How to perform Cardano staking. A detailed guide

  • ADA cannot be mined like most cryptocurrencies since it uses the Proof of Stake (PoS) algorithm, that is, it works through staking.
  • There are two options for staking ADA, with an on-chain wallet or with a crypto exchange.

When talking about cryptocurrency mining, a very common confusion is to believe that all cryptocurrencies have a mining system similar to that of Bitcoin (BTC) or Ethereum (ETH). however, the reality is that the way in which cryptocurrencies are created varies depending on the blockchain in which they are developed and the cryptocurrency of Cardano, ADA, is one of those that does not have a mining system similar to that of BTC.

Below you will find a detailed guide on how Cardano works and how you can perform ADA staking with the aim of earning passive income, similar to mining BTC or ETH.

It is very important to note that Cardano and ADA are two completely different terms, so it is necessary to remember that Cardano refers to the platform or blockchain that hosts the ADA cryptocurrency; so the cryptocurrency itself is ADA, not Cardano, Although as with Ether, the cryptocurrency of Ethereum, the community often refers to Cardano as the cryptocurrency.

Cardano is a Smart Contracts platform that was created with the aim of allowing ADA transactions, which aims to improve the scalability problems present in Bitcoin and Ethereum.

In case you want to delve into the details about the Cardano platform and its ADA cryptocurrency, we invite you to review the detailed guide below. Once these details are understood, you can continue with the explanation about why ADA cannot be mined like Bitcoin and Ethereum.

ADA, a crypto in PoS

ADA is the cryptocurrency used by platform users to carry out peer-to-peer transactions and, additionally, to participate in the network. Nevertheless, ADA cannot be mined like most cryptocurrencies. The reason? Well use the algorithm Proof of Stake (PoS), that is, it works through staking and all ADA coins have already been mined during their initial phase.

In the PoS system, miners do not compete with each other through computing power, since computing power is assigned by the same network according to the percentage of cryptocurrencies that miners retain.. It is precisely for this reason that users carry out Staking of the cryptocurrency, that is, they bet on the network.

Therefore, The backbone of a blockchain like Cardano with a PoS system is staking pools. These consist of users who join and use their cryptos to validate blocks on the network in exchange for it, they receive rewards.

In the particular case of ADA, Ouroboros is the name of the PoS consensus algorithm. In this way, in Ouroboros, a leader is randomly selected among the nodes, proportionally to the amount of tokens bet and it is this leader who is in charge of choosing the blocks to be added to the blockchain.

Therefore, ownership of ADA will be the factor in determining who will be the leader and will be able to add new blocks, and consequently, you will receive rewards for doing so.

How to staking ADA?

The question so far is, how can a crypto user staking ADA?

Staking ADA is as simple as holding the token in a Cardano-backed wallet. By doing so, you will be rewarded with a certain percentage of ADA which will depend on your number of tokens. Nevertheless, There are two options for staking ADA, with an on-chain wallet or with a crypto exchange.

ADA staking with an on-chain wallet

The most used wallets for staking ADA on-chain are Yoroi Y Daedalus. In either of the two you must create a name and a password; This password will be required to authorize ADA transactions and delegation to an interest pool.

In this sense, it is suggested to use a long and secure password, containing uppercase, lowercase, numbers and symbols. Also, this type of wallet will ask to generate a recovery phrase, which will be necessary to restore your wallet.

It is essential to write down this recovery phrase and keep it in a safe place, preferably not on the Internet because with it anyone can claim your wallet and steal your money.

In the case of Yoroi, for example, this wallet runs as a Chrome extension, similar to Metamask. To start staking, you must add ADA to your wallet, for this, find your address in the “Receive” button.

Once you have ADA in your balance, you need to click on the “Delegate List” tab and then search for a staking pool that has low saturation and good growth. After deciding which pool you want, simply click “Delegate”.

Considerations when choosing a staking pool

A very important aspect is that a fee is charged for delegating, it is especially something that should be taken into account in case you want to change from pool to pool.

ThereforeIt is important to study the pool well before entering it. You need to look at whether the pool is producing blocks regularly, how long the pool has existed, and how many blocks it has produced over time. This is not to say that a pool is better the more blocks it produces, but if a pool regularly produces some blocks, it may be a good option.

Pools are limited to a maximum size called saturation point. When a pool is below the saturation point, it has no effect on the rewards, but, when the saturation point passes, the reward for participants decreases.

Another parameter that must be taken into account when selecting a staking pool is the rate selected by the pool operator since the reward that the operator wishes to obtain depends on it.

Strike the ADA and cripto exchanges

ADA staking can also be done through some crypto exchanges. In particular, this can be a viable option for those who are not comfortable handling cryptocurrency wallets and wish to do staking.

Some of the exchanges that allow ADA staking are Binance and Kraken.

El strike the ADA and Binance it’s pretty straightforward. Once you have created your account on the crypto exchange and have passed the entire verification process, you will need to purchase ADA or transfer it to your wallet. If you want to know more details on how to get started on Binance, we invite you to review the detailed guide below.

Binance staking option can be found in the ‘Earn’ drop down menu at the top of the web page, then you will select ‘staking’. In the search engine he will write ADA, and You will have the option to lock your funds for 30, 60 and 90 days based on availability and, depending on it, you will have a higher or lower interest rate.

To participate in staking it is necessary to have at least 1 ADA in your wallet.

Advantages and disadvantages of ADA staking

Like any other action, ADA staking has both pros and cons that must be taken into consideration.

The main advantage is that, sIf you already have ADA tokens, staking allows you to obtain passive income, And unlike Bitcoin mining, in the case of ADA it is not necessary to incur costs and risks associated with mining farms.

While, among the cons, we can mention the risks associated with the valuation of the cryptocurrency, ADA, which can vary. The value of the underlying asset and its volatility must be taken into account, since, If the ADA tokens lose a large amount of value, the losses can exceed the income earned from staking.

In addition, the risk associated with keeping the tokens in a wallet, especially with the possibility of losing the private keys.

Do the pros or cons outweigh? Will ADA staking be a good option to earn passive income?

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How to perform Cardano staking. A detailed guide

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