IPIB practical guide to staking

What to look when selecting a pool

PLEDGE: The pledge shows the commitment of the pool operator to Cardano and it's a measure against Sybil attacks to the network. The is no minimum pledge requirement, but a low pledge means lower rewards. In any case it shows the financial commitment of the owner to the pool. IF THE PLEDGE IS NOT MET NO REWARDS WILL BE GIVEN TO THE DELEGATORS AND THE OWNER.

FIXED COSTS: This value is set by the operator and cannot be lower than 340ADA per epoch (5 days). It is meant to compensate the owner of the fixed operating costs for the pool. The amount is taken from the total rewards, before being distributed.

MARGIN FEE: The pool margin is a variable amount (%) that goes to the pool operator and is taken from the total rewards, before being distributed. It is often used for social purposes, like charity.

Rewards timeline

  • Epoch n. During this 5 days period you delegate to a pool. The costs are: 2ADA refundable stake certificate fee + 0.17ADA transaction fee.

  • Epoch n+1. Your stake is registered with the pool. It's on the live stake of the pool. t will contribute (become active stake) on the next epoch. YOUR ADA NEVER LEAVE YOUR WALLET!

  • Epoch n+2. Your stake is now active and is contributing to the pool. There's nothing to do on your side.

  • Epoch n+3. Your stake is still active and supporting the pool. The rewards for epoch n+2 are being calculated, based on your stake and the number of minted blocks.

  • Epoch n+4. Rewards for epoch n+2 are paid. Your stake is still active. 

  • Epoch n+5.  Rewards for epoch n+3 are paid. Your stake is still active.

Costs, pool size and saturation

The pool margin has minimal inpact on the rewards being distributed. Let's take as an example a pool with 10M ADA staked, the rewards are approximately:
  • Case A, 0% fee: 7160ADA, 5.22% yearly
  • Case B, 2% fee: 7017ADA, 5.12% yearly
  • Case C, 4% fee: 6874ADA, 5.02% yearly

In Cardano the block are assigned to the pool randomly with a probability as a function the pool size. Higher the stake, higher will be the probability to receive blocks to be minted. The probability is engineered so that the rewards are about 5.5% yearly. This mechanism of block assignment makes the rewards somehow oscillating over time. This variation is normal, but is more present on small pools.

The pool saturation is determined by the parameter k, defined in the blockchain. Currently k=500, that means that pools that have more than 64M ADA staked are oversaturated. When that happens the rewards diminish so that the delegators are more willing to select a new pool with below the saturation limit. Soon k will increase to 1000, meaning that the saturation limit will be lowered to 32M. That's why choosing a smaller pool avoids loosing rewards due to saturation.

How to stake ADA

The official Cardano wallets are:Each have a delegation interface where you can search for pools and delegate.
Of course we'd like you to select our pool, so enter IPIB in the search box and delegate!

Staking is SAFE

  • ADA never leaves you wallet
  • ADA is never locked, you can operate without limitations
  • Stake rewards are automatically added to the stake pool
  • To stake you don't need to have a PC running all the time. Staking is not mining!
  • Big or small there's no reason not to stake

Staking helps people

Most of the stake pools have a mission and decide that a part of the rewards earned by the owners are used to support charitable programs or noble causes. When choosing a pool, don't look only at the reward percentage, it's your chance to make the world a better place.

I must thank HEART pool for the inspiration for making this guide.