Cardano Staking: How to Participate and Earn Rewards in a Decentralized Network

Technology 02.05.2023

Cardano Staking: How to Participate and Earn Rewards in a Decentralized Network

Cardano is a decentralized platform that uses the Proof-of-Stake (PoS) mechanism to validate transactions on its blockchain. Unlike other blockchain platforms like Bitcoin, which uses Proof-of-Work (PoW), Cardano's PoS mechanism allows users to participate in the network by staking their ADA coins. In this article, we'll explain how Cardano staking works and what you need to know to get started.

Check out our previous article Cardano: The Top Choice for Blockchain Technology

What is Cardano Staking?

Cardano staking is the process of holding ADA coins in a Cardano wallet and participating in the network's consensus mechanism. When you stake your ADA coins, you are essentially providing them to help secure the network and validate transactions. In return for staking your coins, you earn rewards in the form of additional ADA coins.

How Does Cardano Staking Work?

Cardano uses a PoS mechanism called Ouroboros, which is designed to be secure, decentralized, and energy-efficient. Instead of miners, Cardano has validators, who are responsible for creating new blocks and validating transactions on the network.

The Ouroboros protocol ensures that network control is distributed among stake pools and node operators. To stake ADA coins, you don't need to operate a node yourself; instead, you can join a stake pool and contribute your coins to it. The stake pool validates blocks, and rewards are distributed proportionally based on each participant's contribution.

Compared to Proof-of-Work, Cardano staking is much more accessible as the entry barriers to network validation are lower, with no need for expensive hardware. All you need to stake on Cardano is the coins and a stake pool. Additionally, Cardano staking is non-custodial, meaning your coins remain in your wallet, and you can move them freely at all times. You'll only realize you're staking your coins when you receive rewards ;)

Cardano's staking mechanism is designed to be fair and decentralized, which means that anyone can participate in the network regardless of how much ADA they own. This is in contrast to PoW mechanisms, which tend to favor those with more computational power.

How to Stake ADA Coins on Cardano?

Staking ADA coins on Cardano is a relatively straightforward process. Here's what you need to do:

  1. Obtain ADA Coins: You can buy ADA coins on a cryptocurrency exchange and transfer them to a Cardano wallet that supports staking.

  2. Choose a Staking Pool: A staking pool is a group of addresses (people) who combine their stake to increase their chances of being selected as a validator. When a staking pool is selected to validate a block, the rewards are distributed proportionally to the members of the pool based on their stake. Not sure how to select stake pool? You can search for stake pools on Cexplorer.io.

  3. Delegate your ADA Coins: Once you have chosen a staking pool, you need to delegate your ADA coins to the pool. This can be done through your Cardano wallet by selecting the staking pool and confirming the delegation.

  4. Earn Rewards: Once you have delegated your ADA coins, you can sit back and earn rewards for validating transactions on the Cardano network. The amount of rewards you earn depends on the size of the staking pool, your total amount of ADA staked and fees of the stake pool.

Conclusion

Cardano staking is a great way to participate in the network and earn rewards while helping secure the blockchain. By staking your ADA coins, you can become a validator and help validate transactions on the network. With Cardano's PoS mechanism, staking is energy-efficient, fair, and decentralized, making it a great alternative to PoW mechanisms like Bitcoin. If you're interested in staking ADA coins on Cardano, all you need to do is obtain some ADA coins, choose a staking pool, delegate your coins, and start earning rewards. Staking on Cardano is not only a profitable activity, but it also helps to strengthen the network, making it a win-win situation for all parties involved.