What Is Staking On Cardano?

Delegating tokens to stake pools allows the stake pool to increase the likelihood they will participate in validating new blocks and processing transactions on the network. As a reward for contributing to the network, the Cardano treasury receives 20% of the rewards, the stake pool receives 5-15% of the rewards, and stakers receive the remainder, which can range from 65-75% of the rewards. If you hold ADA and want to maximize your return, you can do so by simply participating in the security and the randomness of the network by staking with a stake pool. Staking is the process where ADA token holders delegate their ADA voting power to a stake pool, which does not require the movement of the ADA. This way, ADA holders don't risk losing custody of their hard-earned tokens.

Most ADA holders prefer to delegate their stake because they don’t have the technical capabilities to operate a validator and prefer to hand over those responsibilities to a professionally managed stake pool. Delegators can select from thousands of stake pools and need to decide based on stake pool fees and branding. ADA holders who self-custody their tokens can re-stake with a different stake pool operator whenever they like for minimal fees. Imagine being able to do that with your bank!!! However, you will have to wait for one epoch to pass before your stake is allocated to the new stake pool. In the interim, you’ll continue to receive staking rewards from the previously staked pool.

Cardano divides time into divisions called “epochs,” where each epoch consists of 432,000 one-second intervals called “slots.” Each epoch lasts 5 days. At the end of each epoch, a staking snapshot is created. Snapshots record the distribution of staked ADA to pool participants and use it to calculate what rewards are owed to each person. New stakes are only registered at the turn of a new epoch, and you generally won't receive any rewards until the turn of the 3rd epoch. When the ADA rewards enter your wallet, you are effectively rewarded for staking that happened a few epochs back. The process is automated, and you don’t need to go and claim your rewards.