How to Stake Cardano (ADA) in a Self-Custodial Wallet
Cardano is one of the largest layer-1 blockchain solutions with a market capitalization of over $100 billion. The project is powered by Input-Output (a Charles Hoskinson company), Emurgo, and the Cardano Foundation, named after the Italian mathematician Gerolamo Cardano, with its token ADA named after the 19th-century mathematician Ada Lovelace. Cardano uses Ouroboros, a proof-of-stake (PoS) consensus mechanism where ADA holders can delegate their funds to stake pools, allowing each pool to verify transactions, create blocks, and govern the network. This article discusses how to stake ADA in a self-custodial wallet, the required tools, and the rewards available to users.
What are Self-Custodial Wallets?
Self-custody is a method to hold cryptocurrencies or nonfungible token (NFT) assets in a wallet that only the user can access and control. Unlike centralized exchanges, self-custody eliminates counterparty risk, making it ideal for Web3 users. Most layer-1 ecosystems have their native wallet solutions. For instance, Ethereum and ERC-20 assets primarily rely on MetaMask, while many Solana users rely on Phantom wallets. When Cardano launched in 2017, there was a full-wallet implementation with IOHK’s Daedalus. Two years later, Emurgo launched the Yoroi light wallet. Since the Shelley mainnet hard fork in 2020, the wallet landscape in the Cardano ecosystem has expanded significantly.
How to Create a Self-Custodial Wallet on Cardano?
Yoroi is one of many wallets that can be used to self-custody Cardano assets. Here are the steps to create a Yoroi wallet:
- Download the Yoroi wallet as a browser plugin.
- Install the browser plugin and click on it to open the Yoroi application page.
- Click the “Add New Wallet” option to create a new wallet.
- Select “Cardano” as the currency, provide a name for the wallet, and set a corresponding password.
- Set up the recovery phrase by noting it down in order and confirming it in the following step.
- The wallet is now ready to accept Cardano assets. To add some ADA to the wallet, click on the “Receive” tab to get the wallet address.
- Transfer ADA to the wallet from an exchange to begin the staking process.
How to Stake ADA and What are the Staking Rewards?
To stake ADA in a self-custodial wallet, users can delegate their funds to a stake pool. In return, the network offers staking rewards to the stakeholders. Validators and other holders stake their ADA through staking pools, enabling the network to validate transactions. When staking began, pool operators and delegators received 5% in staking rewards. Over time, this has decreased to 4.6%, and it is expected to continue decreasing over the years. The staking rewards for delegators depend on the size of the pool, the pool’s performance, and the amount of ADA staked. One of the key benefits of custodial wallet staking in Cardano is that the wallet owner never relinquishes control of their ADA tokens, retaining complete control over them at all times. Delegation is based on the amount of ADA in the wallet on the last epoch boundary (five days).
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