EP006 - Delegating Your ADA to a Stake Pool & Understanding the Benefits
May 4, 2021
In this episode, I talk to Bas Mons, about the importance of moving your ADA from an exchange and delegating Your ADA to a stake pool. Bas is a stake pool operator from the Netherlands.
We touch on some topics and issues that small stake pools have when starting and how delegates can help these pools while also helping charities and missions at the same time.
News - Cardano Africa
Cardano is onboarding 5 million students and teachers to Cardano to ensure performance records are traceable. The Ministry of Education can analyse performance and improve areas where improvements are needed while also providing a clear academic record.
Student can prove their education levels to potential employers and other educational institutions.
This identification runs on Atala Prism, Input Output Global's Digital Identification (DID) solution, which runs on the Cardano blockchain.
The World Mobile partnership announcement is a synergy with Cardano's mission to bank the unbanked. To provide financial services to people in Africa, they first need to be connected to the Internet. World Mobile plans to build a decentralised communications network providing affordable and fast broadband services to remote users. This decentralised mobile network will onboard over 100,000 users, connecting them to Cardano by giving them a digital identity with Atala Prism. It will allow these users to access different finance and lending options that have not been available before, dubbed RealFi, "real" decentralised finance for real people.
World Mobile will help people get online for the first time. Users will be able to access education, healthcare, finance and other services that have not been accessible before.
You can find out more about World Mobile and an upcoming token at https://worldmobiletoken.com/.
Singularity Net and iCog Labs teams are building an innovations lab in Ethiopia to bring the future of artificial intelligence to Africa.
The innovations lab will enable local teams to build the solutions needed in Africa. The innovation lab will work with incubators Ice Addis http://www.iceaddis.com/ to support entrepreneurs and onboard developers to Cardano.
Community driven growth is also happening in the form of mission-driven stake pools the West Africa Decentralise and Catalyst initiative with over 200,000 in funding to help grow Cardano in Africa.
COTI announced their partnership with Save the Children and their plans to provide charitable donations for non-profits worldwide to accept ADA.
EMURGO, the commercial arm of IOG, announced that their track and trace supply chain solution would be rolling out in Africa to various industries such as farming and mining. After being successful for coffee farmers in Indonesia, providing transparency in the supply chain in the industries there.
What Is Staking and Delegating Your ADA?
Bas Mons joins me to talk about delegating your ADA and staking with small pools on the Cardano blockchain but let's first look at what staking is.
If you want a more detailed explanation, you can listen to episode 2 of the podcast to learn about how Proof of Stake works and how it compares to Proof of Work, which Bitcoin and Ethereum, amongst many other blockchains, use to validate their networks.
In short, delegating your ADA & staking provides the validation of the transactions on the network by holding and delegating the cryptocurrency ADA to a stake pool from your wallet. The more ADA delegated to a stake pool, the more secure the network becomes. You, as a delegator, are rewarded with ADA for delegating to a stake pool. The average return is 5% PA on your ADA.
Why You Should Delegate Your Stake to a Small Operator
Bas talks about the cluster pools and why it's an issue to decentralisation. If you look at ADAPools.io, you can see all the different groups formed and the large cluster of pools from exchanges.
In reality, it's a good business model for the exchanges to have. Provide the buying, selling and trading and staking services all in one central location. It's convenient and easy to do so.
Link to AdaPools.io groups and clusters. https://adapools.org/groups
The Benefit of Delegating Your ADA & Staking Yourself
You can stay on the exchange as a beginner and feel safe.
You can move your ADA to your wallet to have more power. Voting rights and move the project in the right direction and control your wallet.
Bas has more to say on this:
There are risks with staying on the exchanges. Bas also explains this.
Leaving your ADA on an exchange means that you don't have control over it. You don't physically hold it. You have a digital representation of your balance of ADA from that exchange, and the exchange holds it in a wallet on your behalf.
If you listen to episode 5, we talk about regulation and how Government regulation can affect an exchange. At the time of writing this, the Turkish Government are searching for the owners of two Turkish exchanges that essentially went belly up on the news of the Turkish Government banning cryptocurrencies as a form of payment.
A Chinese exchange was also targetted this week with a denial of service attack, taking down access to the exchange and overloading the servers. The attack means you can't access your ADA. You're completely locked out.
In both of these situations, your ADA is entirely out of your control. You can lose all of your ADA or other cryptocurrencies.
If you have all of your ADA in your wallet, you would be able to avoid these issues and still buy, sell and trade with ease on other exchanges or decentralised exchanges.
You also can't buy NFTs or Non-Fungible tokens if you have exchange held ADA. NFTs need to be sent to a wallet that you own. If you use an exchange wallet, then you are donating your NFT to the exchange.
If you listen to episode 4, you can learn more about NFTs and how you can create one for yourself.
What's Your Strategy to Build Wealth?
Most people are in it for the money, looking for financial freedom and wanting to get ahead in life to make their lives easier and more enjoyable. There is nothing wrong with wanting money, financial freedom and getting ahead. Being rewarded for effort and knowledge is a good thing.
The Cardano staking strategy of delegating your ADA is slow and long term, but you don't need to think about it too much. You only need to find a pool with a good reputation and is managed well, and you're good to go. Just check in every month or so to ensure it hasn't become saturated. Most small pools are far from being saturated and are unlikely to become saturated.
A lot of people are in it for the quick, easy gains.
If you're good and constantly monitoring the markets, you can make some significant gains, but many pumps and dumps catch people out.
How do we get people to change the mindset of staying on an exchange?
Connect with your stake pool operator. Every active pool has a way to communicate to the operator.
So Many Pools! Which Pool to Choose
There are so many stake pools now it has become so hard to choose which pool to stake.
Bas talks about how there are a lot of pools that are not active.
To search for a pool, you can do so in the Daedalus wallet app. That gives you a plain view of all the pools on the network, and you can filter pools based on the amount of ADA that you have for the best possible returns for yourself.
Another site where you can find more details about all the pools is ADAPool.org . The website is overwhelming when you first look at it, but it gives you much more detail about the pools. There are a few key things to note.
The Pools list area of the website will show you all of the pools ranked by their ranking algorithm, which revolves around the return on ADA.
Look for those social media links and check if the operator is active. Some channels may be more active than others; for example, I'm pretty active on Twitter.
Check for the ROA 1M and Lifetime. It will give you an indicator of the past performance of what return you might get. It isn't always accurate, but it is a good guide.
Check the saturation level of the look. The colour of the bar is a good indicator. Green means the pool is far from being saturated, and a large 'whale' delegator that might come by won't oversaturate the pool and diminish the returns. Oversaturated pools will have far fewer returns.
The only other factor I would be worried about is the pledge. The pledge is how much ADA the pool operator has placed on the pool server and indicates how invested they are in the pool.
A high pledge may mean that the owner got in early on the project and could buy a lot early, or they invested a lot later in the game to get a decent amount of pledge. The higher the pledge, the higher the rewards that get allocated to the pool. Some huge pools may have 1 ADA pledge to deter you from delegating to that pool.
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DISCLAIMER: The information on this site may contain errors or mistakes, please do your own research. Unofficial Cardano website. Past performance is not indicative of future results. Any investment in blockchain assets involves the risk of loss of part or all of your investment. The value of the blockchain assets you exchange is subject to market and other investment risks.