Please explain Staking and why in Laymans terms

Hi Guys,

Can someone explain to me staking pools as i don’t quite get how it works.

Do you put money ADA in from your wallet?

Is there a certain amount you put in like all your ADA or is there a minimum?

How are you rewarded?

How is it determined what you make?

Does it get credited back in wallet and when does it? After how long do you stake for a certain period or forever unless you take out ?

What happens in the staking pool?

Can you lose money in staking pools?

Why would certain staking pools achieve more Money? How and why?

Sorry i know this might be basic simple stuff for some peeps but i’m not quite getting what’s happening in this staking business. Sorry upfront…:innocent:

Do you put money ADA in from your wallet?

No, you simply delegate your ADA from your wallet to the staking pool. Your ADA never actually leaves your wallet so you don’t have to worry about losing your coins.

Is there a certain amount you put in like all your ADA or is there a minimum?

I am not aware of any minimum. Perhaps 1 ADA or some very small amount, if any.

How are you rewarded?

There will be a delegation center in your wallet where you will have clear information about the rewards and their history. You will select the destination wallet (could be the one you are delegating from or some different one) and you will receive your rewards there. The frequency and amount might differ pool to pool.

After how long do you stake for a certain period or forever unless you take out?

You can change your delegation anytime. Unless you do so (or the pool seizes to exist), you will be delegating the chosen staking pool.

What happens in the staking pool?

I suggest reading some more in-depth docs about what staking is, how are transactions being validated etc.

Can you lose money in staking pools?

No.

Why would certain staking pools achieve more Money? How and why?

There will be an incentive scheme responsible for balancing the ideal ecosystem conditions. Staking pools need to be selected as the slot leader to earn and distribute the rewards. How much they distribute might differ from pool to pool (some pools might, for example, choose to donate part of the rewards to certain cause etc. - you will be able to read about this in the pool information prior choosing to delegate).

Edit: as described above, the coin distribution to stakers happen on the protocol level so pools won’t need to handle this manually.

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Thankyou so much. Makes things a lot clearer for me.

Really appreciated Smedzlatko

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This video summarizes the most important things in a short time. I’d like to add that from reading this thread one could think that pools need to distribute the rewards to the users, but this is not the way it works in Cardano.

This is done automatically by the protocol. Each pool gets only the pool costs, the profit margin and the rewards from their owner stake. All other user rewards go directly to the corresponding user.

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Thank you for the addition. Yes, my wording in this case was poorly chosen.

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Hello
My native language is not English and I may miss much to understand what is discussed and written.
Try to give me a deeper insight into matter with regard to Stakings. So I have a few questions about this.
When I delegate my ADA to a pool, I do not pay any fees, but get a reward in the form of ADA after a certain amount of time. From where do these ADA original come from?
Who pays for this reward or where are they generated?
What happens when the computer/server of a pool owner gives up his mind? Can I then easily integrate my ADA into another pool, although at the same time no access to a protocol of the original pool is possible and will be possible? Does the system understand this process or are my ADA assets blocked?

Greetings, Stephan Kambach

Hello @Stephan60, there is a small fee for the delegation process, and pools take a cut as well. But the question about the origin of the staking rewards is very good and interesting because it’s very important for such a system to be sustainable.

Cardano has a prefilled, built-in treasury system, that gets a constant stream of funds from transactions fees and treasury taxes. This is explained in detail in treasuries with Bingsheng Zhang.

You can change your delegation at any time, it will be valid for the next epoch. The delegated ADA are never locked up, blocked or at risk.

PS: I may be wrong but you could be German by your name. If you prefer to write and read German, we have a German Telegram group https://t.me/CardanoGerman and I could point you to a few German articles.

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611/5000

Yes I am a German and after the last following question below I want to visit your web side to obtain information hopefully on an easier way.Thanks

Forgot to ask another question. The Cardano system will be completely decentralized in the near future.
This is done by means of the pool operators. If an operator / owner of a pool did not properly secure his computer and e.g. a command execution exploit would be between the operator and the system of the ADA delegate, then such infected nodes would probably be a big risk to the whole system. Am I seeing this wrong? How safe is it to let normal computer users, who do not have the knowledge of security companies, build a pool system?

best regards, Stephan Kambach

May I also ask, is it possible to stake your ADA without joining a Pool? If yes, how is it done? What is the return if you choose not to join a Pool? What are the cons & pros if you decide not to join a Pool?

It is not possible to stake without a pool, as far as I know. You can run your own stake pool, though.

I suggest reading this FAQ: https://staking.cardano.org/faq/

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Running, updating and securing a server is quite an effort and requires a broad skill set. However, this does not prevent anyone from doing it anyway and for this reason, servers are constantly being taken over by hackers.

This is only a risk for the reputation of the pool, not a risk for the whole system or any funds. (the key that is used to sign blocks does not hold funds if you are sticking to best practices)

That said, a hacked server can cause you many unpleasant, sometimes even legal problems, depending on what the hackers did.

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Like @Smedzlatko already wrote, one can not stake without running the pool software. There are two options: creating/joining a public pool or creating a private pool (for your own)

A private pool is just a pool that is registered without a metadata URL. It will be ignored by the wallets. (so, not listed) If you don’t do this for learning purposes, you need a lot of Ada to make it worth it.

If you don’t delegate your stake, then there are no rewards at all.

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Thanks for your straight forward answer.

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Vielen Dank. Beruhigende und verständliche Erklärungen.

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