|Staking||Adj Reward %||Avg Reward %||Avg Fee %||Inflation||Market Cap||Staked Ratio|
Cardano is one of the most innovative blockchain networks in the crypto space. This accounts for the fact that its native coin, ADA, is constantly listed in the global top 10 coins with a total market cap of over $15 billion and why there are thousands of active Cardano wallet addresses daily.
Owning ADA can be a long-term investment and can even provide users with a hefty amount of passive income through staking. Here’s what you need to know about the Proof-of-Stake mechanism and the best ways to stake ADA.
- Ready to stake Cardano now? Sign up at eToro to earn ADA staking rewards today.
- Staking Cardano is rewarded with ADA cryptocurrency
- By staking ADA, crypto users contribute to the Cardano blockchain
- Staking ADA can be done in staking pools, on exchanges, or directly from the Daedalus wallet
What is Cardano (ADA)?
Cardano is a public blockchain that launched in 2017. It was released in a bid to resolve the scaling and infrastructure issues plaguing crypto’s principal blockchain, Bitcoin. Cardano’s native coin is ADA, which its creators have dubbed the first third-generation cryptocurrency.
Cardano’s evolution has positioned itself as a long-term competitor to Ethereum and Bitcoin. Its algorithm utilizes a Proof-of-Stake protocol, which decreases transaction costs and provides a higher capacity for processing high volumes of transactions quickly.
While all of this sounds good on paper, just how popular are Cardano and ADA? The ADA cryptocurrency has proven especially resilient during the bear market, remaining one of the most popular cryptocurrencies in the world.
Considering its fame and the optimism surrounding the project, it is no wonder that users are interested in maximizing their ADA earnings through staking.
How does Cardano staking work?
Staking is one of the principal methods crypto investors use to earn passive income for their digital assets. The cryptocurrency earns rewards because it is used within a Proof-of-Stake (PoS) consensus, in which nodes confirm transactions on a blockchain network to add new blocks. When new blocks are added, rewards are paid to the node and distributed to investors who delegated their tokens to that node.
Proof-of-Stake and Proof-of-Work protocols are the two main ways blockchains grow and add new blocks. PoW requires miners to hash complex computations, while PoS uses nodes to validate transactions.
Cardano’s PoS consensus mechanism allows for ADA staking. In fact, long-term holders of the coin are encouraged to participate in the process, adding to Cardano’s vision for a decentralized blockchain. Not only will staking be financially rewarding while requiring little effort on the crypto user’s part, but it will also help support the network’s security and new block validation. Here are the different ways to stake ADA:
Staking on an exchange
Difficulty level: Beginner
The world’s biggest cryptocurrency exchanges offer an array of services related to blockchain tech. One of these involves staking Cardano. This option will relieve you of hassles, such as downloading an additional crypto wallet or choosing the appropriate staking pool.
Some of the best-known exchanges that offer ADA staking include Binance, Kraken, and KuCoin. While each will differ in platforms, conditions, and terms, the process is similar for each.
You will first need to create an account and fund the wallet with ADA, either buying it or sending it from an external wallet. Choose the length of time you’d like to stake — which varies by exchange — and confirm the transaction. Your rewards should be sent back into your spot wallet.
Note that some exchanges, like Binance, require that you lock your funds for the entirety of the period in which funds are staked. This means that if you choose to remove your funds sooner, you may forfeit your rewards.
Staking ADA on any of these platforms can be quite profitable. For example, Biance offers an APY of up to 15.79% on ADA staking for a 120-day commitment.
Difficulty level: Intermediate
Staking ADA involves providing your digital assets as support for a blockchain network in return for additional crypto rewards. One of the best and easiest methods to generate passive income through staking is by joining a staking pool. Since Cardano uses a Proof-of-Stake model, you’ll find it easy to put your ADA to good use in staking pools.
Staking through a pool cuts out most of the difficulties involved with running your own node. It just requires some ADA, a safe crypto wallet, and an internet connection.
When you join a staking pool, you are committing — or delegating — your crypto to validators alongside other users. The validators’ chances of validating a transaction — and receiving rewards — increase based on how much is delegated to them. Users who delegate or run validators receive rewards based on the results incurred in a period of time called an epoch, and Cardano’s epoch is five days long.
The Daedalus wallet was explicitly created for the purpose of staking ADA, but Yoroi and Exodus wallets are notable alternatives. You can choose which pool to join based on information such as ROA (return on assets). ADApools lists Cardano staking pools available and includes information like fees, total shares in the pool, estimated ROA, and lifetime ROA. When you delegate to an ADA staking pool, there’s no unbonding period like with staking DOT or other PoS tokens. Instead, a snapshot of your registered staking wallet is taken at the beginning of the epoch and your rewards are calculated based on how much ADA you made available from the wallet. At the end of the epoch, you receive rewards into your designated wallet and can unregister or continue staking.
Running a validator node
Difficulty level: Expert
Running your own validator node on a blockchain can be a complicated process. However, there are a number of reasons why regular crypto users should consider doing this. First, running a node contributes to the network’s strength and scalability. It is also a great way to interact with the blockchain without going through intermediaries. Finally, it can be profitable to run a node, and setting everything up might not be as complicated for experienced and tech-savvy investors.
On the Cardano network, knowledgeable operators function as nodes. Public stake pools are used by other ADA owners who delegate their funds. Meanwhile, private staking pools provide rewards exclusively to their owners. Cardano’s calculator can help interested investors estimate what they can earn in passive income for running a Cardano network node.
When you run a private staking pool, you will set up the operator rewards percentage at 100%. This should discourage others from participating, meaning you will use the node to stake ADA all on your own. This strategy works best when you are already the owner of a large amount of ADA.
Once again, you can use Daedalus, the official Cardano wallet, for running your own network node. Be aware, however, that installing Daedalus requires 16GB of RAM and 100 to 200 GB of storage, at minimum, to operate.
Potential returns for staking ADA
Each staking ADA strategy has its set of advantages and challenges. Running a validator node, for example, involves a greater degree of responsibility and technical knowledge. But, overall, which of these methods is the most profitable?
Joining a Cardano staking pool is the most straightforward method of staking ADA. Cardano’s website provides a calculator that shows how much someone would earn for delegating their coins. If, for example, you would delegate 10,000 ADA at a 4.6083% reward rate, you would make a little over 460 ADA in a year.
If you were to make the same investment while running a public staking pool, you could also set up a daily fixed fee to offset your own running costs. Daily fees of 70 ADA, and additional staking of 10,000 ADA, should provide yearly returns of around 79,500 ADA. Meanwhile, running a private staking pool would delegate all of the rewards to you, but you would not receive any of the daily fees.
Finally, rates on crypto exchanges can vary greatly. On Binance, where the estimated APY for 90 days is currently 11.29%, you would receive 27.8 ADA in rewards for this period. Meanwhile, Cryptolek suggests that if you staked ADA at 11.23% on a 12-month staking period, you would receive 1,123 ADA for adding 10,000 ADA. Note that Binance offers fixed staking, and the rate is subject to a number of conditions.
How much can you make for staking Cardano?
Here are possible earnings on different exchanges when staking 1,000 ADA over a one-year period.
|Platform||APY||Payout Frequency||Potential 1-Year Earnings|
|Binance*||15.79%||30/60/90/120 Days||157.9 ADA|
|Nexo***||Up to 8%||Daily||80 ADA|
*Rate is available for a 120-day period only. Currently, only the 90-day period staking is available at 11.23%. You would earn this only if you ran staking for four consecutive 120-day periods. Furthermore, Binance offers fixed staking
**Rate has varied in recent months between 2% and 4%
*** You earn an additional 2% if you choose your payout in NEXO tokens, and another 1% when you lock your amount
Information accurate as October 2022
What to know about returns for staking ADA
You can stake ADA in a number of ways. But how exactly do you receive your ADA staking rewards?
In order to receive your passive returns for staking, you would first require a compatible crypto wallet. You will need it when depositing the coins, as well as when receiving your staking incentives. Generally speaking, the only difference will be whether you are using a custodial or non-custodial wallet.
For example, Daedalus is the official desktop wallet promoted by the Cardano project itself. It is a non-custodial wallet meaning that only you have access to the funds. You will use it to stake and manage your rewards. The process is similar to the Yoroi wallet, which also uses less storage space and can be enabled as a browser extension.
Meanwhile, if you choose to stake by using a centralized exchange, you will most likely use a custodial wallet. This means that you will need to deposit funds (or purchase the coins) in a wallet owned by the exchange. You will then stake the currency, and the rewards will be received in the same wallet. If you choose to move the funds to a non-custodial wallet, you will need to withdraw the funds and likely pay a withdrawal fee.
Fees for staking Cardano
Each method for staking ADA involves a number of costs. These are different from one service to another.
For example, if you will delegate ADA to a Cardano staking pool, you will need to pay a fixed staking fee. These help offset the costs of running the network. Currently, the fixed staking fee is 340 ADA plus 0%–2%, depending on the pool.
Furthermore, the operator of the pool can set an additional variable price of up to 5%. This is used as a reward for running the node. The cost of operating a node can vary between $100 to $1,000 per month, depending on your equipment, how many public relays you have, your internet service provider, and the price of ADA.
Meanwhile, there will be different expenses when using an exchange for staking. For example, the popular Exodus wallet charges only 2 ADA upon deposit and 2 ADA when unstaking.
At the time of writing, exchanges like Binance and Kraken do not charge a staking fee. However, the majority of their staking services involve keeping your funds locked up for a period of time.
Pros and cons of staking ADA
- Support the Cardano network
- High level of security
- Low fees
- Risk of losing private key
- Wait time for new wallets
- Having to choose the right pool
Support the Cardano network
Remember that when you opt to stake ADA, you are not just earning passive revenue. You are also supporting the Cardano blockchain, which was built out of a desire to improve upon the sluggish Bitcoin network.
It’s a project that has developed quickly. Unlike other blockchain networks, it can process hundreds of transactions per second at very low costs. This setup can easily be integrated into the modern global financial system. Staking ADA helps keep the network secure and robust. So, the next time you are earning your staking rewards, know that you’re contributing to the crypto ecosystem.
High level of security
Cardano uses the Ouroboros protocol within its Proof-of-Stake algorithm. It ensures that network control is distributed across stake pools through the use of node operators.
The protocol also helps to maintain a high level of security, all while helping propagate permissionless and scalable global networks. Ouroboros uses random leader selection, and the network is secured provided that there are at least 51% honest participants on the network.
Fees to stake ADA are generally relatively low. The lowest staking fee when joining a staking pool is 340 ADA, plus a margin of up to 2%. Furthermore, pools get to choose their own variable fees, so you will be able to pick the option that is the most convenient.
If you are staking ADA on a centralized exchange, you might be even better off in terms of fees. Some exchanges, such as Binance and Kraken, do not charge any fees for depositing ADA within a staking pool.
Cons of staking ADA
Risk of losing the private key
The process of staking ADA is not very difficult and shouldn’t require a lot of effort on the user’s part. Technically, you are just delegating funds that are kept within your crypto wallet.
The only real risk is that of misplacing your private keys. Without the security information, you’ll have no way to access the funds. With this in mind, make sure that you keep your private keys on hand, and protected.
Wait time for new wallets
The Cardano network is incentivizing crypto users to stake ADA and assist their network. However, new users will have to learn a bit of patience before they can receive their rewards. New wallets typically need to wait for two to three epochs (10 to 15 days), depending on the staking platform, before rewards are paid out. This is true, for example, of the Exodus wallet, where you will need to wait 10 days before earning rewards.
While staking ADA will require little intervention on your part, first, you will need to set everything up. If you are staking through the desktop wallet, Daedalus, you will first need to download the software and install it. Next, you will need to browse through the available staking pools and make a decision based on which one is most suited to your needs. While this is not very difficult to do, it will require that you learn the elementary technical jargon which may prove to be a learning curve for some.
Is it safe to stake ADA?
Staking ADA is generally very safe, especially since Cardano does not use slashing penalties to reprimand validators. In fact, Cardano relies on incentivizing validator nodes enough that they would act in the best interest of the blockchain, instead of acting maliciously.
When staking using non-custodial wallets (Daedalus, Yoroi), the private keys are always in your possession. Furthermore, the Ouroboros protocol is meant to make your assets safe from outside attacks.
The only risk worth mentioning is when you choose to stake ADA using the custodial wallet of a crypto exchange. However, it is worth mentioning that exchanges such as Binance or Kraken have commonly proven secure. The risks involved have to do with:
- Volatility: The value of the coin may fluctuate, and you may have your assets locked during times when you want to trade or swap.
- Security risks: Your assets are stored in a wallet that is owned by the exchange. If the exchange becomes insolvent, files for bankruptcy, or otherwise fails, you can lose your funds.
How to stake ADA
Staking ADA, as we noted, can be done in a variety of ways, but using an exchange and staking from Daedalus are simple and easy for beginners. Here's an overview for staking Cardano’s native token on Daedalus and on Binance.
First, here’s how to stake ADA on the Daedalus wallet:
Step 1: Download Daedalus & set up your wallet
You’ll first need to install the Daedalus software and set up a new wallet.
Remember that there are system requirements for devices to operate Daedalus, but the installation only takes a few minutes.
Step 2: Go to Staking page
Navigate to “Staking” in the left-hand corner and wait for the program to synchronize with the Cardano blockchain.
Step 3: Choose a validator and wallet
Designate the wallet with your ADA assets that you want to use to delegate to a validator. This will also be the wallet that receives rewards for staking ADA.
Then, you will need to choose your validator. Keep in mind any downtime, commissions or fees, one-month ROA, and lifetime ROA. You'll want to choose a validator pool with minimal fees, comparatively high returns on ADA, and little to no downtime.
Step 4: Start staking
Once you have made your choice, click the ticker on the pool and stake your ADA by hitting the “Delegate” option. You will need to wait until the end of the next epoch — anywhere from 5 to 10 days — before rewards are sent to your wallet
If you don’t want to use the Daedalus wallet, you can stake ADA through Binance outside of the United States, as Binance.US's token staking is limited to a few options that exclude ADA. Here’s how to stake with Binance:
Step 1: Open an account or sign in with Binance
You will first need to make sure that you have a validated account with the central exchange that you are planning to use. You can open a new account or log in with your existing account.
Step 2: Visit the Staking page
You will need to visit Binance’s Staking page under its “Earn” category. Next, choose a 30-, 60-, 90, or 120-day period for staking your coins. Keep in mind that different periods require different staking minimums, from 0.001 ADA to 1 ADA. Click “Stake Now” to complete the process. You will begin receiving your rewards to your spot wallet but will not be able to collect your rewards if you remove the funds ahead of the agreed-upon timeframe.
Is staking ADA right for me?
If you're interested in staking ADA, make sure that you would benefit the most from it. Here are some situations in which someone would want to stake ADA, and when another person should pass on it.
Who could benefit from staking ADA
Staking ADA is an excellent method for long-time owners of the coin to earn extra income. It is relatively safe, entirely endorsed by the Cardano network, and helps support the blockchain and the project’s vision.
Who may want to avoid staking ADA
Significant rewards for staking are incurred over a more extended period of time. If you are simply a day trader who happens to own some ADA, staking might not be your best option to increase your earnings. Also, staking will involve a little more technical know-how and patience. Therefore, people who may not have the time to see the rewards over a long staking period may want to pursue other avenues of passive income.
Final thoughts on staking Cardano
Cardano was created as a way to improve upon the concept of blockchain technology that was shown by Bitcoin. When crypto users opt to stake the network’s native coin, ADA, they are not just doing so to earn passive income, they are also aiding the network's development.
There are several ways in which anyone can stake ADA. All of them are easy to implement. Therefore, if you are a long-time owner of ADA, this is an excellent way of using your digital assets.
Frequently asked questions
What does ADA do?
Is ADA a good crypto?
Is staking ADA crypto worth it?
Do I pay taxes on ADA staking?