Founded in 2015 by Ethereum co-founder Charles Hoskinson, Cardano is a proof-of-stake (PoS) blockchain that is often referred to as the “Ethereum killer,” owing to its superior technology and high level of security and sustainability.
Much like Ethereum, Cardano also allows users to stake its native cryptocurrency, ADA, to earn staking rewards. Cardano allows individuals to stake via staking pool operators and pool their tokens with other users or run their own Cardano staking pool.
Staking pools are frequently operated by those with technical experience and the appropriate hardware for effectively staking on the Cardano network, although anyone can become their own staking pool operator. Users also have complete autonomy to decide which pool they’d prefer to join and can assess each based on pool size, uptime and past performance.
Cardano divides periods of time into epochs, a measure of time used to specify when events in the network are set to occur, such as incentive distribution or validator transaction assignments.
On Cardano, each epoch consists of 432,000 slots, smaller units of time further divided into one-second intervals. One Cardano epoch lasts approximately five days. After each epoch concludes, a snapshot records the distribution of staked ADA tokens. This is used to calculate the rewards each staker will receive.
Users who wish to participate in staking will enter a pool through delegating, which allows coins to be unstaked and restaked multiple times with various pools, provided that user wait for the current epoch to pass before relocating their assets.
Steps to stake Cardano (ADA)
There are various ways to stake ADA, as discussed below:
Staking via an exchange
Below is a step-by-step guide on how to stake Cardano via an exchange:
Find a reputable cryptocurrency exchange
The first step is to find a cryptocurrency exchange that supports ADA trading and staking, such as Binance and Coinbase. There are other options for staking ADA, which will be discussed in greater detail later on.
After creating an account with a cryptocurrency exchange, users must deposit ADA tokens in their exchange wallet. This can be done by buying Cardano coins directly from the exchange or transferring existing ADA holdings into their exchange wallet.
Select the staking option
The next step is navigating to the “Staking” page on the exchange platform’s interface and selecting “Cardano.” Most platforms will provide the option to select the staking duration, which will determine the amount of time one’s holdings will be locked away.
After selecting the desired stake duration, users have to decide how much ADA they wish to stake. Exchanges usually charge a small fee for staking services, so this must be considered when deciding the amount to be staked.
Research staking pools
Once the appropriate stake duration and amount of ADA coins have been selected, it is time to research staking pools. Exchanges offering staking services usually list recommended staking pools from which users can choose. Staking pools are usually ranked based on key information, such as the total number of blocks produced, overall performance in block creation, expected returns on investment and more.
While the most attractive pools based on these indicators are usually ranked on top, users can still choose staking pools based on their own criteria. Before selecting a pool to join, assessing factors such as pool size, uptime, liquidity and past results is essential. Depending on the platform, users can view important details about each staking pool, such as:
- Return on staked ADA or interest rate
- The cost to join (divided into a tax percentage and a fixed rate)
- The size of the staking pool in terms of how much ADA is in it and how close to capacity it is
- How much money the staking pool operators have delegated to the pool
- The number of blocks that have been minted in the pool’s history.
Some users may also choose to consider off-protocol factors when selecting what staking pools to join, such as how certain pools align with their personal advocacies. These include considering whether a pool is operated by a non-government organization or is running on green energy, and the like.
Delegate your ADA tokens
After finding a suitable staking pool, users can then delegate their ADA tokens to the chosen pool. This is done by entering the password to one’s wallet and clicking “Delegate.” Once completed, the user’s assets will have been successfully staked in the pool.
However, it is important to note that centralized exchanges (CEXs) keep users' crypto assets on their systems, which has drawbacks for investors, such as the "not-your-keys-not-your-crypto" issue. Moreover, CEXs impose restrictions on staking ADA with them.
Staking with staking pool operators (SPOs)
Staking your ADA with independent SPOs instead of CEXs helps maintain the decentralization of the Cardano ecosystem, and offers benefits such as full independence and direct control of one’s funds, as well as the ability to invest in pools of their choice.
Here are the steps to stake ADA with staking pool operators:
- Obtain an ADA wallet: To stake ADA, users will need a wallet that supports staking. They can use any of the wallets that support Cardano, such as Daedalus or Yoroi.
- Transfer ADA to one's own wallet: Once users have a wallet that supports staking, they can transfer their ADA from an exchange or any other source to the wallet.
- Choose a staking pool: Users can find a list of staking pool operators on the Cardano website or on community forums. Research the available options, compare their performance, fees, and other factors, and choose a pool that meets your criteria.
- Delegate your ADA: After selecting a staking pool, users can delegate their ADA to the pool by following the instructions provided by their wallet.
- Earn rewards: Once users have delegated their ADA, their wallet will start earning rewards from the staking pool.
It's important to note that users don't need to transfer their ADA to the staking pool operator to participate in staking. It means that they can retain full control of their funds and withdraw them at any time.
Where can I stake my Cardano?
Here is how to stake one’s Cardano crypto asset holdings on various platforms.
How to stake Cardano on Coinbase
Coinbase offers an annual percentage yield, or APY, of 3.75% for Cardano staking. According to the platform, users’ ADA remains in their account at all times, and they can opt out anytime. To stake ADA, users must:
- Create an account on Coinbase.
- Select their desired Cardano staking pool and review the corresponding staking amount required.
- Buy Cardano on Coinbase or deposit the tokens from an external wallet into their Coinbase wallet.
- Add their ADA to their selected Cardano staking pool and approve the corresponding fees and minimum lock-up period.
- Wait for their Cardano staking rewards to arrive every five to seven days after the initial holding period of 20–25 days.
How to stake Cardano on Binance
According to Binance, users can stake Cardano on the exchange and earn up to 6.1% APY. Users can also receive weekly staking rewards and unstake them anytime to access their funds without waiting for an unstaking period. To stake on Binance:
- Create an account on Binance.
- Visit the Binance “Staking” homepage.
- Ensure that there are adequate funds in your Binance spot wallet.
- Choose ADA from the list of tokens listed on the page.
- Read and follow the prompts on the screen about first-time staking on the platform. Click “Next.”
- A “Stake Crypto” pop-up will appear. Enter the desired amount for staking or choose the percentage of total assets to be staked.
- To restake token rewards automatically, select “Auto Restake.” This will compound your staking rewards automatically. To have staking rewards deposited to your wallet, select “Disable Auto Restake.”
- Click “Preview Stake.” Review the details and click “Confirm.”
- The user will receive a “Staking Successful” confirmation in a pop-up window. To complete, click “Understood.”
How to stake Cardano on eToro
EToro offers its users convenience by automatically staking supported cryptocurrency holdings, such as ADA and Ether (ETH), on behalf of users. As such, no extra steps are involved in staking ADA on eToro. Once a user has created an account and stored ADA in their eToro wallet, they can automatically earn staking rewards.
EToro retains a small percentage of the reward, or “fee,” for all operational and technical costs. The reward percentage of the monthly staking yield that each user can receive will depend on their membership status on eToro:
- Bronze members and all users in the United States: 75%, with a holding period of nine days.
- Silver, Gold and Platinum Club members: 85%, with a holding period of nine days.
- Diamond and Platinum+ Club Members: 90%, with a holding period of nine days.
How to stake Cardano on Yoroi
Yoroi offers up to 4.62% APY on Cardano staking. Yoroi is a noncustodial light wallet for Cardano where users can send and receive transactions and stake their holdings to enjoy returns. To stake Cardano on the platform:
- Download the Yoroi plug-in from the Yoroi website.
- Enter payment information to be used when purchasing assets through Yoroi.
- Select between the platform’s hot wallet or cold wallet options.
- Follow recovery set-up prompts on the screen.
- Purchase ADA through Yoroi or transfer existing holdings to your Yoroi wallet.
- Select a Cardano staking pool and delegation icon.
- Add desired funds to the selected pool and review the corresponding fees.
- Confirm and start earning returns on ADA.
What are the risks of staking Cardano?
Staking Cardano is an attractive way to generate passive income, but there are still some risks that users should consider. For instance, the potential earnings from staking ADA are not fixed and are heavily influenced by several factors, including the amount of ADA that is staked, the performance of the stake pool, and the percentage fee that the stake pool charges.
The amount of ADA staked directly affects the potential earnings, as higher levels of staked ADA can lead to increased rewards. The performance of the stake pool is also crucial, as it impacts the likelihood of producing blocks and receiving rewards.
Finally, the percentage of fee charged by the stake pool can reduce the overall earnings potential, as a higher fee percentage will result in a lower net return on the staked ADA. It is important to consider these factors and carefully weigh the risks before engaging in ADA staking.
While dynamic availability offered by Cardano's Ouroboros protocol enables block-producing nodes to go online and offline without notice, it's important to note that the system's security and functionality depend on honest participants controlling over 50% of resources. Additionally, for a truly decentralized system, nodes must be able to rejoin the network easily without relying on further trust assumptions, such as trusted peers or checkpoints.
Finally, Cardano staking rewards depend heavily on market prices. So, if the price of ADA depreciates, users may experience lower returns than expected. As with any investment, it’s essential to research and understand any associated risks before staking ADA on the Cardano network.