A blockchain is a decentralized network of computers that exchange and store information in the form of blocks. The information in these blocks can contain simple data such as transactions, but can also, in the case of the Cardano blockchain, be more complex, e.g. making it possible to provide loans, issue identities, and even to vote.
Proof of stake is the consensus mechanism used in the Cardano blockchain. The proof of stake protocol describes how information, stored in the form of blocks, is verified and added to the blockchain. In this mechanism, stake pools are selected to produce blocks based on probability, which is derived from the amount of stake (ADA) delegated to these pools. Whenever a pool produces a block, the pool receives rewards, which are shared with its delegators proportionally to the amount of stake delegated. For more information, see the staking page.
While the blockchain technology offers a very secure network and platform for storing information, there is a potential threat to all blockchain networks in the form of a so called 51% attack. If the majority of all stake (or computational power in the case of blockchains based on the proof of work protocol such as Bitcoin) would come in the hands of a single party, it could start to approve fraudulent transactions.
With the rise of the value of blockchain networks, controlling a majority of stake becomes increasingly difficult as this requires controlling the equivalent of billions of dollars. And even if someone would acquire a majority of stake, adhering to the protocol and earning rewards for block production would be far more lucrative than approving fraudulent transactions. Moreover, Cardano’s proof of stake consensus mechanism has effective incentives in place promoting decentralization and preventing a potential 51% attack.
Time on the Cardano network is divided in epochs, which in turn are divided in slots. The first epoch started when the Cardano mainnet went live on September 29th 2017. Epochs are periods of exactly five full days and slots are equal to seconds.
When a stake pool is selected as slot leader, the pool is expected to produce a block in that specific slot.
ADA is the cryptocurrency used on the Cardano blockchain named after the mathematician Ada Lovelace. It is used to facilitate the operating of the network, such as for the payment of transaction fees. Besides, ADA can be bought at cryptocurrency exchanges to invest in the Cardano project.
By staking, you delegate the stake associated with your ADA to a stake pool, allowing the pool to participate in the proof of stake protocol on your behalf. As a consequence, the pool you delegate to will have a higher chance of producing blocks, and when it does, you will receive rewards proportional to the amount of stake delegated.
First of all, by delegating your ADA to a stake pool, you will receive rewards. Annually, and on average, you will earn about 3-5% interest, depending on a pool’s luck and its parameters. Secondly, by delegating to smaller pools, and thus moving your stake away from big exchanges, you contribute to decentralization and the security of the network.
For a clear and simple explanation on how to stake your ADA to a stake pool, see the delegation page.
This choice depends to a large extent on personal preferences. Is it important to you to delegate to a mission-driven pool? Is it important to you to support decentralization by delegating to a small pool? An important aspect to consider for everyone is if pool parameters are within reasonable standards. Is the fixed fee (close to) 340 ADA? Is the margin fee lower than 5% (or even 3%)? Is pledge significantly higher than zero? I do not recommend to choose a pool solely based on past ROA, since this gives no guarantee for the future. No pool is able to promise a certain ROA and luck tends to average out in the long run.
However, it is possible to verify pool performance to a certain extent. First of all, you can check a pool’s lifetime luck on ADApools, which should be close to 100% in the long run. If luck is significantly lower, this is an indicator of missed blocks in the past and poor performance. Secondly, you can verify the uptime of some pools on PoolTool (height of the pool should be in green). Uptime is an essential precondition for a functional pool; a pool should not be offline for more than a few hours during maintenance, which should be scheduled around the time of its leader slots in order to avoid missing blocks.
Yes, you are able to use the same wallet in both Daedalus and Yoroi at the same time.
No, staking is completely safe and there is no risk of losing your ADA. By staking, you do not actually transfer your ADA to a stake pool, but you delegate your rights to participate in the protocol, while your ADA remains safely in your wallet. For more info, see staking.
As long as you safely stored your recovery phrase, there is no problem. You can easily restore your wallet on another device.
No, you can spend your ADA however you please while you are staking. You delegate your wallet and not a specific amount of ADA to a pool.
No, when you receive more ADA in your wallet, this amount will automatically be staked as well. You delegate your wallet and not a specific amount of ADA to a pool.
Yes, you can always decide to delegate to a different stake pool whenever you please. Note that changes will take effect two epochs after you submit your re-delegation. For more information on the staking timeline, see staking.
As with all other transactions, you pay a transaction fee of 0.17 ADA. If you delegate for the first time, you will also have to pay a deposit fee of 2 ADA, which you will get back when you decide to undelegate.
The fixed fee is meant to cover the operational costs of stake pools. For every epoch that blocks are produced, the fixed fee, with a minimum of 340 ADA, is subtracted from the total pool rewards and given to the stake pool operator. The fixed fee is only charged once no matter how many blocks were produced in that epoch.
The margin fee is meant to ensure the pool’s profit. Stake pool operators can choose a margin fee of 0-100% which will be taken from the pool rewards after the fixed fee has been subtracted.
Stake pool operators are required to pledge a certain amount of ADA in their own pool to show commitment to their pool and to prevent the creation of many pools by the same operator. In line with this, SPOs with a high pledge rightfully gain more trust by showing that they put a lot of skin in the game.
Stake pools with a stake higher than 63.3 million ADA are saturated and will forfeit a part of their rewards. In turn, their delegators will miss out on rewards as well and are given a clear incentive to re-delegate. This is designed to prevent stake pools from becoming too large and to promote decentralization.
The stake that is currently used by stake pools. Delegation of this stake occurred two epochs before. For more information on the staking timeline, see staking.
The current state of delegated ADA to a stake pool. It will be active in two epochs. For more information on the staking timeline, see staking.
Luck is an indicator of pool performance. Its calculation is based on the number of blocks a pool should produce given its amount of stake and the number of blocks actually produced. For example, if a pool is expected to produce 100 blocks in an epoch based on its stake, but only produces 80 blocks, its luck for this epoch will be 80%. Lifetime luck should be close to 100% if the pool is performing properly.
You will receive rewards two epochs after the epoch of block production. Note that your delegated stake must have been active during the epoch of block production – this means that it was delegated to a stake pool two epochs before the epoch of block production. For a more extended explanation on the staking timeline, see staking.
In order to receive rewards your stake must have been delegated to a stake pool two epochs before the epoch of block production (and rewards are distributed two epochs after block production). Note that it’s possible that no blocks were made in a specific epoch. Especially small pools don’t produce blocks every epoch, but when they do, they also provide significantly more rewards for their delegators, since rewards are distributed proportionally to the amount of stake delegated. For a more extended explanation on the staking timeline, see staking.
Rewards are composed of the total amount of transaction fees during the epoch of block production and from funds of the ADA reserve.
No, rewards are automatically added to your wallet and used to stake again. Rewards only need to be claimed when you want to move them out of your wallet.
Annually, and on average, you will earn about 3-5% interest, depending on a stake pool’s luck and its parameters. Small pools will not produce blocks every epoch, but when they do, they also provide significantly more rewards for their delegators, since rewards are distributed proportionally to the amount of stake delegated.
Mokum Stake Pool
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Mokum Stake Pool consists of one block producing node and two relay nodes, with each node running on a separate Intel NUC mini PC. The block producing node has 32GB of RAM, the relay nodes have 16GB of RAM and all nodes have a 1TB SSD. With this setup, Mokum Stake Pool confirms to the recommended future-proof stake pool hardware setup.
Mokum Stake Pool is monitored 24/7 through Grafana. This includes an alerting system, which is activated in case any indicator of pool performance passes a certain threshold. In the (unlikely) scenario of a power outage, the pool will automatically reboot when connected to power supply again.
A bare-metal pool is a stake pool using at least one bare-metal server: a computer that is a single-tenant physical server. This computer is not shared between users, unlike cloud hosted servers or other forms of virtualization. Therefore, bare-metal pools increase the resilience of the Cardano blockchain network.
Amsterdam is also called Mokum by the local people. Originally, it means ‘city’, but Mokum is now used to describe our beautiful hometown.