Cardano (ADA) is a proof-of-stake blockchain. This means that ADA coins need to be made available (i.e. staked) to be used as validators of transactions taking place on the blockchain. ADA holders are thus incentivized by rewards to stake their coins to pools: these are independently run server networks that underpin the proof-of-stake mechanism. Staking rewards come in the form ROA (return of ADA). The concept is similar to how you might earn interest on fiat currency held in a bank account.
Where to buy ADA?
Just as with all crypto, you need to trade your fiat currency for ADA via an exchange. Personally, I like Coinbase. They have a solid reputation as one of the leading crypto exchanges globally and their app is clear and simple to use. Whatever crypto exchange you decide to use to purchase your ADA, remember to check the fees. Fees can be levied when you top-up (with bank transfer typically costing less than card) and when you trade (often referred to as spread fees).
It’s worth mentioning that, if you use Coinbase, as soon as you purchase ADA, Coinbase will automatically start staking your Cardano on your behalf. Coinbase offer ADA holders a 2.6% ROA.
Where to hold ADA?
There are numerous different providers of crypto wallets out there. Don’t fall into the trap of assuming that, just because you purchased ADA from (say) Coinbase exchange, you need to transfer your Cardano Coinbase wallet- you can transfer your ADA to any wallet.
What are decentralized crypto wallets?
Don’t forget that the premise of Cardano is that it wants to provide decentralized finance (DeFi) to its users. Therefore, holding your Cardano in a centralized wallet (i.e. a wallet that could, in theory, be ceased by the government) somewhat misses the point. Whether it be the Russian people blocked out of card networks like Visa and Mastercard (in the wake of the war in Ukraine), or the freezing of protestors’ bank account’s by the Canadian government, DeFi has its merits, regardless of where you live in the world.
Once you’ve purchased your ADA via an exchange, you can transfer it to a decentralized wallet such as Yoroi.
Staking ADA via your Yoroi wallet
Yoroi makes it relatively straightforward for users to stake their Cardano. Here‘s a step-by-step guide on how to do it. What’s more, you will have the choice of which pool you want to select to stake your ADA. I would recommend consulting ADAPools.org to help you choose. In short, you’re looking for a reputable pool that offers a high ROA. ROAs above 4% are achievable, which is considerably higher than what get from Coinbase.
Is it safe to stake Cardano?
Some people might be worried that staking ADA comes with risks. However, there are no risks associated with staking Cardano. Your ADA remains in your wallet the whole time and you can “de-stake” it from whatever pool you have chosen to stake in whenever you choose.
Be mindful that there are lots of crypto scams out there. Don’t transfer your ADA to an unknown wallet address under any circumstances and keep your wallet secure by using a unique and strong password.