Discover what cryptocurrency staking is, how Cardano is staked, the pros and cons associated with it, and places to stake ADA.
What Is Staking in Cryptocurrency?
Before we delve into the details of staking Cardano, let’s first explore what it means to stake a cryptocurrency. Stacking a cryptocurrency means committing your cryptocurrency assets to a blockchain network and confirming transactions. You can stake cryptocurrencies that use the proof-of-stake protocol for payment processing.
In the world of crypto, staking is considered the ultimate goal because it allows you to make passive income. With this, participants pledge their coins to the cryptocurrency protocol. Then validators are chosen from among these participants, and they confirm blocks of transactions. If a new block is added to the blockchain, the validator receives newly-mined crypto coins.
Can Cardano Be Staked?
Cardano can be staked, and its staking is very common in the cryptosphere. Investors have the option to hold their ADA tokens on the network. This gives the investor a stake in the overall network proportional to the number of coins held.
ADA tokens can also be delegated to a staking pool, which is considered a better investment strategy. This process includes validating new blocks and processing transactions which then earn you tokens. These tokens are known as the staking reward.
As is evident, this activity requires minimum effort and yields high results, the extent of which is dependent upon the exact cryptocurrency.
How to Stake Cardano?
Cardano can be staked on a cryptocurrency exchange or by using a wallet. If you wish to use the services of a broker or a crypto exchange to stake ADA, follow the given steps.
* Create an account with an approved and trustworthy exchange that supports ADA staking.
* Deposit your desired number of ADA tokens into the wallet on the exchange. This can be done either by transferring your existing tokens into your wallet or buying new ADA tokens, e.g. you can buy Cardano with USD.
* Go to the staking page on the exchange platform and choose Cardano.
* You will be given different options for the duration for which you want your coins to be held. For this duration, you are not allowed to withdraw your tokens. If you do so, you will not receive your staking reward. In fact, at times, it is not even possible to withdraw your tokens before the duration is complete.
* After finalizing the duration, enter the amount of ADA tokens you want to stake and confirm the process.
Advantages of Staking Cardano
Since there is no cost, hassle, or risk associated with staking Cardano, it is considered an extremely safe activity to commit this cryptocurrency to a blockchain. That being said, not everyone is advised to stake in Cardano because they might not benefit largely from this.
Staking in Cardano makes the most sense when you already own ADA tokens and are looking for a long-term investment. Since you already plan to not use your tokens and hold them, staking is likely to lead to higher yields than traditional investment opportunities.
However, if you do not have any ADA tokens or prefer short-term investments only, it might not be a lucrative decision to get Cardano just for staking.
Disadvantages of Staking Cardano
The activity of staking Cardano in itself does not pose any real threat, but there can be concerns associated with the wallet. Losing the private key can completely expose your wallet and all that it holds, even besides your staked cryptocurrency.
Furthermore, sometimes pool owners can take even a part of your staking reward, so make sure you have conducted thorough research and are well-aware of what you should be receiving to avoid getting swindled by others.
Moreover, the fees associated with staking can be a deterrent for some, so it can help to divide your stakes among different pools to reduce the staking fees.
Where to Stake Cardano?
There are multiple ways to stake Cardano, including cryptocurrency exchanges and wallets. You can use them to safely stake your coins and generate passive income. Let’s consider an example of each method.
* Binance is a very popular cryptocurrency exchange offering a wide range of services. It also offers users to stake their ADA. This exchange is also known for offering the highest staking reward. By locking your Cardano tokens for just 30 holds, you can receive a 5.09 per cent annual percentage yield.
* Daedalus is the official cryptocurrency wallet developed by the team of Cardano itself. As such, there are hardly any options that are more reliable and convenient than this. It is a full node wallet, and by downloading the wallet, you will have access to the entire copy of the Cardano blockchain.