Staking
What is Staking?
ADA holders can "stake" or designate their ADA to a stake pool and earn rewards in ADA. By staking ADA to a stake pool, ADA holders are entrusting that the stake pool can produce new blocks for the Cardano blockchain and can earn a share of the rewards that the pool collects.
It's worth noting that while staking provides rewards, it's also a way for ADA holders to participate in the network's security and governance.
How Does Cardano Staking Work?
A stake pool is then elected as slot leader to produce a new block for a specific slot (a short period of time). Slot leaders are determined by a lottery system, and the chance of a stake pool being chosen as a slot leader is proportional to the amount of ADA staked (or delegated) to it.
At the end of each epoch, or a 5-day period, the elected stake pool and its delegators are rewarded with ADA for producing new blocks and securing the blockchain.
Cardano's staking is completely liquid meaning it allows ADA holders to stake their ADA without any lock-up period, ensuring immediate access and control over their funds. Users can swiftly switch their delegation between stake pools and receive staking rewards that are instantly available for use. This design provides flexibility and liquidity, distinguishing Cardano from many other staking mechanisms.
How Much ADA Will You Earn From Staking?
The yearly average amount of ADA earned is currently around 3.25% APY. However, the amount of ADA you earn from staking on the Cardano network depends on several factors:
Amount of ADA Staked: The more ADA you stake (or "delegate") to a stake pool, the higher your potential rewards. Your rewards are proportional to the amount of ADA you've staked in comparison to the total staked ADA in the network.
Stake Pool Performance: If you delegate your ADA to a stake pool, the performance of that pool matters. A stake pool that consistently produces blocks when it's elected as slot leader will yield better rewards than a pool that misses its opportunities.
Stake Pool Saturation: Stake pools have a saturation point of 64 million ADA. If a pool has more ADA delegated to it than this saturation point, rewards start to diminish. When choosing a stake pool to stake too, it's a good idea to choose a pool that isn't saturated to maximize rewards.
Stake Pool Fees: Each stake pool can set its own fees. These fees are deducted from the total rewards before they're distributed to delegators. Pools with higher fees might provide lower net rewards, but fees aren't the only consideration. A high-performing pool with slightly higher fees might still yield better net rewards than a low-performing pool with lower fees.
Network Parameters: The Cardano protocol has certain parameters that influence staking rewards, such as the percentage of ADA that's set aside for rewards in each epoch. These parameters can be adjusted over time through governance decisions.
Total Staked ADA in the Network: The overall percentage of ADA being staked in the entire network can influence individual rewards. If a larger percentage of ADA tokens are staked, the reward for each individual staker or delegator might be reduced, as the fixed reward pool is distributed among a larger number of participants.
Your Staking Duration: While there's no "lock-up" period for staking ADA (meaning you can un-stake your ADA at any time), rewards are distributed in epochs. If you stake or delegate your ADA partway through an epoch, you might not receive rewards for that epoch.
VESPR Rewards Dashboard
Features:
Epoch meter: The day of the 5-day epoch we are currently in.
Total rewards: The total rewards earned from staking displayed in ADA and USD.
Staked ADA: The amount of ADA currently staked.
APY: Average APY calculated based on the past 10 epochs.
Stakepool: The stakepool you are currently staked to.
Upcoming: When and how much you will earn on the next rewards distribution and from which pool.
Future: Estimated rewards for the next 2 epochs which are calculated based on your current wallet balance.
Past: Your past rewards.
Distribution To Users (DTU)
To maximize the amount of ADA rewarded from staking, users need to be aware if their stake pool is producing blocks and distributing a larger portion of their revenue to their delegators.
To make your stake pool search easier, VESPR has done these calculations for you. A stake pool with a higher DTU distributes a larger portion of its revenue to its stakers. In other words, the higher the DTU, the higher your rewards will be.
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