After recently getting into crypto I discovered Cardano for me. After a bit of research, I found out that it is possible to stake it and earn some dividends off of it. In this post I will focus what I researched regarding staking pools and how to transfer the ADA off from the exchange. This post will not explain ADA since there are probably a lot of these explanations out there.
TRANSFER FROM EXCHANGE
So, I bought my first ADA on the exchange of my choice. Now was the question: How and where do I store it and how can I delegate it towards a staking pool? The first question is easily answered. To store your ADA you need your every day cold storage (of course you can use other wallets as well but I am assuming that everybody on this website has a cold wallet like Ledger). I am currently using a Ledger Nano S and was shocked at first moment. You can not store ADA as easy as BTC or ETH. Luckily there are two support apps that make it possible to store your ADA on your Ledger anyway.
There is either Yoroi or AdaLite. I was using the latter for no reason. Both are equally fine. After you visit the AdaLite website you have several options. I selected the “Hardware Wallet” and connected my Ledger Nano S. For this to happen your Ledger must have the ADA-applications open.
The next step is to export your public key to the app. This way AdaLite will have a reference point to where your ADAs are “really stored”. This action has to be confirmed on your Ledger by pressing the confirm buttons. After that AdaLite is ready to go and I could transfer my ADA over to this application. At this point I would be able to stake/ delegate my ADA. There is only one question left.
HOW TO CHOOSE A LENDING POOL
Since I am not a millionaire and don’t own a lot of ADA I have the possibility to join a staking pool. Here, I have the opportunity to make gains proportional to the amount I am willing to delegate to this pool. To delegate to a pool, I just had to put in the pool address. AdaLite will show you tax which is basically a little fee which the pool only takes away from the gains (not your staked coins!). Furthermore, there is a starting fee of something around 2.1 ADA to just stake your coins. But as far as I understood you only pay this fee once. This fee comes from the 340 ADA fixed cost which is also divided on to the several staking participants.
On the website pooltool.io or adapools.org there is a variety of different staking pools that I could delegate to. But how should people select the staking pool? During my research I found several indicators that one can use to find out the perfect ADA pool for himself.
ROA 1M/ Lifetime: This indicator is basically the return you would get compared to the return over its lifetime. Usually, the pools are somewhere around 4-5.5%.
Stake: This column shows how much ADA was staked in this pool. Furthermore, it shows how big the saturation is. A rule of thumb is that the more ADA is staked the less reward the stakers are getting on average. This should encourage users to stake on smaller pools.
Luck: This is an indicator how many blocks this pool could validate compared to the potential blocks that he could have validated. If a server of a pool is sometimes down this would bring the luck down and that means that the stakers don’t get any rewards because no blocks were validated.
Fees: This are the fees that I explained earlier. The higher the percentage the smaller of a reward the staker is getting at the end of an epoch.
At the end of the day the user has to make a trade off between higher rewards a bigger risk of not getting a block or getting a fixed number of blocks but therefore sacrificing some portion of the stake reward.
According to this website this tradeoff is minimal. Hence it makes no difference which staking pool are choosing. But this opinion has to make everybody for himself.
Published by ga38jem on Publish0x on the 9th of September 2021
