Cardano Staking: Everything You Need To Know About ADA Returns

IOHK, Cardano’s development group, has been hard at work on the upgrade. For the most part, waiting is all that is left—here’s what you should expect …

Cardano is currently on the road to Shelley, an upgrade that will introduce staking for the first time via its Oroborous Genesis consensus mechanism.

IOHK, Cardano’s development group, has been hard at work on the upgrade. For the most part, waiting is all that is left—here’s what you should expect from Cardano’s upcoming staking features.


The Basics of Cardano Staking

In some ways, Cardano’s staking system will be just like any other staking system. If you hold Cardano (ADA) and decide to stake it, you’ll earn a return on your investment. This helps the network as well: staking is the process by which validators are selected to create a new block. If you don’t want to validate, you can delegate your tokens to a staking pool, which is a much simpler process.

SIMETRI ResearchSIMETRI Research

Unlike Ethereum, Cardano won’t offer solo staking. Individuals must either run their own pool or join an existing pool. This will ensure that Cardano’s validator network stays large: “If people could get rewards without operating a pool or delegating to one, then there might not be enough node operators to have a successful network,” an IOHK spokesperson explained to Crypto Briefing.

Finally, Cardano addresses support staking in a unique way: they have separate keys for spending and staking. This means that if you decide to stake your ADA tokens, they will never leave your wallet. Plus, Cardano doesn’t require your tokens to be locked in for a term—you can un-stake your tokens at any time. This flexibility sets Cardano apart from many of its competitors.


How Will Cardano Achieve Decentralization?

Cardano has a few ways to ensure that its pools don’t accumulate too much centralized power. For one thing, Cardano’s stake pools will offer lower rewards as they get larger. This will encourage users to move between pools on a regular basis, and this will in turn theoretically prevent any pool from gaining dominance. Meanwhile, a sorting tool will help users find the most profitable pools at any given time.

Secondly, Cardano’s staking pools will not lead to centralized governance. “Stake pools don’t vote. Only the genesis key holders will be able to vote initially,” Cardano’s staking FAQ explains. This is explained in more detail in this forum post. In theory, this means that the community should have a fairly large say in the direction that Cardano development is taken.

Finally, Cardano will prevent centralization by asking exchanges to use enterprise addresses—special addresses that don’t permit staking. In theory, exchanges could choose not to use these addresses, but IOHK believes that if exchanges don’t comply, users would find out and move to more cooperative exchanges. “We may also be able to force the issue through other means,” IOHK’s spokesperson told us.


What Are the Logistics of Staking?

If you join a staking pool, you won’t need a constant Internet connection, and you won’t need to monitor your stake 24/7. However, if you decide to operate a staking pool, you will need constant Internet connectivity, and you’ll also need various technical skills.

Regardless of your choice, you won’t need a powerful computer or ASIC device: unlike mining, staking doesn’t require a lot of power.

Staking on Cardano doesn’t require a minimum amount of wealth. If you join a pool, there will be no minimum staking limit. Furthermore, if you decide to operate a pool, you can do so without owning any ADA at all—in this case, you would simply provide technical services. By comparison, Ethereum’s minimum staking limit will be 32 ETH (that said, its pools may offer lower limits).

On a related note, it’s not clear how profitable Cardano staking will be. Developers haven’t discussed the matter yet, but some estimates from the community predict that annual returns will be roughly 1-5%. These numbers are pure speculation, but they are also roughly in line with what some other blockchains offer. Of course, ADA’s market price will also affect profitability as well.


When Can You Expect Cardano Staking?

Right now, Cardano is in the first stage of its testnet phase, in which nodes operate in isolation. Soon, the testnet will move to the second stage and connect those nodes together. In the third stage, the testnet will add incentives and delegation, though there won’t be any real value at stake—instead, testnet tokens without real value will be in use.

Some staking pools have already started to take shape—however, none of these pools have any official status, and it is hard to say which pools will eventually gain prominence.

Furthermore, IOHK isn’t helping any pools gain visibility: “We don’t promote or endorse any stakepools,” IOHK told us. Regardless, if all goes well, Shelley and staking should go live during Q4 of 2019.

Good things take time: Cardano is planning one of the most original, and possibly one of the most decentralized, staking models ever. It seems that rewards will be reasonably profitable, and Cardano’s focus on stake pools will make it easy for users to participate.

And only time will tell if Cardano has what it takes to become an Ethereum killer.

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Binance to airdrop 9 million Stellar, now offers staking rewards

Despite this abuse of customer funds, fans of the currency and Binance … Free money sitting around on coinbase rn #crypto #xlm #stellar #lumens …

Binance is set to introduce staking rewards for Stellar Lumens and will be airdropping 9,500,000 XLM, worth $775,000, to users of the exchange.

Stellar is a proof-of-stake cryptocurrency designed for cross-border payments. This means holders can choose to “stake” their coins and receive staking rewards, as an alternative to mining.

Binance will distribute staking rewards to its customers based on how many Lumens they hold on a daily basis–there is a minimum requirement of 10 XLM in order to qualify. The rewards will be calculated and handed out monthly, in a similar vein to staking rewards for other coins on Binance: NEO (GAS), Ontology (ONG), and VeChain (VTHO).

Why is Binance suddenly feeling so generous towards Stellar Hodlers you might ask? Because Binance had been ‘accidentally’ staking its customers’ lumens for nearly a year.

“Binance discovered that we had been staking Stellar Lumens (XLM) from 2018/08/31, following recommendations from the Stellar team on changing some parameters on both cold and hot wallets,” the announcement stated. While technically, it’s easy to overlook small changes in how a wallet works–It seems strange that nobody was aware of the staking rewards landing in the exchange’s wallets.

Stellar to hold its first conference in Mexico City

Despite this abuse of customer funds, fans of the currency and Binance seem delighted, and the price of Lumens has, at the time of writing, surged by 10%.

Just learned about Stellar and earned $XLM in return! Use my invite to join Coinbase and earn up to $50 of $XLM. https://t.co/wYwKszEsaV

— Roy Aldridge (@RoyAldridge) July 18, 2019

The airdrop of 9,500,000 XLM ($775,000) will be held on September 1. It will be handed out proportionally among those who hold lumens on the exchange from July 20 to the distribution date.

Binance CFO Wei Zhou told Decrypt in April (which didn’t make it into the article) that Binance did not stake any coins on behalf of its users beyond the coins that it had publicly announced.

An expert in the staking industry has also told Decrypt that other major exchanges are staking coins on its users’ behalf—and keeping the profits, according to analysis of blockchain records. However, we have been unable to corroborate this. But strangely, no one seems to care that much.

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What is Staking as a Service? Complete Guide

Coinbase’s recent foray into ‘Staking as a Service’ via their Coinbase Custody arm grabbed headlines across the cryptocurrency landscape last month …

Coinbase’s recent foray into ‘Staking as a Service’ via their Coinbase Custody arm grabbed headlines across the cryptocurrency landscape last month. Representative of an ongoing departure from standalone, traditional custodial services, the move is part of a broader branch of developing narratives around Proof-of-Stake (PoS) blockchains that are launching.

Considering Ethereum’s pending transition to PoS and the emergence of networks like Cosmos, staking may ultimately prove to be a prevailing trend among custodial services as the industry progresses. However, even if staking does become a widespread service down the line, its long-term effects on the developmental role of governance in PoS networks is uncertain.

Staking as a Service

The move towards staking services is not strictly limited to Coinbase either; several firms are gearing up for a potential rush of institutional clients into the promising returns touted by staking crypto assets.

Expanding Custodial Services and Hopeful Returns

Staking as a service has fueled positive speculation about the appealing returns from idle crypto assets that suffered heavily during the extended bear market. Institutions have been hesitant to jump into the crypto markets for a variety of reasons, and the uncertainty of altcoins and their poor performance following the meteoric highs of late 2017 likely contributed significantly to their uncertainty.

At a high level, staking as a service is basically when a firm (i.e., a crypto asset custodian) posts the ‘stake’ or ‘bond’ required to validate transactions and receive the requisite return via a PoS-based protocol network. Staking requires that network tokens are locked in a ‘hot’ wallet which functions as the collateral for validating transactions, and also allows staking participants to participate in the governance of a network.

For example, Coinbase’s announcement of staking services initially will center on Tezos. Coinbase will post the bond required for ‘baking’ on Tezos, the colloquial term for staking in their community, on behalf of their institutional clients. Importantly, Coinbase will store all institutional funds that clients want to deposit for staking offline in cold storage and will provide their own funds to the hot wallet, effectively mitigating risk on behalf of the client in the case of the funds being slashed or stolen. Institutional funds will remain fully insured in cold storage.

Tezos Staking

Staking bonds often correlate to a percentage of the total being staked. For instance, if a Coinbase client wants to stake $10 million XTZ (the native Tezos coin), then Coinbase would need to post the bond into the hot wallet of $1 million — since the bakers must post a 10 percent bond of the total stake in Tezos.

The percentages of staking bonds will likely differ between PoS chains, and both returns and risk will need to be accounted for by the firms offering staking as a service.

Custodial firms are banking on staking as a service as a revenue-generating solution to the woes of the market that attracts more institutional money. For example, Coinbase’s staking services that they announced with Tezos can lead to 6.6 percent annual returns — after Coinbase takes its cut. Such returns are vast improvements over interest earned on a financial instrument such as government bonds, offering an appetizing draw for institutional clients to deposit funds with custodial services that offer staking services.

A flood of institutional money into custodial services to take advantage of staking will likely not happen overnight, but having a third-party service conduct the often convoluted process of staking is an important development in the eyes of many observers. According to Coinbase’s announcement:

“Prior to today, the risk necessary to actively participate in staking has mostly outweighed the return. As a result, many institutional investors have elected to sit on the sidelines.”

Segregated vs Non-Segregated Services

Coinbase is not the only custodian providing staking services either. Firms such as Figment, Cryptium, Battlestar Capital, Anchorage, and Copper are also positioning themselves for the rise of PoS protocols.

Battlestar Capital even partnered with crypto-lending pool provider, Celsius Network, to offer ‘non-segregated’ staking services that can yield up to 30 percent returns on idle assets — a projection that should clearly be taken with a grain of salt.

High-yield projections aside, it is important to understand the difference between Battlestar Capital’s non-segregated and Coinbase’s segregated staking model. In Coinbase, client accounts are separated on-chain into independent accounts to make the transparency and regulatory process more similar to banking — something that is comforting to institutions and regulators.

Conversely, Battlestar Capital and Celsius Network are operating a staking pool where ‘self-bonding’ strategies are possible to yield higher returns. Self-bonding in Tezos was described by Battlestar Capital Founder, Jason Stone, to Coindesk as:

“If you deposit your Tezos with a group running a self-bonding strategy, you earn the amalgamated yield of bonding plus delegating, as opposed to allowing the service provider you chose to receive the greater yield from posting bond themselves, leaving you with only the rewards (less a fee) from traditional baking, i.e., choosing a provider to delegate to.”

Coinbase cited Battlestar Capital as not being a competitor sinceCoinbase is not a public staking service offering open to everyone. Coinbase’s move into staking services is also intriguing for another reason; several prominent executives have left their institutional arm recently, leaving the overall strategy of their institutional business in question. However, staking services seem to be a significant focus for the major cryptocurrency exchange, whose estimated $520 million in revenue in 2018 fell short roughly 60 percent of their original projections.

Coinbase will also be rolling out governance support for MakerDAO, and its Maker token that governs the Dai stablecoin parameters within the platform’s CDPs. Notably, MakerDAO has been struggling with scaling to demand, recently proposing a stability fee of 14.5 percent.

Concerns Moving Forward

Healthy skepticism is a critical aspect of meaningful progress, and there are some legitimate concerns about the long-term effects of staking services offered by custodians. For instance, low staking participation among PoS networks is likely their greatest challenge moving forward, and although third-parties performing the staking eases the burden on clients, many institutional clients will likely prefer to delegate their staking governance power — particularly if they are eventually staking on numerous chains.

Even if institutions choose to participate in the governance of chains they are staking on, they would have enormous impacts on the future direction of such platforms. Considering their outsized deposited assets that correspond directly to influence in decision-making in staking protocols, institutions would dwarf smaller governance participants, concentrating major governance or on-chain amendments (i.e., with Tezos) in the hands of a few rich institutions — a notion that runs contrary to the larger narrative of decentralized control in crypto.

Fears of concentrating governance power and other complexities involved with PoS are criticisms that have already been articulated extensively and are beyond the scope of this article.

However, where the problem of aggregated governance power can really be compounded is when custodial services offer staking to institutional clients early in a bootstrapped PoS network’s existence. For example, should Coinbase offer staking services for pending PoS network like Polkadot once it launches based on client demand, institutional clients would command significant influence over the early stages of the network.

Their initial deposits would grant them increasingly stronger control over the network as they would generate larger returns in the native network’s token in proportion to their vast holdings — precluding retail investors from having a meaningful impact and disincentivizing them to participate in governance further.

It is too early to lucidly understand the consequences of staking services for PoS networks, however, largely because PoS networks are a relatively new phenomenon and the flagship PoS transition, Ethereum, has still yet to unfold. In addition, governance is a notoriously convoluted concept, especially when you mix in novel cryptocurrency networks and interest-bearing services based on services for validating their transactions.

Staking services may prove a fruitful business model for both custodians and institutional clients, but understanding the potentially adverse consequences of its development along the way is also vital to take into consideration.

Conclusion

Staking as a service seems poised to become a dominant trend in the cryptocurrency space as institutions look for revenue-generating returns on their idle assets and PoS networks continue their growth. Staking represents an intriguing concept in both investment and governance, and it will likely have significant consequences on the looming entrance of institutions into the broader sphere of digital assets.

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Leverj crypto exchange integrates support for staking

Leverj, a non-custodial crypto exchange, announced it has now integrated a staking user interface for its native LEV token and is accessible easily via …

Leverj, a non-custodial crypto exchange, announced it has now integrated a staking user interface for its native LEV token and is accessible easily via a menu click on the Leverj platform.

The staking interface covers 4 sections of information, and appear in the following order: Information about the current staking cycle, Personal staking possibilities, Information about the staking contract, and Staking history.

In the first few staking cycles, users are likely to see sharp changes as they get started with staking and the fees collected are minimal. Over a period of time, historical information will provide valuable insight into the value staked and possible FEE rewards for staking.

Staking is a periodic activity. Each period or cycle lasts 172800 Ethereum blocks. This roughly maps to 30 calendar days, since there is an Ethereum block approximately every 15 seconds. The mapping of blocks to elapsed time could vary depending on several factors, including network congestion. The interface tells you how many of these cycles of 172800 Ethereum blocks have elapsed.

Staking Possibilities

Users can stake the native platform token LEV to earn FEE. Leverj exchange systems link to a user’s wallet via MetaMask. If a user has LEV available in their wallet and not locked elsewhere then they will see it as the available amount to stake.

Staking Contract

Staking is managed by a smart contract. A link to the staking smart contract is available on Etherscan.

Send LEV to the staking smart contract.

The amount of rewards is a function of the amount of a user’s stake relative to the total value staked in the cycle. It also depends on when the tokens were staked. The longer the tokens were staked in a cycle, the more the rewards.

Re-staking

Once a cycle is complete, users have the option to re-stake or withdraw all funds back to their wallet.

Note that US persons are not allowed to trade on Leverj. Users from a sanctioned country or Specially Designated National (SDN) as per OFAC are also not allowed to use the system.

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