In cryptocurrency, staking involves locking away your tokens to support transactions on the blockchain. Individuals who stake their tokens become nodes or validators. These are active participants that help to keep the network running. Their tokens are used to validate transactions or verify new data that are being added to the blockchain. The concept of staking is fundamental to how the Cordano platform works. ADA Coins (the official token of the Cordano network) staked on the network help to validate transactions. In return for staking your ADA token on the Cordano Network, you get to earn rewards or incentives depending on the number of tokens you stake. Read on to discover how to stake Cardano and the pros and cons of doing so..
Can Cardano Be Staked?
Yes, the Cordano blockchain uses a proof-of-stake (PoS) mechanism. This consensus mechanism is coded into the blockchain and decides who gets selected to take part in the process of adding new transaction data to the blockchain-based on how much they have staked.
How to Stake Cardano
There are two main ways for ADA holders to stake their tokens. They can either delegate their ADA coins to a staking pool run by someone else or decide to run their own staking pool. Delegating your tokens to a pool operator to stake on your behalf basically means you’re joining your tokens to that of others as part of a pool. The rewards earned are shared between everyone in the pool.
Pros and Cons of Cardano Staking
If you’re a long-term holder of ADA coins, then staking is just right for you. Cardano staking is quite safe since there is no risk of losing your ADA coins. If you’re considering Cardano staking, here are the pros and cons to consider
Pros of Staking Cardano
- Staking provides a way to earn passive income especially if you plan to hold ADA tokens on a long-term basis.
- Cardano staking is easy. Unlike mining, you don’t have to spend money on buying a mining rig and maintaining it.
- Staking your ADA tokens is beneficial to the network as it helps to keep the network running with minimal energy.
Cons of Staking Cardano
- Cardano staking is relatively low risk. The only real risk of this type of investment is the possibility of losing the private keys to your wallet. However, this is a risk common to all types of cryptocurrencies even if you’re not staking.
- Staking may sometimes attract high fees. To avoid this, you should consider diversifying your portfolio.
- The price of ADA coins is subject to volatility and this can affect the value of your asset.
Where to Stake Cardano
You can earn passive income by staking Cardano through a wallet or cryptocurrency exchange. Some platforms that offer Cardano staking include:
- Binance
- Kraken
- Crypto.com
- CEX.IO
- KuCoin
- Yoroi Wallet
- Daedalus Wallet