method you choose or which pool you choose for staking. But yields aren’t always the main incentive for stakers. For some, it’s about supporting a decentralized network or even supporting a cause.
Frequently Asked Questions
ADA, Cardano’s native token, offers an attractive way to stake your crypto because yields are respectable at up to 5% and you don’t have to lock up your tokens when staking to a pool.
Currently, ADA staking returns a yield of about 3.5 to 5% APY.
Cardano does not use slashing, eliminating that risk often found on other blockchains such as Ethereum. There’s also no lock-up period. Spending or transferring your staked ADA just reduces your staked balance.
ADA staking pools are made up of groups of ADA stakers that work together to increase the chances of earning block rewards. The pool shares in the rewards, minus an epoch fee and pool margin that go to the pool operator.
Currently, you can earn 3.5 to 5% staking ADA.
Yes. Coinbase offers ADA staking.