Cardano’s Shelley is approaching so staking will come to reality soon. Let’s check what we know now.
Note that at the end of the page there will be updated parts.
What is staking
Staking is a way how to distribute consensus power among users of the protocol. You can consider it as an improvement of PoW where pools and miners are responsible for making consensus. While in PoW, distribution of consensus power is based on external resources like electricity and the ability to create a pool, in PoS, the distribution of ADA coin is used. Thus the Cardano network consumes less energy than PoW networks.
In Cardano, time is divided into discrete increments, called slots and slots are grouped into longer periods, called epoch. There are 21 600 slots in each epoch. At the start of each epoch, a lottery determines who gets the right to create a block in every slot. The winner is called a slot leader. The lottery is based on the generation of a random number which determines who will get the right to become a slot leader. Chances of winning for any given slot is proportional to the stake one control.
In simple words, staking is about the distribution of consensus power based on coins each entity holds and use for making of consensus. Entities win the right to produce a block and they are rewarded for that if they behave honestly.
Who can participate in making consensus
Every ADA holder can participate in making consensus and be rewarded for that. Cardano allows everybody to guard network security and decentralization. There are two basic types of users: Pool operator and users who delegate ADA to a selected pool.
Pool operators are responsible to run a node 24/7 and the node needs to be connected to the internet. Pool operators need to have own ADA for staking. Thus, they become trusted by users.
ADA holders, who cannot or do not want to run such a node, can just select a pool operator and delegate coins to the pool. The power of a pool consists of a stake of pool owner and also a stake of all users how have delegated coins to the pool.
Cardano wants to have many pools to be better decentralized than common PoW network. Thus, incentives are set in a way that it is more profitable to delegate coins to an average-size pool than to the biggest one. Users must keep it in mind and delegate coins smartly.
When a reward is paid
The reward is paid always at the end of each epoch. So not after the creation of a new block as it usually is in PoW. Every 5 days protocol itself sends rewards to each pool operators and users who are eligible for that. So pool operators do not touch and have no chance to influence or restrict sending of the reward.
How delegation works
It will be very simple for users to delegate coins to a pool. Everything will be available in official wallets.
- Desktop wallet Daedalus.
- Lightweight wallet Yoroi.
There will be a list of registered pools with all the needed statistics about them. A user just picks one and the wallet creates a certificate and delegates coins to the pool. It should be possible to pick more pools.
Important information is that the user does not lock coins by the delegation. The user still has all coins in the wallet that can spend them. Pool operators cannot touch and misuse the user’s coins. Even if the pool does not behave honestly users do not risk their coins and cannot lose them.
It is recommended to keep ADA in own wallet. It is not smart to keep ADA on exchanges. You know the rule. Not your keys, not your ADA. Cardano will have kind od enterprise address that exchanges should use. Staking will not be supported on enterprise addresses. Cardano cannot enforce enterprise addresses to exchanges so basically an exchange could offer to stake coins. But it is not supported scenario.
ADA is supported by hardware wallets Ledger Nano X, Ledger Nano S and Trezor Model T. Staking should be possible even if you keep ADA on any hardware wallet.
Rewards will be paid from transactions fee and the first 10 years also from coins which are prepared for that. It is expected that at the beginning there will not be many transactions so these coins help to compensate pool operators and users for their effort.
The reward for users should be approximately 3%.
Nobody loves taxes. Yoroi wallet will be able to prepare a document for taxation. Every tax event, so every reward paid you by the protocol, will be listed in the document including the current value in fiat. You can choose from some major fiat currency. So at the end of the year, you will exactly know how much you should pay.
Now you are prepared for staking. We will update the page once there will be more information available.
Be with us: Cardanians.io
UPDATE: 29. September 2019 — Staking test-net launch announcement
There was a great event in Plovdiv where Charles Hoskinson together with the community celebrated two years from launching the main-net. Current main-net runs in a federated model.
Charles announced the launch of incentivized test-net what happens in November 2019. A snapshot of the current main-net ledger will be taken at a specific moment (currently not known when exactly) and all ADA that will be at the moment on Daedalus and Yoroi will be transferred to the test-net. Be careful, ADA that will be on exchanges will not be transferred to the test-net.
If you want to participate in staking during the test-net phase ensure you have your ADA on Daudalus or Yoroi wallet.
The test-net allows registering a pool and users will be able to delegate ADA to a pool. In Q1 2020 Shelley main-net should be launched and all ADA you will earn in the test-net will be gradually transferred to the main-net. Users will not be able to use or move earned ADA in the test-net. However, they will be able to use earned ADA once they will be moved to the main-net.
After the test-net snapshot will be taken users can do what they want with ADA on the main-net. At least it is our current understanding.
We will let you know once the date of taking the snapshot will be announced.
Consider staking your ADA coins with Cardanians.io
If you like our articles, you can support us with some donation:
#cardano #crypto #blockchain #bitcoin #PoS $ada $btc #decentralization #PoW #DAO