How is Cardano paying for all these staking rewards

I just feel a little uneasy about the amount going to be paid out when not much is coming in.Shouldn’t you be concentrated on getting 1000’s of paying customers before you start dishing out rewards for staking?

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The reward system is part of the staking component. The way the system is designed it needs to fend of 51% attacks and Syibil Attacks. Staking is a component that prevents such attacks. You can read their publish papers on this. However unless you like reading academic math papers and your a computer scientist or mathematician, they can be quite complex. A nice article in common terms is here. The article doesn’t really talk about the k factor. This is element that helps sets the saturation point of a stake pool. Meaning you can only stake so much before it doesn’t have an effect. (combating the 51% scenario)

The short answer is that staking provides a critical component in the security and robustness of the protocol. It also provides incentives for creating stake pool operators which keeps the protocol decentralized.

You might also want to watch Charle’s whiteboard on decentralization.

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One more little follow up here. This is how I explain crypto to my non computer / developer friends. It’s like building a railroad. Shelly is the tracks and the locomotives. The stake pool operators make the blocks which are the freight cars. The freight / cargo are the smart apps/contracts (Gougen which gets turned on in a matter of months). Freight gets loaded on the freight cars / smart contracts get loaded on blocks. The protocol (Shelley) delivers the contents of the contracts / freight.

Whereas a real railroad is owned by one company / president, the Cardano railroad is “owned” by all the stake pool operators and stakeholders.

It’s a simplistic analogy, but it helps my non-crypto friends understand.


The funds for rewards are already held within the system, from the very beginning earmarked for this purpose.

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As several others said: the circulation within the ecosystem is set up in such a way that there will always be funds available to incentivise decentralisation and participation.

The new website has a section about the Ouroboros protocol (not coincidentally named after the ancient symbol of endless cyclical renewal: that you might also find helpful:

EDIT: “ecosystem” really is the keyword here. There won’t be a single entity responsible for upkeep or payouts, and there won’t be customers in the traditional sense – only participants.

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If you checkout the difference between Total Supply and Max Supply here, that is what will primarily be used to reward stakers. The amount going out from that will ramp down over a number of years, as transaction fee income ramps up (hopefully!) to take its place.

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