Cardano
Layer 1 Protocol, Cardano Ecosystem
Cardano presents itself as a third-generation blockchain and aims to become an environmentally sustainable and scalable network. It tries to achieve that through its research-driven approach, requiring an academic rigor before any change is implemented.
As proof-of-stake blockchain, it’s being developed into a decentralized application (DApp) platform with a multi-asset ledger and verifiable smart contracts.
APY | ~5% |
Total Supply | Capped to 45B |
Compounding | automatic or manual |
Compounding Frequency | Every epoch (~ 5 days) |
Reward Distribution Period (Payout frequency) | Every epoch (~ 5 days) |
Unbonding Period | No unbonding period |
Validator Self-Bond Requirement | No Self-Bond required but it is recommended |
Slashing Penalty | No slashing involved |
Validator Diversity | Over 2,200 individual single-pool operators hold 22% of total stake and there is a validator cap |
Cardano is a proof-of-stake blockchain for decentralized applications and verifiable smart contracts. The network has a research-driven approach to its development. Any decisions made go through a peer-review process of scientists and programmers, guaranteeing an academic quality to its development.
ADA is the native token of Cardano and can currently be used in staking; in the future, it will be usable for a variety of applications built on the Cardano network and for governance purposes.
- Rewards are distributed every 5 days
- Rewards are automatically compounded
- There are no slashing penalties
- No unbonding period
- Tokens are not locked up during the staking period
After staking tokens, there is a two epochs period before token holders start earning rewards. Therefore, stakers will begin receiving staking rewards after 20 days.
To delegate your tokens, you may choose between two native wallets from Cardano:
- Yoroi - a browser-based wallet developed by EMURGO. The Yoroi wallet is a light version for making transactions and runs on Firefox and Chrome as an extension. It has an instant setup, a user friendly interface, and does not take up much hard drive space. It also supports various languages, including English, Spanish, Italian, Russian, Chinese, Japanese, etc.
- Daedalus - a full node wallet developed by IOHK. Being a full node wallet requires a complete installation of the blockchain, which helps verify the transactions and secure them. This option provides an advanced privacy system and might appeal to technically inclined users, but its space and bandwidth usage is considerable.
For more information on best practices and safety tips when using wallets, see this support article.
If you're launching the wallet for the first time, you have to choose the language, agree to the terms and conditions and choose “Simple” as the level of complexity. Skip “Cardano payments URL” and confirm.
Now create your ADA wallet. Remember that the safest option at this point would be to use a hardware wallet. If you already have a wallet, click on “Restore wallet” instead.
When creating a new wallet, you’ll have to pick a name and a strong password.
If you’re not using a hardware wallet and chose to go with a local wallet instead, jot down your newly given 15 words seed phrase. Make sure to write it down somewhere safe.
Once your wallet is created, you will see the Yoroi dashboard.
Now you’ll need to send some ADA to your wallet. Simply go to the 'Receive' tab in order to copy your address, and use this address to send over ADA.
From the dashboard, open the “Delegation” tab and you’ll see a multitude of staking pools in the list. Find and select a staking pool, click “delegate” - then confirm the transaction.
Congratulations, now you’re done! You’ve successfully delegated your ADA tokens.
Note that there’s a 2 ADA staking fee registration that you must pay the very first time you stake, and that there is no lock-up (unbonding) period on Cardano, meaning you can stop the delegation process at any time. Rewards are compounded, so any new gained ADA will be automatically staked as well.
Install it and create a wallet. Remember to secure your passphrase somewhere safe!
Once you see the dashboard, the side menu on the left will show the network icon. Click on it as it will take you to the “Delegation center”- then, click on the “Stake Pools” tab.
Use the search bar to type in the pool name that you want to delegate your ADA.
After you’ve found a pool, click on it and you’ll be able to see more information about the pool. When you are ready, select “delegate to this pool”
Now you need to select the wallet you would like to delegate from.
Double check that you’ve selected the right wallet and pool to delegate, and then confirm the transaction with your password. Next, connect your hardware wallet to confirm the transaction.
Note that there’s a small fee to pay for the transaction.
That’s it - you now have successfully staked ADA. There will be a latency period of 15-20 days, before your stake will start to earn rewards.
Cardano uses on-chain governance with a treasury to vote on and fund the blockchain's developments. There are two types of governance proposals on Cardano: Funding proposals (FP) and Cardano improvement proposals (CIP). Funding proposals originate with the community and aim to enhance the ecosystem. CIPs are publicly visible to the community for discussion, located in the Cardano Foundation Github CIPs Repository. A CIP might describe a Cardano specific process, provide information, or propose protocol-level changes. Cardano improvement proposals can be found here.
There are several projects and dApps being built on Cardano; you can explore its ecosystem through an interactive map on CardanoCube.io.
One of the most popular projects, SundaeSwap, is a decentralized exchange which allows participants on Cardano to provide liquidity and ear a return on their deposit, whist creating a market for others to exchange their tokens.
What is staking?
On a Proof of Stake blockchain, staking is the act of depositing tokens in order to become a validator; that is, to participate in proposing and attesting to transaction blocks. Anyone with a minimum necessary coin balance can validate transactions and earn staking rewards on these blockchains.
What is the name of the asset being staked?
Cardano’s native token, ADA will be staked to capture new issuance rewards and fee revenue. ADA can be used in these ways:
- 1.Payment for computation and validation services (i.e., transaction fees)
- 2.Medium of exchange
- 3.Participation in governance (eventually)
How long does it take to unstake?
You can unstake your ADA tokens anytime. You have full control of your ADA tokens even when they are staked and they are never locked.
How are the rewards disbursed?
Rewards are distributed every epoch (~5 days) amongst all stakeholders that have delegated to a stake pool, either to their own stake pool or another pool.
What is the rate of new issuance (aka "annual inflation") for ADA?
The current annual inflation rate is set at 2.01% as of 1/20/22.
What affects future yields?
Rewards come from a combination of monetary expansion and transaction fees. The delegator earns according to their amount of stake, minus the pool operators commission fee. Rewards are affected by the pool’s performance - whether it became a ‘slot leader’ and signed new blocks, how many times, and total uptime.
The monetary expansion comes from the reserve; the reserve is determined by the difference between the total supply of ADA and the maximal supply of ADA. The total supply of ADA consists of all ADA currently in circulation, plus the ADA in the treasury. In contrast, the maximal supply is the maximal amount of ADA to ever exist (45 billion ADA).
At the moment, the expansion rate is currently set at 0.3% - meaning during each epoch, 0.3% of the reserve is distributed as staking rewards and treasury funding, and will continue to do so in the following years and until exhaustion. This sets off an annual inflation of ~2.0%.
From the total two sources of income, a certain percentage - currently set at 20% - goes to the treasury, and the remaining 80% is used to reward staking operators and delegators.
Therefore, at the current established rates, delegators can expect an APY of approximately 5%.
Do I maintain custody and control of my ADA when staking?
You maintain custody of your ADA at all times. There is no bonding or unbonding period.
Can my staked ADA be slashed (seized or destroyed)?
No. Currently, Cardano does not enforce slashing. However, poor node behavior can lead to missed rewards.
Is staking income liquid or automatically staked?
Staking income is staked automatically, which means you will need to unstake your tokens to withdraw your staking income.
What is the total supply of ADA?
There’s a maximum supply of 45 billion ADA with a current circulation of approximately 31 billion.
Last modified 5mo ago