April 11, 2022
How to Stake on Cardano
Cardano is a proof-of-stake blockchain meaning that, unlike many other major blockchains, it is secured by its token holders, not a group of miners with finely tuned mining rigs. All ADA token holders have a stake in the Cardano network, can be thought of as a part owner of Cardano network, and can safely use their ADA from their Cardano wallet to secure the network whilst earning passive income in the process.
Proof-of-stake has multiple benefits over a proof-of-work, including widely touted environmental benefits, but the main benefit to note for the users and holders of ADA is the ability to earn passive income from simply holding and staking their tokens.
We’ve answered the important FAQs on staking Cardano at the end of this piece, including “What is Staking on Cardano?” If you want to skip ahead to find an answer to a simple question please do so! In this piece we’re going to go through:
- How staking works on Cardano
- How to choose a stake pool
- How to stake your ADA from a Cardano wallet
- How to claim your Cardano staking rewards in your Cardano wallet
- What extra tokens it is possible to get from staking on Cardano
- Staking beyond ADA
Let’s dive in!
How Staking on Cardano Works
Holders of ADA, Cardano’s native token, can delegate their ADA tokens to a stake pool. When a stake pool mints a block the stake pool receives a block reward, in ADA, from the network’s treasury. This reward is then distributed, minus the fees set by the stake pool operator, as a reward to the people who have delegated their ADA to support that stake pool and enable it to mint blocks.
Rewards are distributed pro-rata, meaning that you receive a percentage of the rewards equal to your percentage of the total amount of ADA staked to the pool. e.g. if you stake 500ADA to a pool and the total amount staked to the pool is 10,000ADA, then your percentage is 5%. Therefore, you will get 5% of the staking rewards that are for delegators. If you’re interested in how the underlying staking protocol works for Cardano it is called Ouroboros and more information can be found on this page here.
Note that your ADA must be held in a Cardano wallet to allow you to stake your tokens to a pool of your choosing. ADA cannot be staked through most centralized exchanges (and those that do allow you to do so don’t allow you to choose a pool and neither will they give you all of your rewards).
None of this is relative to the Cardano price because all reward values are calculated in ADA, irrespective of its perceived value in another currency. Therefore, the rewards received from staking do not fluctuate based on the price of Cardano.
How to Choose a Cardano Stake Pool
Stake pools are run by stake pool operators, SPOs. Anyone can become a stake pool operator but setting up a stake pool does require some technical knowledge, a good and reliable internet connection, and the correct hardware to support it. Every Cardano stake pool is not guaranteed to produce blocks, there are certain parameters that they need to hit in order to be eligible to be selected through the random selection process that is used in the Ouroboros proof-of-stake protocol.
There are multiple tools that can be used to help you search through the list of over 3000 Cardano stake pool, you can find them amongst other stake pool focused tools by searching the term stake pools on Built on Cardano. When looking at stake pools on these tools you will see many different statistics that might overwhelm you. Here are the most important factors that you should look for when trying to choose a stake pool.
Pledge A SPO pledges a certain amount of stake to their pool. A pledge shows that the SPO has some “skin in the game”. The pledge size has a very minor effect on the pool’s reward rate. A larger pledge means a higher amount of rewards per block produced, although this impact is negligible. A higher pledge is preferable to delegators.
Fee The fee is designed to allow SPOs to always receive the funds required to maintain their stake pool. The fee is deducted from the total epoch’s rewards before they are divvied out. A pool’s fee is nearly always set at the minimum of 340ADA. This fee is taken from all of the epoch’s rewards, not from each individual delegator.
Margin The margin of a pool is how much of the block reward, after the deduction of the fees, that the stake pool operator, SPO, receives. The margin is a percentage and can range from 0% to 100%. The higher the margin the fewer rewards are left to be distributed amongst the pool’s delegators. A lower margin means more ADA for delegators and is, therefore, preferable to delegators.
Saturation As more stake is delegated to a pool the amount of rewards it receives goes up, and so does its saturation rate. Once a pool has reached a saturation rate of 100% then rewards stop increasing. Rewards of over saturated pools decrease as the stake amount increases. Delegators prefer delegating to pools that are not saturated, and some avoid those that are near saturation because they may become over saturated soon.
The above can be described as the “Key Performance Indicators” for a stake pool. There is also the Return on Stake, ROS, (Also called Return on ADA, ROA) which is a common data point that is displayed when looking at stake pools. ROS is the expected, percentage return on your stake, and is usually based on data from the last 30 days or the lifetime of the pool. ROS can fluctuate depending on many other factors making it a hard metric to use when choosing a pool. The commonly quoted return on stake for staking to a Cardano stake pool that is producing blocks is around 5% per year.
Note that you should check the pool you have delegated to regularly because everything is always in flux. The saturation level will change as users move their stake around, and SPOs can adjust the fees, margins, and pledge when they want without informing anyone. Many SPOs will keep their delegators updated on changes via Twitter, Telegram, or another channel.
There are also other factors that can be taken into consideration when choosing a stake pool, and these factors could be described as a part of a stake pool’s “personality”. These are highly variable and the list below is by no means complete. These could be considered personal factors as they can often align with a person’s personal value or desires.
Mission Driven Some pools commit to donating XX% of the rewards the SPO receives to a charity or a certain fund.
Renewable Energy A pool can be run from a renewable energy source and pools that do tout this as a reason to delegate to them.
Community Contributors Many pools provide tools and services to the community, this can range from content like blogs and videos, to tools used to explore the blockchain, to simple ADA calculators, gaming competitions with ADA prizes, and beyond.
Location People may like to support pools that are in a particular country or city.
The Infrastructure A pool can be built on high quality or poor quality hardware. Many pools will detail their infrastructure to provide their delegators with assurance that they can keep up with the speed of the network and will always be available to mint blocks.
Extra Rewards Incentives Extra tokens, FTs and NFTs, that delegators can claim for staking to a stake pool. These can include ISPO pools as well as regular pools and are covered in the “Extra Tokens” section below.
Single Pool Operators The Ouroboros protocol has been designed to help foster the decentralization of the network. To do so there need to be as many different stake pool operators as possible. Some SPOs have multiple pools, called a multi-pool operator, and others are Single Pool Operators, operating just one stake pool. Delegating to a pool by a single pool operator, instead of a multi-pool operator, can help to increase the decentralization and security of the network.
The best practice for you to ensure that you get a return on your delegation is to use the first list of data points to help you to narrow down your stake pool choices. If you then can’t decide on which pool you want to delegate to then view their content, most pools have a website associated with them, to learn more about the pool’s personality and what extras they are offering the Cardano community and, perhaps, the wider world. Some people will choose to forego the Primary factors and choose to focus on supporting a pool that supports their values, how you choose your pool is really up to you.
If narrowing down from over 3000 to just one seems daunting then you can use the Cardano Advisor Bot, here, to help you choose your stake pool.
How to Stake Your ADA from a Cardano Wallet
Once you’ve chosen which pool you want to delegate to you now need to delegate your ADA to that pool. It is advised to use a Cardano wallet, not an exchange, to delegate your ADA. Many exchanges don’t allow you to delegate your ADA and those that do will often charge you a fee for doing so and rarely, if ever, allow you to choose which stake pool to delegate to.
There are many Cardano wallets out there for you to use and each has a different staking interface. Some will allow you to search for a stake pool in the wallet interface and others will only allow you to view which pool you are delegated to and to claim your staking rewards. These sections of the wallet can be given numerous names including “Stake”, “Staking”, “Delegate”, “Delegation”, or a variation of these words or a combination of them.
Each pool has a ticker of up to 5 numbers and letters, it’ll look something like this [BUILT]. Be aware that multiple pools are able to have the same ticker and that you should check the unique pool ID of the pool you’re delegating to make sure that you’re delegating to the pool you chose.
Staking your ADA comes with a cost of 2ADA (plus a transaction fee of ~0.17ADA). This fee is a first time, once only fee. If you want to re-delegate your stake to a different stake pool then you only need to pay the transaction fee.
If the wallet you’ve chosen to use allows you to enter and select a stake pool in the wallet itself then simply type in the pool’s ticker, find the correct pool (remember to confirm the pool’s unique ID) and click the confirm button, often titled “delegate” or “stake”.
However, some wallets only provide a delegate button and do not enable you to choose a pool in the wallet. When you hit delegate it delegates your stake to the wallet creator’s pool of choice. This doesn’t have to be seen as a bad thing because the pool chosen is often that of the wallet’s creator, and they’re someone who is contributing to the Cardano ecosystem.
Some don’t even have this delegate button, but there is a work around for both these scenarios. If you have one of the aforementioned wallets then slip on over to pool.pm and follow these steps:
- Click the search function in the top right hand corner
- Type in the ticker of the pool that you have chosen
- Click on your chosen pool
- Once in the page click the pool’s ticker at the top, e.g. BUILT, to be taken to their website where you can double check their unique pool ID
- Go back to pool.pm, and click the “Join” button on the right hand side of the page and choose your wallet from the drop down list
- Sign the transaction and wait for it to process on the blockchain and BOOM, you’re delegated!
Once you’ve staked make sure to follow your pool’s social media channels, typically Twitter and/or Telegram, to get updates about block production, parameter changes, and delegation changes. Some pools also operate a Discord server where they have built communities around their pool operations.
If you want to move your stake to a different stake pool all you need to do is follow the steps above to re-delegate your ADA to a different pool. When re-delegating your ADA you do not get charged the 2 ADA one-time fee that was associated with your initial staking. You only have to pay the transaction fee for transferring your delegation to another pool.
Can I Use My ADA When it is Staked on Cardano?
Your ADA is not locked when it is delegated and you are free to spend and receive ADA into your wallet just as if it wasn’t. At the beginning of each epoch, every five days, a snapshot of all delegation is taken and that is used to distribute the staking rewards for that block. However much ADA is in your wallet at the time of the snapshot is how much will be counted toward your stake.
The Timeline of Staking on Cardano
Whilst the initial staking transaction may confirm quickly there will be a length of time, 15-20 days, before you actually receive any rewards from your staking. The timeline of staking works around the Cardano time keeping system. The Cardano protocol divides time into epochs. Each epoch lasts for five days and at the beginning of each epoch a snapshot of the network is taken that is used to calculate who is staking to which pool and how to divide up the staking rewards. The timeline from when you delegate your stake to when you receive your rewards goes like this:
- You delegate stake during epoch 1
- The snapshot is taken at the beginning of epoch 2
- Your stake is inactive for epoch 2
- Your stake is active at the beginning of epoch 3
- In epoch 4 your rewards for epoch 3 are calculated
- In epoch 5 rewards earned during epoch 3 are distributed
- In epoch 6 rewards earned during epoch 4 are distributed
- And so on and so forth with rewards
So you can claim your rewards for an Epoch ten days (two Epochs) after that Epoch is finished.
How to Claim Your Cardano Staking Rewards
In your Cardano wallet there will be a button for claiming your rewards. It is that simple. Each time you collect your staking rewards you need to pay the network transaction fee to collect your rewards.
Cardano Epoch rewards accumulate for you. You do not need to claim your rewards each Epoch. They will sit there until you claim them.
What extra tokens can you get from staking on Cardano?
It has become common for stake pools to offer incentives for their delegators in the form of exclusive tokens and NFT drops. There are also some tokens that are available to all delegators on Cardano no matter which pool they delegate to.
The website DripDropz tracks and distributes the fungible tokens that are available to delegators of each pool on Cardano. On DripDropz you can search through tokens to see which ones are available for which pools, or, if you’ve already delegated your ADA to a pool, you can enter your wallet address and find out which tokens you can claim. These tokens do not accumulate like your ADA rewards and must be claimed every epoch.
NFT drops are very pool specific and are often done by the SPO themselves. To keep up-to-date with when these occur follow the pool on social media. Finding pools that offer NFT drops often requires more digging because they are not listed on the DripDropz website, which is for fungible tokens only.
Some pools are also run by the creators of NFT collections and offer special rewards, usually in the form of tokens, to holders of their NFT who stake their wallet holding that NFT to their pool.
ISPO: What is an ISPO?
ISPO stands for Initial Stake Pool Offering, sometimes just called an ISO. An ISPO is a novel and popular fundraising and token distribution mechanism used by projects on Cardano. Projects will create stake pools and distribute their projects tokens to the people that delegate to their pool. This usually happens for a set period of epochs that is determined by each individual project.
There is a catch. This is often done in place of the delegators giving up some, most of the time all, of their ADA rewards. So the pool owner keeps all of the ADA staking rewards for themselves, usually using them as funds for their project, and delegators instead receive the project’s tokens. Often, these tokens are not distributed immediately. Instead they are airdropped to delegators anywhere from the end of the ISPO to 1-2 years in the future.
Staking Beyond ADA
Staking is a popular mechanism on various Cardano protocols for multiple reasons. All the methods mentioned here are in relation to a project or protocols own token, NOT ADA. Many are also staked in the delegation style with ADA where your tokens never leave your wallet. For many of the options mentioned below you must relinquish control of the tokens you want to stake and lock them up in the protocol.
Some protocols require various amounts of token staking for different tiered levels of access to services or areas of the platform. On other protocols you can stake your tokens to be charged lower fees on the platform, and tokens can also be a requirement for securing a node that you have set up to be a part of their network.
Probably the most popular form of staking with regards to protocols and their tokens is the staking of governance tokens to enable you to vote in governance decisions on the platform. This measure is put in place to prevent manipulation of the platform’s governance.
Staking can be an intricate game of maximizing your token earning by monitoring and collecting tokens from DripDropz every epoch, moving from ISPO to ISPO as each one starts and finishes, and chasing different pools for exclusive rewards. But it can also be a one and done situation where you delegate your ADA to your chosen pool and keep an eye on their socials just to make sure nothing goes wrong. How and where you manage staking your ADA is up to you but, due to the nature of the protocol, you can rest assured that your ADA is always yours and always safe.
Cardano Staking FAQs
What is Staking on Cardano?
Cardano is a proof-of-stake blockchain and users can delegate their ADA, Cardano’s native currency, as stake to a stake pool. These stake pools make blocks for the network (instead of miners as in popular proof-of-work chains) and receive rewards for doing so. These rewards are distributed amongst the pool’s delegators. When you delegate your ADA it remains safe with you in your wallet.
Can You Stake Cardano on Coinbase?
You can stake Cardano on Coinbase, however you don’t get to choose which pool you stake to and there is a 25% commission taken from your staking rewards.
Can you Stake Cardano on an Exchange?
Some exchanges do allow you to stake your ADA tokens, however they are staked to the exchange’s private pools and don’t contribute to the decentralization of the network. You are also usually charged a fee, quite a hefty one, for giving them the privilege of staking your ADA to one of their pools for you (which they probably already do, keeping the rewards themself).
What is The Cost of Delegating on Cardano?
There is a one-time fee of 2 ADA (plus the Cardano network transaction fee of around 0.17ADA) for delegating to a stake pool. If you choose to re-delegate your ADA to a different pool you only need to pay the transaction fee, around 0.17ADA. You can do this as many times as you wish.
Where Can You Stake on Cardano?
Your ADA can be staked from almost any independent Cardano wallet and some exchanges do also allow you to stake your ADA. You can stake your ADA to one of over 3000 pools registered on the Cardano network.
Is Staking on Cardano Safe?
Yes, staking on Cardano is safe. When you stake your ADA to a stake pool on Cardano your ADA never leaves your wallet and no one else ever has control over it.
How much ADA do I need to stake on Cardano?
You can begin staking on Cardano with as little as 3 ADA. There is a one-time, 2ADA fee for setting up your stake, along with the network transaction fee of 0.17ADA. What remains in your wallet after the deduction of these fees is then staked to your chosen pool.
What Rewards can I expect from Cardano staking?
The average, annual return regularly quoted for staking to a Cardano stake pool that is regularly minting blocks is 5%. So if you stake 1000 ADA for one year you can expect to receive 50 ADA in rewards over the course of that year.
Where Can I See my Cardano Staking Rewards?
You can see your earned staking rewards in the staking interface in your wallet. This is also where you can claim your staking rewards. You need to pay the network transaction fee, of around 0.17ADA, to claim your rewards. These rewards accumulate and don’t need to be accumulated every epoch.