Staking with cryptocurrencies like Cardano (ADA) is booming. In this post, we’ll use the Yoroi browser wallet to show you how you can make passive profits with ADA – and what alternatives there are.
Cardano was invented in 2015. The project of Ethereum co-inventor Charles Hoskinson aims to fundamentally change the way in which cryptocurrencies work. In contrast to Bitcoin, Cardano does not use a Proof-of-Work (PoW) consensus mechanism, but relies on Proof of Stake (PoS).
What is Proof of Stake?
Cardano does not require miners to secure and validate transactions. Instead, network participants deposit the crypto currency ADA. These tokens are then periodically selected at random to validate transactions. For this, those who operate Cardano Staking receive a reward.
One can think of ADA staking like a lottery. In this lottery, every single ADA is like a lottery ticket. Since an algorithm randomly selects who is allowed to validate transactions on the Cardano blockchain, the participants with the most staked ADAs have a higher chance of being selected. For this reason, ADAs are pegged into so-called staking pools. In these pools, several ADA stakers team up and pool their coins in order to maximize their profits.
Staking is booming in the crypto space. In this post we explain how exactly Cardano staking works.
How can you stake Cardano?
There are several ways in which you can stake your ADA. Below we take a look at two of the most popular methods.
1. Stake Cardano yourself
Download browser wallet
To operate Cardano Staking yourself, you need your own wallet. We recommend, for example, the Yoroi browser wallet from Emurgo, which you can download as a browser add-on from yoroi-wallet.com. At the moment the browsers Chrome, Edge, Firefox, Android and iOS are supported.
Once here, you can choose between the wallet options “Simple” and “Advanced”. In this tutorial we will look at the simple variant. As soon as you have clicked on “Select”, you will be taken to a page that asks if you want to activate Cardano Payment URLs. We skip this step because you can activate this function later and it is not necessary for Cardano staking.
Create a Yoroi wallet
After you have successfully installed the Yoroi Wallet in your browser, you can choose between three wallet options. In the following we will take a look at how to create a completely new Cardano wallet.
To do this, click on “Create Wallet” and then select the Cardano platform. Then you have to give this wallet a name and create a password that is as secure as possible. The password is required to authorize all types of transactions that are carried out with the Yoroi Wallet. Once you are done, you can click the “Create a Personal Wallet” button.
In the next step, you will be asked to create the recovery phrase for your wallet. You need this recovery phrase, consisting of 15 randomly generated words, to restore your wallet to other wallets or devices. For example, if you no longer have access to your computer, you can use these words to access your wallet with another device.
So make sure you write down the 15 words and keep them in a safe place and never pass them on. Next you will be asked to type in each word. As soon as you are done, click on “Confirm” and the creation of the Cardano wallet is finished.
Now you can deposit ADA into the Yoroi Wallet to start Cardano staking.
Delegate ADA to a staking pool
After you have successfully deposited your ADA into the Yoroi Wallet, all you have to do is delegate it to a staking pool. First, click on the “Delegation List” tab, which will show you the various staking pools.
You can then scroll through the various Cardano staking pools or search for a pool directly using its name or ID. As soon as you have found a staking pool and informed yourself about its conditions, you can delegate your ADA to the corresponding pool using the “Delegate” button. In the example above, THC Cardano Stake World’s stake pool would be the most profitable.
This is because investors can expect an annual return of 8.95 percent on their investment with this pool (based on the profits of the past 30 days). Before you delegate your ADA, however, you should always check the risks associated with staking in the respective pool. Once this process is complete, you have successfully pegged your ADA and can start generating passive income in ADA. According to the Staking Rewards website, it is possible to make profits of up to seven percent a year with this type of Cardano staking.
2. Staking through crypto exchanges and brokers
Since it is too cumbersome for many to stake ADA themselves, there are also staking pools that offer crypto exchanges such as Coinbase, Kraken or Binance. In the meantime, well-known brokerage apps such as eToro Cardano also offer staking as a service. ADAs are paid into a staking pool that is managed by one of these crypto exchanges or brokers. The advantage of this method is that investors do not need any prior knowledge to participate in Cardano staking. According to Staking Rewards, overall returns of four to six percent per year can be achieved with this method.
Of course, convenience has its price: Since you entrust your ADA to a central party, there is a risk that it will be hacked or confronted with regulatory problems, which could result in losing your coins. In addition, additional fees may apply.
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