I am pasting a copy of an email that I sent out to some family and friends that have bought ADA over the past couple years. I found that many of them were excited when they first purchased the coins, but have slowly had their attention pulled in other directions. I wanted to give an update/refresher for them and I figured that a lot of other community members might know similar individuals. Feel free to take and use this as a template in any way that it might be valuable!
Good afternoon all! As individuals that own (or at least did own at one time) Cardano’s ADA cryptocurrency, I wanted to follow-up and give some details on what is going on with the protocol. I’ve talked to some of you about this, but Cardano’s incentivized portion of the network is only a week or two away from commencing (finally!!!). It’s been a long process getting to this point, but hopefully the wait will be worth it. The user interface should be fairly straightforward and easy to use for everyone.
(For those that just want the jist of this email, you can scroll to the “TLDR” portion at the bottom.)
A quick Cardano recap for those that are interested…
Cardano is a proof-of-stake protocol. What this means is that the ledger of everyone’s balances is secured by the owners of the ADA coins themselves. The rights to make modifications to this ledger are weighted based on the amount of coins you own. Essentially, those who own more ADA have more control/dictation over the operation of the network. The theory here is that those individuals with the largest holdings have the greatest financial incentive to keep the network operating in an honest and truthful manner.
Currently in the Cardano network, transactions are processed every 20 seconds. These groups of transactions are referred to as “blocks”. The protocol randomly selects a specific ADA coin every 20 seconds to determine which owner gets to mint the block. In exchange for honestly creating a block, that person will receive a small financial compensation known as a “block reward”. Obviously the more ADA that you own, the more likely you are to be selected to mint the next block. The problem here is that minting a block requires that you leave a computer on 24/7. For many ADA holders this doesn’t make financial sense. They just wouldn’t receive enough block rewards each year to warrant dedicating an entire machine and the electricity necessary to run it. Because of this, the best option will be to delegate your right to mint a block to someone else.
Stake delegation will allow you to give someone else the right to mint a block on your behalf. Assuming that the individual that you stake to is honest, they will receive a block reward on your behalf. Once they have received the reward, they will deduct a pre-agreed upon percentage from this value and the remainder will be forwarded to the ADA owner’s wallet. This allows smaller ADA holders to contribute to network security, and receive compensation on behalf of that service.
So where are we at?
Before this can be rolled-out fully, there will be a test version to make sure that it runs smoothly as planned. For this test version, the plan is to copy the exact number of coins that everyone owns and to create a duplicate version of the protocol. This version will allow new staking features to be tested without risking the health/well-being of the main network.
Estimated returns for simply staking your coins during this test period will be between 6-12%. Actual returns will depend on how the level of participation from all other ADA owners. (For those that haven’t been following the cryptocurrency markets lately, the current value of ADA is around 4 cents. I know that the nominal returns at this point don’t seem like much, but I am still confident that we will see the value of ADA rising significantly for the coming 12-18 months!) The rewards that are earned on the test network will be redeemable on the main network once the testing has ended. In other words, you will be earning real money for participating in the testing.
How do I participate in testnet staking?
It will be fairly easy to participate. Make sure that you are not storing your ADA coins on an exchange. You will need to have moved them off an exchange either to the Daedalus wallet (Desktop/Laptop) or to the Yoroi wallet (Mobile version). As of now, it is planned to make a copy of the entire network this Friday, November 29th. Once this has been done, a test version of both Daedalus and Yoroi will be released a week or so later. It is currently planned for December 9th. All you will need to participate in the testnet is your recovery phrase (12 words for Daedalus, 15 words for Yoroi) for either application. If you do not have the recovery phrase for some reason anymore, it is very important that you create a new wallet and move your funds to this new recoverable wallet.
TLDR (Too long, didn’t read);
Cardano is finally launching it’s reward phase of the staking testnet. In order to participate, you will need to make sure that you have your recovery word list from either Daedalus or from Yoroi. A copy of the network will be done on November 29th, and the test version should be released sometime around December 9th. At this time, you will need to download a test version of whichever wallet application you are using.
I will send a follow-up email to everyone over the coming weeks to keep everyone up to speed on what you need to know. I know at one point most of you know that I was very excited about the future of Cardano, and please know that I still see big things coming! It has taken a little longer than most people had hoped, but the future capabilities of this technology are as promising as ever!
P.S. For anyone who doesn’t want to receive future emails about this, just reply and let me know. I promise that I won’t be insulted! That being said, if you know someone else that owns ADA that might be interested in being kept in the know of important dates, please shoot me their email.