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EP022 - How to Retire on ADA Cardano

August 25, 2021

In this episode, we are going to look into how it may be possible to retire on ADA and live on the returns from staking your ADA to a stake pool and from other methods of getting returns in Decentralised Finance (DeFi) protocols such as decentralised exchanges and decentralised finance platforms.

Living Off Returns from Staking ADA

In the 1980s and early 1990s, interest rates were high and the potential of saving money to live off the interest rate returns was appealing. With the current global economic environment and interest rates so low that people are losing money keeping it in a bank, we all have to find other methods of retaining our value of assets and different ways of gaining returns.

Cardano, as well as many other DeFi platforms, provides such a solution. The staking protocol allows for an annualised return of 5.5% paid out and compounded on a 5 day period.

That is, your total amount of ADA that is staked is compounded for returns at 5.5% on a 5 day period.

Our retire on ADA calculator will allow you to determine the amount of ADA that you will need to retire on the staking rewards.

How to Retire on ADA Calculator

Based on your desired annual income, this calculator will work out how much ADA you will need to stake annually to achieve your goals. Enter in your desired annual income and enter in the target price of ADA. Please note: This calculator doesn't take into account the compounding effects.

The amount you'll require before tax.
The target price of ADA you expect when you want to retire.
This is the total amount of ADA you require to be able to stake earn the required amount per epoch. This does not take into account the compounding effect of rewards.

Please note that this calculator is to be used as a guide. Your personal situation will differ from our guide and calculated numbers. Percentages of returns from various stake pools vary from time to time but do average out to the what the protocol aims for which currently is 5.5%.

The price of ADA is almost impossible to predict. We use historic data and market influences to best determine future prices, but know one really knows.

This field is for validation purposes and should be left unchanged.

If you can get rid of your mortgage or rent and reduce your living costs, you would be surprised how little income you'll need to live day-to-day. It is possible to live on a minimum wage in Australia if you live in a cheaper area along with no mortgage or rent.

How Much Do You Need to Retire on ADA

The amount that you need to retire will depend on your country's living costs. A small 1-bed room apartment in Sydney, Australia would cost approximately $3,250 AUD a month, which is almost double the amount some workers make a month in the Philippines.

Someone staking ADA and wanting to live off the rewards will get a lot more value from their ADA in one country compared to another.

In this example, we will calculate the required amount of ADA based on a desired $40,000 yearly income.

$40,000 / 73 = $547.95

This number is the amount of fiat that is required per epoch. (73 being the number of epochs per year).

$547.95 / $4 = 136.99 ADA

Now we divided the amount of fiat by the desired price of ADA in the same currency which gives us 136.99 ADA.

If we take the original desired yearly income, $40,000 and divide that but the price of ADA $4 and divide that total by the percentage or ROA of the protocol of 5.5% we get the estimated amount of ADA required to stake to obtain the desired income.

($40,000 / $4 ) / 0.055 = 181818.18 ADA

To obtain a $40,000 yearly income at an ADA price of $4, we will need to stake approximately 181,818.18 ADA. Rounded up to 200,000 in the podcast.

How much money can you make from staking ADA?

If a stake pool is operating as it should, it will return to users 5.5% PA compounding every 5 days.

How many ADA are staked?

Currently, there is 70% of all ADA being staked to stake pools in the Cardano ecosystem.

How much is Cardano worth in 2030?

We don't know what the price of ADA will be in the future. The price on-trend has increased in all major cryptocurrencies over the last 4 years. With the worlds current economic situation, it isn't unfathomable to think that the total market capitalisation of Cardano can't double from where it is now.

With large entities such as Grayscale only holding a small amount of ADA in its Digital Large Cap Fund, there is still much more room for movement for Institutional money to move into Cardano.

Earning Passive Income from Liquidity Mining on Cardano

As more decentralised exchanges start rolling out on Cardano, we will be able to provide liquidity to these projects.

When liquidity is provided, there is a chance of gaining trading fees as an incentive for providing this liquidity. In this example, I'll be using the Ardana stable coin, dUSD, and reward token from their DEX, $DANA.

A nice trading pair such as ADA/dUSD could continuously earn more reward $DANA tokens from users simply providing ADA and dUSD to the liquidity pools.

These $DANA tokens can be traded or added as liquidy in other pools, or even used as a Governance token to help direct a project towards a goal.

Simply provide liquidity and earn a return on fees for providing that liquidity.

Earning Passive Income from DeFi Protocols

As these DeFi protocols are launched on the Cardan blockchain, you will be able to create online savings accounts in crypto and provide liquidity for loans for others to borrow and speculate with.

Projects such as MELD, VyFi, Liqwid and Ardana all have the capabilities for users to earn more on their crypto assets simply by providing liquidity for certain aspects of their platform.


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