Last modified: June 24 2021
Staking on the Cardano network allows you to earn passive income on the amount of ADA that you have staked. You will earn rewards by staking your ADA, similar to how you might earn interest when maintaining a balance in a bank account. When staking some other crypto, you have to agree to lock up your tokens for a period of time. This is not the case with Cardano. You can spend your ADA whenever you choose. Staking your ADA allows you to support the Cardano network, providing stability by helping fund the infrastructure used to run the network. And you will earn ADA tokens as rewards for your support of this infrastructure.
Delegation is how ADA holders delegate their stake to a stake pool. It allows ADA holders that do not have the skills or desire to run a node to participate in the network and earn rewarded proportional to the amount of ADA delegated. Follow this process to delegate your ADA.
LECK is currently building its staking base and while we are building it, rewards will be less often. The more ADA delegated to the pool, the more often rewards will be generated. With a stake of between 50-100K ADA, rewards will be once ever one or two months. Once we are above 100K ADA, we should be able to generate rewards on a monthly basis. If you stake to a larger pool, you will receive rewards more often, but know that the rewards will be significantly less than the amount you get when LECK receives a reward. On average, both large pools and small pools should average out to 4% ROA (return-on-ADA) a year.
Understanding Stake Pools
Pledge is the amount of ADA that the stake pool owners have promised to stake themselves. Pledge is not mandatory and it is up to the owners what they want to set this to. The pledge suggests questions like: Do the owners have “skin in the game”? Do they believe in the Cardano network and their own stake pool enough to buy in themselves? We here at LECK have pledged what we can afford and plan on increasing our pledge as we earn rewards. Our current pledge is only the beginning.
Fixed cost is the amount of ADA that is allocated to each stake pool per epoch when rewards are earned. The minimum amount of fixed cost for all stake pools at present is 340 ₳. What this means is that if the stake pool only mints a single block in a given epoch, of the 750 ₳ earned as rewards, 340 ₳ will go to the owners and the other 410 ₳ will be split amongst the delegators as rewards. The fixed cost is meant to cover the costs of running the stake pool, which include the infrastructure, website, promotion and marketing.
Margin is the percentage of rewards, after removing the fixed cost, that the owners will receive for their time and efforts. Here at LECK, we believe in a low margin that will allow us to keep our focused and to stay committed to delivering the best possible service. We hope it will also eventually allow us to feed our rewards back into the pool to better support our delegators.
As S4M says, saturation is a term used to indicate that a particular stake pool has more stake delegated to it than is ideal for the network, while k is the targeted number of desired pools. Once a pool reaches the point of saturation, it will offer diminishing rewards. The saturation mechanism was designed to prevent centralization by encouraging delegators to delegate to different stake pools, and to incentivize operators to set up alternative pools so that they can continue earning maximum rewards. Saturation, therefore, exists to preserve the interests of both ADA holders delegating their stake and stake pool operators, and to prevent any single pool from becoming too large.