We have seen a lot of defoliation and misconceptions well-nigh how staking works and the differences between stake pools. We hope this guide volition help clear up whatever confusion most how staking rewards are earned and what is and is not of import when choosing a staking puddle.
Decision-making Your Own Stake
Importance gene: 5/5
Not your keys, not your crypto.
You should never use exchanges to store your cryptocurrency long-term (just look at what happened to the globe’due south largest exchange in 2014). This is doubly true for using exchanges to consul your stake. When you allow an substitution stake for yous, you are giving up control of your own funds and handing the keys to the exchange. You tin can maintain control of your ADA by using a Cardano wallet, such as Daedalus, Yoroi, or AdaLite.
Importance gene: 5/v
This is the most important metric to evaluate. Your ROS can have a huge striking if the puddle you lot have delegated to is missing the slots they have been scheduled for. Pools merely receive rewards for the blocks they mint on the blockchain. Poorly maintained pools will tend to miss opportunities to mint blocks, causing the total rewards paid out to stakers to decrease.
A minor consideration is the hardware a pool runs on. If the server has bereft resources, they tin can get bogged downwardly with keeping upwards with the tip of the blockchain (or even crash) and miss out on minting blocks. Additionally, if a puddle runs on a dedicated server at the operator’s house, it is susceptible to power outages. Fifty-fifty if the server runs on an uninterruptible power supply (UPS), their local cyberspace service provider equipment can go down, rendering the pool inoperable for a period of time. Large cloud computing providers, such as AWS and DigitalOcean, provide servers in multiple availability zones, so that even in the issue of widespread power outages, pools tin remain operational if they have backups in another zone.
Overall, puddle operation tin can exist a hard metric to evaluate. As explained in the previous section, a modest pool can have wild swings in the number of blocks they create. Then if a puddle had a low ROS during an epoch, it does not necessarily mean information technology is performing poorly. You must evaluate a puddle’s operation over many sequent epochs to get a feel for their overall performance. This makes a puddle’s transparency very important, every bit we’ll explain later.
Importance factor: four/5
Supporting decentralization is critical to the long-term success of the Cardano network. In order to brand sure the blockchain continues to run reliably and with integrity, we need to maintain a salubrious distribution of stake beyond many stake pool operators. Yous can help past non delegating to groups that command a large number of stake pools, such as Binance:
Communication and Transparency
Importance factor: 4/5
Since determining how effectively a pool is running based solely on ROS is very difficult to practice, pools that openly provide performance data should be given serious consideration for your stake. For example, PoolTool provides the ability for pale pools to self-report the slots they get elected for at the kickoff of each epoch. These reports are then evaluated against the actual blocks the puddle produces, and PoolTool publishes both of these values on the pool’s page. This provides real measurements of a pool’s performance over time.
For example, nosotros postal service regular pool updates to our telegram channel, so delegators can easily stay upwardly to date on our performance. The team is ever available for comments, suggestions, or questions.
Importance factor: three/five
To maximize the rewards yous earn, you lot will desire to choose a pool with depression fees. In that location are two types of fees pale pools charge:
is an amount of ADA taken from the total rewards the pool produces in an epoch (epochs concluding five days). Notation: this is
a fee charged to each delegator.
is a percent taken from the pool’south total rewards each epoch afterward the fixed fee has been deducted. These fees become to the puddle’due south operators to cover the costs of running their pool (more on this later).
Equally an case, let’due south break downwards the rewards payouts betwixt ii pools with the same amount of pale for a hypothetical epoch:
- Pool A has a fixed fee of 1,000 ADA and a margin of two%.
- Pool B has a stock-still fee of 360 ADA and a margin of 4%.
If each puddle earned 20,000 ADA in rewards during an epoch, the rewards would be distributed as follows:
- Puddle A would take a stock-still 1,000 ADA from the rewards plus another 380 ADA in margin (19,000 * 2%) for a total of 1,380 ADA. The remaining xviii,620 ADA would be divided amongst pool’s delegators based on the amount of ADA they staked in the puddle.
- Pool B would take a fixed 360 ADA plus another 786 ADA in margin for a full of 1,146 ADA. This puddle’s delegators would get the remaining 18,854 ADA.
During this epoch, Pool A had an effective tax of 6.nine% (1,380 / 20,000) while Pool B had an effective revenue enhancement of five.vii%. The larger the stake in a pool, the smaller the effect of the fixed fee, as this fee is divided between a larger amount of delegation. If the example stake pools were larger and earned 100,000 ADA in rewards during an epoch, their effective taxes would exist 3% for Pool A and iv.4% for Puddle B.
Beware of extremely low-fee pools, like those charging 0% margin. Puddle operators can change their fees at any time, and pools with fees that seem too good to be true are likely to enhance their fees after they fill their pool.
Importance factor: 2/5
Information technology is important to choose a pool that is not over-saturated. The current Ouroboros implementation attempts to enforce decentralization past capping rewards at a specific limit to foreclose pools from growing as well large. In the current version of the network this value is gear up to 0.66% of the total ADA staked. And so, if a pool has six.half-dozen% of the total ADA staked, it will but receive rewards as if it had 0.66% of the full ADA staked. Therefore, stakers in this pool are receiving ane/10th of the rewards they would be in a smaller pool. Smaller pools volition non run the adventure of being over saturated, but they will on average mint fewer blocks.
Pool rewards need to be considered as averaged over fourth dimension. A smaller pool will divide bigger shares of the reward amongst its stakers (since there are fewer of them), but they will statistically get chosen to produce less blocks. A larger pool will find more than blocks just payout smaller rewards. Equally long as the bigger pool isn’t saturated, the rewards will exist the same over fourth dimension. Also, since information technology is a random pick, some pools may accept good or bad luck “streaks”. For example, the Cardano network has targeted about 4.six% rewards (Return on Stake, or ROS). Large pools will tend to pay out more than consistent rewards, as there is lower variance in the number of blocks they mint per epoch. Small pools will have much more than variation in the amount of blocks they produce per epoch, and so the rewards will vary significantly. Across three epochs, a small puddle may payout 1%, nine%, and iv% ROS, only over time the rewards will average out to 4.6%.
This is of import to remember when looking at puddle operation over a curt catamenia of time. A small puddle may become “lucky” on their first few epochs and get selected for many more slots than boilerplate. They will announced to pay out a much higher ROS than other pools. However, after several epochs, this will even out to the expected ROS.
The following graphic illustrates the breakdown of pool fees (more on this afterward) based on puddle size and the modest overall consequence they have on overall ROS:
Importance factor: 2/5
is the corporeality of ADA the pool operator(southward) have staked in their own pool. This effectively lets delegators know how invested the operators are in the success of the pool. Pledged ADA earns rewards just like if it were staked, then if a pool goes downwardly, its operator will not just miss out on collecting fees for the missed blocks, but they volition also lose rewards on their pledge.
Pledge also has a small result on the rewards earned by the pool’south delegators. This is called the
pledge influence factor, which is currently prepare to 0.3. The overall effect of pledge is very minor on the ROS a delegator will earn. Compared to a pool with 0 ADA pledged, here are a few examples of how much more a delegator can expect to earn:
|ADA Pledged||Increase in ROS over 0 pledge|
Based on these values, y'all tin see that it would be amend to stake your ADA in a pool with 0 pledge and a 2% fee than a pool with 12M ADA pledged and a 3.5% fee. Fees and pool performance are a much bigger factor in your expected returns than a pool’s pledge, as we explained in the previous section.
If I spend or add funds to my wallet afterward I delegated to a pool, does the staked amount alter automatically?
Yep - when yous delegate to a pool, you are delegating your unabridged wallet - not just a fixed corporeality. And so if funds are added or removed from your wallet, you lot staked corporeality will change accordingly.
If I delegated to a pool during the Incentivized Test Net (ITN), do I need to redelegate for Mainnet?
Yes - in fact, you volition have 2 wallets that need to be delegated. You will need to migrate your original Byron-era wallet to a Shelley wallet. Additionally, your ITN rewards are paid out in a new wallet, which you can recover using the recovery phrase generated when you lot created your ITN wallet. Check out our Daedalus staking tutorial for more details.
Why does information technology take two epochs to earn rewards?
Slot leaders are elected at the start of each epoch, and then the pale in the prior epoch is used to select leaders. Then the epoch must embark and each pool must testify up when it’s their plough for a slot. Afterwards the epoch has ended, all the pools will have produced the blocks assigned (or missed them), and rewards are calculated. The rewards are and then paid out on the post-obit epoch.
Do simply big pools get selected to brand blocks?
No, they only have the best take chances statistically. A puddle with only 10 ADA in it could get selected, only its chances are extremely low. Over a very, very long catamenia of fourth dimension, this pool has the opportunity to earn the aforementioned amount of rewards as a pool with 10M ADA, only information technology will take much longer to even out.
Does k=500 mean only the top 500 pools will exist able to earn rewards?
parameter only means pools will saturate at 0.2% of the full staked ADA. People tin withal delegate to over-saturated pools, and there can be any number of unsaturated pools. Basically, it just means only up to 500 pools can operate with the maximum amount of stake and not exist saturated.
Is my ADA locked when I delegate to a pool?
No, you are free to spend your ADA at any time (although you will stop earning staking rewards on anything that you spend).
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