Staking pools are what allows Cardano to be up and available for us. And in order for the Cardano network to work, there needs to be the staking pools. So let’s sink into what is a Cardano Ada staking pool and sooner, you’ll learn what it exactly is, how you can run them, and how to benefit from it.
Stake pools are nodes on the Cardano blockchain that have a public address where other holders can send their Ada in order to delegate their stake. Both individuals and businesses can choose to run a staking pool but pool operators must possess the right technical skills and adequate computing infrastructure.
So this includes powerful enough computers to be able to run the nodes, as well as bandwidth to be able to do that. Additionally, it also requires availability and uptime. That means it isn’t going to be a computer that turns on and off every night.
Stake pool are central to the reliability of Cardano. It’s crucial that stake pool operators are both reliable and credible. Stake pools that regularly experience downtime are unlikely to be chosen by Ada holders looking to delegate their stakes.
So let’s take a closer look at how this works. You start by designating a stake pool, or also known as a node. Then, you register this node with the network. And then comes staking your Ada, where the more Ada you stake, the more likely you are to be able to have other people delegate their stakes with you. All of this ultimately builds into your reputation score so that people choose to stake their Ada with you.
Cardano nodes are central from source. They register their stake address to the Cardano blockchain and generate stake pool keys. In case you’re curious to know why you, or anyone, should build a Cardano staking pool, read our previous article.
Cardano blockchain reaches consensus through a protocol that it use. Using this protocol, it selects a leader for each slot, who then creates the next block on the blockchain. These slot leaders are chosen from the available stake pools on the network.
Stake pool operators then distribute these rewards among the stakeholders at a predefined percentage, and keep the remainder of the slot leader reward for themselves. So, in theory, the amount of rewards a stake pool operator can receive is directly proportional to how much Ada is staked in their pool. But they’re always to ensure long-lasting success and profitability to your stake pool.
As a stake pool operator, you’ll need to attract delegates to stake their Ada in your pool. The amount of people that chooses your pool over others is measured through stake pool desirability, otherwise known as the reputation score of your pool.
The primary method of attracting participants to a stake pool will be maximized reliability and uptime of the pool, as well as setting generous staking reward percentages. So, if you want to attract a lot of people, it’s going to depend a lot about how much you’re willing to incentivize the participants.
You can think of running a stake pool like a business. You odds of winning there are maximized by providing the best reliability, rewards, performance, and desirability. By doing so, you’ll attract more customers; or in this case, stake delegators. As a result, running a stake pool can be attractive or as passive as you desire. However, be aware of the fact that the pools run by more active and committed operators will generally perform better.
One vital thing to look at is if we’re not running enough of these staking pools, then Cardano isn’t going to run effectively. So, in order for Cardano to be successful, we need to have good and successful staking pools. And if we want successful staking pools, we need to ensure that there’s no presence of greed but commitment and attention to what we’re doing here. It’s works just like how they “high tides raises all boats”.
This is a fascinating and a more greener technology that’s progressing well with its developments. Because while we’re running these nodes, it allows us to share this distributed computing instead of having lots of miners who are chewing up a ton of electricity.
So that’s winds up the few things to know when you go about running a stake pool node. Thank you for sticking with me to the very end. As always, make sure to keep your kids protected with CleanRouter and CleanPhone so that you have the ultimate parental controls with how your kids use their phone 🙂
If you’d like to learn more about the same, kindly check out this video: