Staking ADA

Why Staking?


Normally we would buy ADA at an exchange and then keep that ADA to appreciate in price and do normal trading (buy/sell) on the exchange. In this case the only rewards one gets is the price appreciation based on market's law of demand, supply and irrational exuberance.

With Staking, it's possible to hold your ADA for a longer period of time and earn 5-7% interest on it. But this requires holding your ADA in a compatible wallet like Daedalus, Yoroi.

There are two ways one can stake one's ADA:

  • Have your own Stake pool and then lock in one's ADA into that stake pool (incurring work and marketing expenses to promote one's pool in addition to setting up the pool, which can be a technical barrier for normal ADA holders)

  • Use other already existing pools and DELEGATE one's ADA to that POOL. There are more than 1000+ pools, and we welcome you to LKBH pool for this DELEGATION.

Once you delegate your ADA to proper Pools, then when the pools are selected by the algorithm to mint blocks (from the Cardano blockchain), they get rewarded for the same. The details of the rewards is outside the scope of this document.

And these rewards are shared between the pool operator and the delegators who support the pools. This is a win-win scenario for both parties. And hence just like saving accounts in normal banks ADA holders can generate return on their ADA investment by staking with mining pools such a LKBH.

A more detailed article of why rewards are generated and why they are expected to increase over a period of time is mentioned in this article

For Indian Investors using Indian Rupees: A guide to staking on LKBH

stake_with_lkbh.pdf

For EUR or USD investors a guide to Staking on LKBH:

Step 1: Buy ADA from an Exchange

We are now entering a new era where we can now participate in the crypto ecosystem by holding tokens relevant for that network. For this purpose the token that CARDANO uses is called ADA. You can buy this token from different exchanges like kraken.com, binance and host of other exchanges. If you need assistance in this regard just drop us a message on telegram and we will reach out to you. After this most probably the ADA will be held in the exchange.


Step 2: Transfer ADA to your Wallet

Currently there are two wallets which provide the opportunity to select pools where you can delegate your ADA. They are Yoroi and Daedulus. These are software app based wallets and are so called Hot wallet (as they need the user to be online). First thing to understand is how these wallets work. This wallet is like a bank. It has a unique set of addresses and also a private key (called a mnemonic, a special set of words 12, 15 or 24 words long). The addresses are derived from the mnemonic. And you need to specially take care of this Mnemonic so that in case something happens you can reinstall the wallet (software) and restore the wallet using this private key(mnemonic).

The addresses associated with an wallet is where you can transfer your ADA to. They are the destination addresses where you can transfer funds to, from your exchanges.

Currently Cardano is working with cold wallets (hardware like ledger.com), to ensure that direct staking is possible from there. Till that happens we need to use the hot wallets mentioned above.

Step 3: Delegate your ADA to a Stakepool

We will walk you through example delegation via the Daedulus wallet. This is a realistic scenario where I delegated certain amount of ADA to this pool. As you see it may be that once delegated we need to wait till the current epoch is completed is over.

Step 4: Check your earned Rewards

There is a rewards tab that shows the rewards are awarded by the ouroborus algorithm within the daedulus wallet.