5 Questions Answered By A Stake Pool Operator.
As a Cardano pool operator and Harmony validator, I often get involved in conversations with people who are interested in crypto, but — understandably — struggle with getting a grasp on how it all works.
The mix of legitimate concerns, incorrect comparisons, and twists of thought are food for thought, to say the least. The questions I am asked are interesting, sometimes amusing and on occasion flat-out baffling. Therefore, I thought it would be fun to share some of them with you guys!
Q: “How much interest will I receive if I stake?”
Staking rewards depend on the blockchain and change per epoch. It fluctuates as it depends on blocks made, how much is staked on the whole network, protocol changes and so on. On most chains staking nets an APY (annual percentage yield) of ~5%.
That being said, staking rewards and interest are not the same thing. Interest is a fee that is paid over lend funds, for example to a bank. Staking, on the other hand, represents someone’s stake in coins on a blockchain network.
The idea of Proof of Stake (PoS) is that validators (also called staking pools) can add blocks to the chain depending on the number of coins the validator has. It is a consensus mechanism. The higher a validator’s stake is, the more likely a validator is to make the next block. A validator makes rewards for each block it adds to the blockchain. These rewards are shared among the validator’s operator and the people who delegated their coins to the validator in question.
Q: “Where is Cardano’s headquarters located?”
Cardano is a blockchain platform with the ambition to become decentralized. Unlike services we are familiar with like Netflix, Apple’s App Store and Amazon’s Web Services, no one will have full control over all aspects of Cardano. Hence, there is no head office.
The side note is that Cardano is still in development. Right now, the Cardano Foundation, IOHK, and Emurgo are working on the Goguen era of the Cardano blockchain. Contacting them would result in the most comparable experience to calling a head office.
Q: “Can new Bitcoins be made? If so, will mine drop in value?”
No, certain blockchains like Bitcoin feature a hard cap. Bitcoin has an absolute maximum of 21 million Bitcoins, of which ~18.8 million are in circulation right now. People often consider hard caps as a good thing. It makes a coin scarce in nature, which drives up the value of each coin.
The blockchain landscape also features some uncapped coins. Take Dogecoin for example. There are 10,000 Dogecoins mined each minute. You can imagine that this makes it difficult to label holding Doge for the long term a wise investment. The longer one waits to sell the higher the chance that the Dogecoin market is saturated. The price should drop as time goes on — if rational thinking applies.
Q: “The laptop I had wallets on is stolen. Did I just lose all coins I had?”
It depends. Is the laptop locked with a password? If so, is the hard drive secured with something like BitLocker? If not, bad actors could attempt to break into the laptop and transfer coins to wallets of their own. Whoever has access to the wallet is as good of an owner of its contents as you are. In other words, make sure to protect the laptop at all costs!
Is the laptop secured? Good! Then there are two scenarios we can consider:
You were using a wallet linked to an account (think of Coinbase and Binance). In this case, change all passwords as soon as possible. Setting up two factor-authentication also helps.
OR
You were using a wallet that came with a seed phrase (think of Exodus or non-custodial wallets like Yoroi). Install the wallet on a new device and recover the wallet with the same seed phrase (12 or 24 words). Nothing will be lost as all info is stored on the blockchain.
Important! Make sure to write the seed phrase down on multiple pieces of paper. Store the words in multiple safe locations. Forgetting or losing the seed phrase is game over.
Q: “How come Binance has disabled Cardano transactions once again?”
Well, RIP Binance. I get this question a lot. It would be an understatement if I said that Binance disables withdrawals on a regular basis due to “maintenance” (1,2, 3, 4, 5).
As the veterans among us like to point out: not your keys, not your coins!
While exchanges are convenient, using them comes at a price. Their users are required to relinquish control over their accounts. In other words, the exchange holds the power to block access to wallets, lock funds and reject transactions.
I often recommend people to hold coins in non-custodial wallets and stake them from there. These wallets eliminate the risk of coins getting trapped on an exchange. On top of that, these wallets often feature staking solutions. You even get bragging rights on supporting a blockchain’s decentralization. How neat is that?!
Was this post fun or helpful? Great! Please, consider giving it a thumbs up and sharing it with others. Did it leave some questions unanswered? Let me know which ones and I will answer them as soon as I can.
Cheers,
Olivier Wouters
Operator of the IDEAL Stake Pool
