Cardano is a decentralized third-generation proof-of-stake blockchain platform and home to the ADA cryptocurrency. It has been designed from the ground up by a team of top engineers and academic experts. Cardano has a strong focus on sustainability, scalability, and transparency and is a fully open source project that aims to deliver an inclusive, fair, and resilient infrastructure for financial and social applications on a global scale. It is powered by Ouroboros, the ground-breaking proof-of-stake consensus protocol.
Staking is an important part of the Cardano blockchain, as it helps to secure the network and ensure its integrity. By participating in staking, you are contributing to the maintenance and validation of the blockchain, which is essential for its continued operation.
One of the main benefits of staking Cardano is the ability to earn rewards. When you stake your Cardano, you are helping to validate transactions on the network and are rewarded for your contribution with a portion of the transaction fees and newly minted coins. The amount of reward you receive will depend on the amount of Cardano you have staked and the overall level of staking participation on the network.
Stake pools offer several benefits for stakers, including increased decentralization of the network and potentially higher rewards due to the pool's larger stake. By participating in a stake pool, you can delegate your stake to a stake pool operator who is responsible for maintaining the pool and validating transactions on the network. This can make it easier for individual stakers to earn rewards, as they do not need to set up and maintain their own staking infrastructure.
Stake Pool Operators
Committed to the health and diversity of Cardano, stake pool operators (SPOs) act as the driving force of the ecosystem, being responsible for transaction processing and block production. Interested in running your own stake pool? Find out how to set up and operate a stake pool.
A stake pool is a reliable server node that focuses on maintenance and holds the combined stake of various stakeholders in a single entity.
Stake pools are responsible for processing transactions that will be placed in the ledger, as well as producing new blocks. Stake pools are at the core of Ouroboros, Cardano's proof-of-stake protocol.
To be secure, Ouroboros requires a good number of stakeholders to be online and maintain sufficiently good network connectivity at any given time. This is why Ouroboros relies on stake pools, entities that are committed to run the protocol 24/7, on behalf of the contributing stakeholders that hold ada. The idea is that these resource holders can bring their resources (their stake) together and form a pool, where typically one holder is the operator of the pool and the rest are delegators. Typically, the stake pool operator (SPO) installs and runs software compatible with the platform (the server node), while delegators take a more passive role. They delegate their stake to the pool.
While Ouroboros is cheaper to run than a proof-of-work protocol, running Ouroboros still incurs some costs. Therefore, SPOs are rewarded for running the protocol in the form of incentives that come from the transaction fees and from inflation of the circulating ada supply.
Delegation of stake is a mechanism inherent in the Cardano proof of stake (PoS) protocol that allows the protocol to scale even in a setting where the set of stakeholders are highly distributed.
As Cardano is a proof of stake (PoS) system, owning ada not only allows you to buy goods or services, but also confers upon you the right and obligation to participate in the protocol and create blocks. Stake delegation is a mechanism inherent in the Ouroboros protocol that allows the protocol to scale even in a setting where the set of stakeholders might be highly fragmented.
Anyone who owns ada can participate in stake delegation while retaining their spending power. Note that you can spend your ada normally at any time, regardless of how you delegated it. This mechanism will enable stakeholders to participate in the slot leader election process in each epoch.
Stake delegation gives rise to stake pools that act in the similar way to mining pools in the Bitcoin protocol. Stake pool operators (SPOs) must be online to generate blocks if they are selected as slot leaders.
During each epoch, rewards are distributed amongst all stakeholders who have delegated to a stake pool, either to their own stake pool, or another pool. These rewards are auto-generated by the protocol itself, and are not managed by the stake pool operators (SPOs).