Staking and delegating for beginners — A step-by-step guide
Today’s hard fork marks the release of Shelley and with it, the arrival of stake pool creation and delegation.
Cardano is a proof of stake (PoS) blockchain. This means that even if you do not have the time or resources to run a stake pool, you can still delegate your ada to another pool operator and have it staked on your behalf.
The Cardano Foundation’s Community Management team has been busy answering your questions surrounding the Shelley hard fork, and we know that many community members are eager to begin participating in delegation and earning rewards for taking part in consensus on Cardano.
That is why we have put together this short guide for beginners, where we discuss when you can start earning rewards from staking by delegating your ada to a stake pool, how to delegate, and we also explore some of the technical terms surrounding staking.
This guide is primarily for ada holders who wish to delegate their ada to a stake pool, but are not sure about where to start. There is a separate guide for stake pool operators coming soon, so make sure you read that if you want to run your own stake pool.
When can I start delegating my ada to a stake pool?
The hard fork will begin a new epoch on Cardano — a period in which new blocks are created through slots. Slots occur every 20 seconds within an epoch, and each epoch lasts exactly five days. The first of these blocks will be epoch zero on the new Shelley mainnet. We recommend watching this video to learn more about slots and epochs.
Technically, delegation will be possible as soon as the hard fork from Byron to Shelley has concluded — at 21:44:51 UTC on the 29 July 2020 to be precise. However, in practice, eager delegates will have to wait a while until registered stake pools become visible on the Shelley mainnet before ada can be delegated to them.
For stake pool operators that participated in the incentivized testnet, the registration process should be completed fairly easily — but those looking to delegate their stake should remember that new stake pools will become visible on the blockchain at different times.
Therefore, if you delegated to a pool during the incentivized testnet and it is not yet available on the mainnet, we recommend that you check back later.
What do I need to do to start delegating my stake?
Daedalus is the only wallet that will support delegation to stake pools immediately after the hard fork. If you use the Yoroi wallet, you will not be able to delegate your stake from launch — but this functionality will arrive soon. Similarly, some cryptocurrency exchanges may offer the ability to stake ada through their wallets in the future.
It is very important that users download the latest version of Daedalus before they start delegating, which you can find by navigating to Cardano.org, selecting ‘Individuals’ from the menu at the top of the page, and clicking on ‘Daedalus’.
Once you have installed the latest version of Daedalus, synced your wallet with the blockchain, and have your ada stored in your wallet, you can start the process of delegating your stake.
If you previously had ada stored in an older version of Daedalus, you may be required to transfer your funds from a Byron legacy wallet to a Shelley mainnet enabled wallet. Users should note that there will be a small fee in ada to make this transfer. You will be prompted to do this when Daedalus launches.
Update: Many community members have asked for more information on the Byron to Shelley wallet redemption process. Here are the necessary steps to redeem your Byron era wallet in the latest version of Daedalus:
- Open your newly downloaded Daedalus wallet (please download using the link above, or click the download button when prompted in your legacy version of Daedalus)
- Once Daedalus has finished verifying the blockchain, you will be prompted to migrate your Byron legacy wallet to the new Shelley blockchain.
- To restore your Byron legacy wallet, you will need your Byron wallet recovery phrase. Enter your phrase when prompted to do so.
- You will now be prompted to create a new Shelley wallet, complete with a new wallet recovery phrase.
- Write down and verify your recovery phrase to create your Shelley wallet. You will need to sync with the blockchain before your wallet information and balances are up to date.
As always, please make sure you write down your recovery phrase and store it safely. We cannot stress the importance of this step enough — you must write down, verify, and store your recovery phrase in a secret and secure location. Do not skip this step.
Update: When you sync your Shelley wallet for the first time, your wallet will need to update its history of the blockchain. Do not panic if you momentarily see your funds disappear or change in value. They are still there, immutably, on the blockchain — it just takes a short while to sync with the latest blockchain history.
Once your ada is in your Daedalus Shelley mainnet wallet, you can start the delegation process. We go through this step-by-step below:
- On the left of your Daedalus wallet, click the network icon. This takes you into the delegation center;
2. Once you are in the delegation center, you will see a list of your wallets. Select the wallet which holds the ada you wish to delegate to a stake pool. Click the ‘Delegate’ link;
3. Now, a lightbox will appear which lists the steps required to delegate your ada. Click continue, where you will be prompted to choose a wallet;
4. Select your wallet, and click continue. You will now need to choose a stake pool. Here, you can either select from the list of available pools or start typing the name of a pool you wish to delegate to;
5. Once you have chosen a pool, you will need to enter your spending password and pay a small fee in ada to delegate to it. Do not worry, the stake pool operator does not have control over your funds, and you always keep your ada;
6. Once it is successful, you will receive a message congratulating you on delegating your stake. You will have to wait for two epochs for your staking preferences to update on the Cardano blockchain.
Remember, you can create multiple wallet addresses within Daedalus and delegate your ada to different stake pools. Follow the process above for each separate wallet. You may wish to do this to compare different pool rewards during the first few weeks of staking and delegation.
Your staking rewards should begin arriving after a couple of epochs, although this will depend on the status of the network and the rate at which your pool is chosen as a slot leader — we will explore rewards in more detail below.
What rewards can I expect from delegating and staking?
Delegating stake pays out rewards in ada, but the actual amount you receive will change depending on several factors.
For example, delegating to a pool which has a relatively small amount of ada staked to it — or where the pool operator has set a mediocre rewards percentage — is likely to result in fewer rewards over time.
This is due to a lower likelihood of your selected stake pool being chosen as a slot leader — a concept we will be exploring in detail in a later article.
Therefore, rewards may vary between pools, and changes to network parameters could also affect rewards. If you would like to estimate how much ada you could earn from staking rewards, then we recommend using the Cardano.org staking calculator.
When will I receive my rewards?
If you delegate your ada during the first epoch, the pool which you delegate to can produce blocks two epochs later. Two epochs after that, you will begin receiving rewards. This is the case in any epoch you begin delegating your stake in.
We know that each epoch is exactly five days long. Therefore, you will begin receiving staking rewards after 20 days. Therefore, there is no need to panic if staking rewards do not appear in your Daedalus wallet during this time — this is completely normal.
Understanding stake pool fees
In a later article, we will be exploring in-depth the parameters you might examine when choosing a stake pool to delegate to. However, we are going to quickly discuss stake pool operator fees here.
Stake pool operators have a long list of running costs associated with establishing, maintaining, and marketing their stake pool — such as server running costs, website hosting, and hardware to name a few.
Naturally, for doing all the hard work, a stake pool operator will seek to cover their costs and time, while also retaining some staking rewards for themselves as profit when their pool is chosen as a slot leader.
The percentage of the slot reward that the stake pool operator retains is known as the stake pool fee, while the rest of the slot leader rewards are distributed among the stake pool’s delegates according to their stake — the amount of ada they have delegated to the pool.
Stake pool operators are allowed to decide their stake pool reward percentage themselves, at anywhere from <1% to 100% (at which point the stake pool would essentially become private).
It may be tempting to choose a pool with the lowest fees to try and maximize your delegation rewards, but this may not always be the right choice.
Often, high-quality pools — those which have the highest desirability and reliability — will have a greater amount of ada staked to them and be chosen more often as slot leaders, and therefore may yield higher rewards for their delegates despite having comparatively higher fees.
Ultimately, it is up to each ada holder which stake pool they delegate to, but do keep in mind when first choosing a stake pool that lower fees do not always equal higher rewards.
Monitoring your rewards
Finally, we will discover how you can monitor your delegation rewards. Once you have joined a pool and four epochs have passed, you will begin receiving rewards in ada. In your Daedalus wallet, click the network icon on the left-hand side again.
You will now see a tab called ‘Rewards’. Clicking this tab will show you a summary of your rewards from all the different stake pools you are delegated to. You may export this information as a CSV file to view separately in spreadsheet software.
Please note that as we move to the mainnet version of Shelley, Daedalus will also be updated. While the process we have described here should be largely the same, there may be minor changes to the Daedalus UX and UI.
Removing or redelegating your ada from a stake pool
There may come a time when you want to remove your ada from a stake pool, either to realize better gains in another pool or to use your ada for something else. As we briefly discussed, ada that you delegate to a pool still belongs to you and you always retain full control over your funds.
To redelegate your stake, simply open your wallet and head to the delegation center. In the list of wallets you own, find the wallet you wish to redelegate. On the right-hand side, there will be an option to ‘redelegate’ your ada — select this option.
You can now go through the same process as you would follow to delegate to a stake pool for the first time and redelegate to a new pool. Remember, this process will take two epochs to update your staking preferences, and another two epochs before you begin receiving rewards — so think carefully about how and when you redelegate.
Likewise, to remove your ada from a stake pool, you simply need to send your ada from your staking wallet to a fresh wallet address that you control. As the ada you delegate never leaves your wallet, this process is as simple as sending a normal transaction.
Are you ready to start delegating your stake?
Hopefully, you should now see how simple it is to start delegating your ada to a stake pool, and we sincerely hope that every member of the Cardano community gets the opportunity to take part in the consensus of the protocol.
Staking and delegation are integral to the stability and security of Cardano, and through delegation, everyone is empowered to take part — making Cardano better for both the few and the many.
The Cardano Foundation would like to thank our community for participating in this historic time for the Cardano blockchain, and we wish you all healthy delegation rewards in the coming months.