A Primer on Cardano Stake Pools
(Originally written for my friends who asked for my “TED Talk” on crypto)
If you’ve been reading a lot about crypto lately and have been frustrated on trying to get into it safely, I’d like to share with you how I’ve been successful at it (based on my research since March of this year).
The different cryptocurrencies have been going up and down with a lot of volatility, but for the most part have been trending up. They keep going up because there’s a lot of new demand, and most of these coins have a limited number of assets to trade (low supply, high demand). The people who have bought high right before things crashed have mostly recovered from their losses as well. (I wrote this two days ago, right before the latest rise and crash, but it’s not affecting me because I’m not looking for a profit in a matter of days.)
The reason people keep having a demand for these cryptocurrencies is because of new features and technology that are launching on these networks. If you’ve heard the excitement around NFTs and smart contracts, those tokens require cryptocurrency to run. This is effectively like the olden days when people had to buy time to run their programs on mainframes — now, to run the code that turns a smart contract into a token (that can be re-sold or traded) you have to offer up an amount of cryptocurrency depending on how complicated that smart contract is.
One cryptocurrency that I like that is starting to get some traction is called Cardano. The coin itself is called Ada or ₳.
The reason why people are talking about it so much, is that it was started by one of the guys who was a part of Ethereum, it doesn’t have the high fees that Ethereum has, it’s about to launch smart contracts like Ethereum, and it IS already proof-of-stake (which is what Ethereum is evolving to support).
As of September 2, it is at $3 per ADA, whereas Ethereum is at almost $4000. Even if ADA only goes to $30, that is still a 10x return. I personally would not go into this looking for a short term return, because this is something I’d want to hold onto for about two to three years and see how it grows. Much like how I missed the boat when Bitcoin was $90, then $3000, then $9000…and now hovering around $50,000.
Because Cardano is proof-of-stake, there is one other advantage to investing in it: once you have ADA, you can “delegate” it to a stake pool, which basically means you can pull your money with other people in order to get rewards from the network. This is basically like having a proxy vote for a publicly traded company — just like your total number of shares is equivalent to how much of a vote you get, your total number of ADA is how you calculate how much of a reward you will get.
There is a 20 day warm-up period before you start earning interest, and after that every five days you will earn somewhere between 5 to 6%. I’ve earned 13 ADA since June. After that, I decided to start my own stake pool using the same software for the Cardano network. I’m taking 1.5% off the top of the rewards (to help run the pool because I have to pay for three servers) and the other 98.5% gets divided amongst the other people who delegate with my pool. Basically, by having ADA, you can join other people who have ADA in creating a pool — and then the Cardano network will give out rewards that will be split up and shared based on the percent of ADA that each person controls. The ADA itself stays in your wallet, and you can buy and sell or convert it as you see fit. (Every five days a “snapshot” is taken which is how your reward is calculated.)
For more information, please follow me on Twitter @jeffreality or on Instagram @jeffreality.eth. You could also tip me using Venmo @jeffreality or via jeffreality.eth …
The above writing contains opinions and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
