Cardano Staking! This is how you “mine” Cardano!
Cardano is a decentralized blockchain with an open-source platform. Cardano uses a proof-of-stake mining (Cardano Staking) algorithm called Ouroboros. The consensus this algorithm uses is generated by coin-holder votes. Slot leaders hold ADA, a native platform token and generate new blocks on the blockchain by confirming transactions. Mining Cardano doesn’t work the same way as mining Bitcoin or Ethereum as all ADA tokens already exist. In this post, we will be going over how Cardano mining works.
I am excited for 2019 phase of Cardano. Nice deep dive here about Staking — which takes next steps w/ Shelley release in 2019 https://t.co/lHY6dYHcCW Early days, slow grind, hard work still ahead. Cardano community is growing – putting puzzle pieces together. https://t.co/hfyotvLhnl
— Garry Golden (@garrygolden) October 23, 2018
Proof of stake mining
Normally, you mine with your computer system or mining hardware and get coins as a reward. This is how new transaction validation works on a blockchain. This is the proof-of-work consensus. There is a second method of mining called proof-of-stake also. Instead of using your hardware to confirm new transactions, it’s done with the coins you already own. A certain amount of your crypto coins are on the stake dependant upon the implementation of the PoS consensus. Users will get a certain percentage of their coins as a reward.
In a nutshell, staking is akin to earning interest on the crypto coins you already own. This is a reward for supporting the network by holding crypto coins and running a node. If you have crypto coins in a wallet that uses PoS, your coin supply will continue to grow for as long as you are holding on to them in the wallet. As staking is related to time, the amount of time your coins have been in your wallet effect the amount you are paid in crypto as a reward.
How does Cardano staking work?
Cardano uses a custom proof of stake algorithm named Ouroboros.
This system determines how individual nodes reach a consensus on the network. The Ouroboros algorithm is a key feature of the infrastructure supporting the ADA cryptocurrency, whilst also being a major innovation in blockchain technology. The Ouroboros consensus negates the need for power-hungry hardware, contrary to the proof of work consensus. As a result, this opens up the blockchain scaling for a much wider use.
Cardano mines must stake their funds. This form of mining node is a stakeholder. All stakeholders have a chance of becoming a slot leader. However, not all stakeholders will have a say in this election. Miners will need at least 2% of the total stake in order to become an elector. Electors will vote on a slot leader for the next epoch during the current epoch. This election is somewhat of a ‘fair lottery’. Though stakeholder can become a slot leader, the more ADA a user has, the higher their chances are. Each slot is published in 20 seconds and a stakeholder is elected for every new slot.
While Cardano Staking this seems like a great way to earn ADA without doing anything, the current Cardano network traffic is too low for this to be a viable option. Many people decided to HODL their ADA coins last year with hopes of making a living off of proof of stake in 2018. They were in for a surprise when they found that even if you own 1 million ADA, you will only make $0.50 cents per day off of staking interest. As it currently stands, the slots will need to become around 1000x bigger in order for the yield to be a fraction of a percent per day.
While HODLing ADA may not be the best option, users are always able to trade it on cryptocurrency exchanges like iCE3X to make a profit. Our ADA trading markets went live on August 1st, 2018, providing 0% fees when trading against ADA/BTC pairs. If becoming a stakeholder doesn’t seem like a lucrative option for you, trading may be your best bet. Be sure to do your own research before investing any of your finances, and only use money you can afford to lose.
What do you think about Cardano? Is it a cryptocurrency worth investing in? We believe that Cardano has a lot of potentials, and may even become one of the most popular cryptocurrencies over time. Are you into cardano staking? Do you think to invest in? It’s like a real banking, you put money and make money while doing basically nothing. Think about it!?