What is Cardano?
Cardano (ADA) is a proof-of-stake blockchain platform that aims to enable positive global change by allowing changemakers, innovators and visionaries to create possibility for the many, as well as the few. It was founded by Charles Hoskinson, who is also one of the co-founders of Ethereum. Cardano’s native cryptocurrency token is ADA, which is named after the 19th-century mathematician Ada Lovelace. ADA is used to participate in the network’s operation and governance.
Cardano – Real time price
How does Cardano work?
Cardano works by using a proof-of-stake system, which is more energy-efficient and scalable than the proof-of-work system used by Bitcoin and Ethereum 1.0. In proof-of-stake, owners of ADA tokens can validate transactions and earn rewards by staking their cryptocurrency tokens in a stake pool. Cardano uses a protocol called Ouroboros, which is the first peer-reviewed and verifiably secure proof-of-stake protocol. Ouroboros divides time into epochs and slots, and randomly selects a leader for each slot who is responsible for creating a new block and adding it to the blockchain.
Cardano also aims to be a platform for smart contracts and decentralized applications (dApps), which are self-executing commands that can enable various use cases such as identity management, supply chain tracking, gaming, and more. Cardano is designed to be interoperable with other blockchains and legacy systems, as well as adaptable to changing needs and regulations.
- Scientific approach – Cardano is based on peer-reviewed research and evidence-based methods, which aim to ensure its security, scalability, and interoperability.
- Proof-of-stake protocol – Cardano uses Ouroboros, a provably secure and energy-efficient proof-of-stake protocol that allows anyone to participate in the network and earn rewards by staking ADA tokens.
- Smart contracts and dApps – Cardano aims to be a platform for smart contracts and decentralized applications (dApps) that can enable various use cases such as identity management, supply chain tracking, gaming, and more.
- Multi-layered architecture – Cardano separates its settlement layer (CSL) and computation layer (CL), which allows for more flexibility and innovation in the network. The CSL handles the transactions of ADA tokens, while the CL handles the smart contracts and dApps.
- Slow development – Cardano has been in development for over five years, but it is still not fully functional. It has yet to launch its smart contract and dApp capabilities, which are essential for competing with other platforms like Ethereum.
- Lack of adoption – Cardano has a relatively low number of users and developers compared to other platforms. It also lacks a strong ecosystem of partners and projects that can drive its growth and utility.
- High competition – Cardano faces fierce competition from other platforms that offer similar or better features and services. Some of these platforms include Ethereum, Polkadot, Solana, Binance Smart Chain, and more.
- Technical complexity – Cardano is a complex project that involves advanced concepts and technologies. This may make it difficult for some users and developers to understand and use it effectively. It may also pose challenges for its maintenance and upgrade.
This is how you stake Cardano
To stake Cardano, you need to have a Cardano rewards wallet that supports the Shelley protocol and allows you to delegate your ADA cryptocurrency tokens to a stake pool. Some of the popular wallets that support staking are Daedalus, Yoroi, and Ledger. To stake Cardano with a wallet, you need to follow these steps:
- Create or restore a Cardano rewards wallet and transfer your ADA tokens to it. Make sure you have your recovery phrase and password safely stored.
- Choose a stake pool that you want to delegate to. You can use various tools and websites to compare different stake pools based on their performance, fees, rewards, and mission.
- Delegate your ADA tokens to the stake pool of your choice. You can do this by following the instructions on your wallet. You will need to pay a small fee for the delegation transaction.
- Wait for rewards to be distributed. It may take up to 20 days for you to receive your first rewards, depending on when you delegated and how the epochs align. After that, you should receive rewards every five days as long as you keep your ADA delegated.
You can change your stake pool at any time without losing any rewards. You can also undelegate your ADA tokens and transfer them to another wallet or exchange if you wish.
You have to pay a fee for delegating
The fee for delegating Cardano is a one-time payment of 2.17 ADA that you have to pay when you delegate your ADA tokens for the first time. This fee is deducted from your wallet balance and not from your rewards. The fee covers the cost of registering your stake address on the blockchain and creating a certificate of delegation. You do not have to pay this fee again if you change your stake pool or undelegate your ADA tokens.
In addition to the delegation fee, you also have to pay a small transaction fee every time you delegate, re-delegate, or undelegate your ADA tokens. This fee is also deducted from your wallet balance and not from your rewards. The transaction fee is based on the size and complexity of the transaction and is usually around 0.17 ADA or less. The transaction fee covers the cost of processing and validating the transaction on the blockchain.
Cardano staking in pools
A Cardano pool is a group of validators who pool their resources together to increase their chances of creating new blocks and earning rewards on the Cardano network. A Cardano pool can be either public or private. A public pool is a Cardano node with a public address that other users can delegate to and receive rewards. A private pool only delivers rewards to its owner.
A Cardano pool is run by a stake pool operator, who is an individual or business with the knowledge and resources to run the node on a consistent basis. A stake pool operator can charge a fee for their service, which reduces the rewards for their delegators. A stake pool operator can also pledge some or all of their stake to their pool to make it more attractive and receive more rewards.
A Cardano pool is influenced by several factors, such as its performance, costs, margin, saturation, and desirability. These factors affect how likely the pool is to be selected as a slot leader and how much rewards it can earn and distribute.
Rewards calculated for staking ADA
The rewards for staking ADA are calculated based on several factors, such as:
- The total amount of ADA staked in the network. The more ADA is staked, the lower the rewards per ADA, and vice versa.
- The performance and fees of the stake pool. The better the stake pool performs in creating new blocks, the higher the rewards for its validators and delegators. The stake pool also charges a fee for its service, which reduces the rewards for its delegators.
- The inflation rate of ADA. The network issues new ADA tokens every epoch (five days) to reward the validators and delegators. The inflation rate decreases over time, which affects the rewards per ADA.
- The length of time that ADA is staked. The longer the ADA is staked, the more rewards it can earn over time. However, there is no minimum or maximum lock-up period for staking ADA.
According to the official Cardano website, the average annualized return rate for staking ADA is around 3.26%. However, this rate may vary depending on the factors mentioned above and the actual network conditions. You can use a staking calculator to estimate your potential rewards based on your staking amount, term, and stake pool.
Become a Validator on Cardano
To become a validator on Cardano, you need to stake at least 32 ADA tokens in a stake pool. A stake pool is a group of validators who pool their resources together to increase their chances of creating new blocks and earning rewards. You can either join an existing stake pool or create your own stake pool if you have enough ADA and technical skills. To create your own stake pool, you need to run three pieces of software: an execution client, a consensus client, and a validator.
You also need to register your stake pool on the Cardano network and pay a registration fee of 500 ADA. Running a stake pool requires a reliable internet connection, a secure server, and some maintenance work. You can earn rewards from staking ADA as a validator or a delegator, depending on the performance and fees of your chosen stake pool.
How to create your own Cardano pool
To create your own Cardano pool, you need to have some technical skills and resources to run a node on a consistent basis. You also need to have at least 32 ADA tokens to stake in your pool. To create your own Cardano pool, you need to follow these steps:
- Install the node software from source on your server. You can use Ubuntu or Debian as your operating system.
- Set up the configuration and topology files for your node. You need to specify the network parameters, the node port, and the node socket path.
- Create a block-producing node and a relay node. You need to run two nodes: one that produces blocks and one that relays transactions to other nodes. You need to configure the topology files for each node so that they can communicate with each other and with the network.
- Create keys and addresses for your pool. You need to generate several keys and addresses for your pool, such as payment keys, stake keys, cold keys, VRF keys, and KES keys. You also need to register your stake address on the blockchain and delegate it to your pool.
- Generate stake pool keys for your pool. You need to create a stake pool registration certificate and a delegation certificate for your pool. You also need to pay a registration fee of 500 ADA for your pool.
- Register your stake pool on the network. You need to submit your stake pool registration certificate and delegation certificate to the network using a transaction. You also need to update your KES keys periodically to keep your pool operational.
- Advertise your stake pool to potential delegators. You need to create a metadata file for your pool that contains information such as your pool name, description, ticker, homepage, and pledge. You also need to host this file on a web server and provide its URL and hash in your stake pool registration certificate.
Secure your pool against attacks
To secure your pool against attacks, you need to follow some best practices and precautions, such as:
- Protect your block-producing node from being exposed to the internet. You should only connect your block-producing node to your relay nodes and not to any other nodes. You should also use a firewall to block any unwanted traffic and use secure protocols such as SSH to access your node.
- Protect your keys and certificates from being compromised or stolen. You should store your keys and certificates in a secure location, such as a hardware wallet or an encrypted drive. You should also backup your keys and certificates regularly and keep them offline. You should never share your keys or certificates with anyone or upload them to any online service.
- Protect your stake pool metadata from being tampered or spoofed. You should host your metadata file on a reliable web server and use HTTPS to serve it. You should also verify the hash and URL of your metadata file in your stake pool registration certificate. You should update your metadata file if you change any information about your pool.
- Monitor your pool performance and network status regularly. You should use tools and scripts to check the health and activity of your nodes, such as CPU usage, memory usage, network latency, block production, and rewards. You should also keep track of the network parameters, such as the epoch number, the slot number, the K parameter, and the a0 parameter. You should be alert for any anomalies or issues that may affect your pool operation.
- Update your node software and keys periodically. You should always use the latest version of the node software that is compatible with the network protocol. You should also update your KES keys every 90 days to keep your pool operational. You should follow the official announcements and guides for any software or protocol updates.