- Any ADA coin holder can influence the growth of the Cardano ecosystem and it is up to them to take advantage of it.
- If you stake on a centralized exchange, you can’t delegate ADA coins to support a pool whose operator is actively doing something useful for the community.
- Voting in Catalyst is another way for ADA coin holders to directly impact the growth of the ecosystem and be rewarded.
- Catalyst allows people across all continents to agree to support a particular project and fund it. Completely without politicians.
- DeFi services, such as providing liquidity to an AMM exchange, can offer a higher annual yield than what staking offers at the Cardano protocol level.
- Some DeFi services may offer rewards for their services and make sure you don’t miss out on Cardano staking rewards.
- If an exchange uses your ADA coins in DeFi services, it means you bear the risk but the exchange benefits.
Do not stake ADA coins on exchanges
Stake ADA on exchanges poses many risks to owners. A centralized exchange can be robbed or shut down by the order of an authority. In either case, you may have trouble getting your ADA coins back. The exchange may not return your coins to you immediately when you wish. It may even require some locking period if you stake on it. Holding coins in your own wallet is the safest form of cryptocurrency ownership. We wrote an article on this topic Do not stake ADA on exchanges.
The possibility of securing a sustainable passive income motivates people to engage in staking. This human desire to economically secure themselves is very beneficial to the network, as the decentralization and security of the network are based on the distribution of ADA coins. Coin owners own the Cardano network, an infrastructure that they can use for financial or social contact. People can get the power back in their hands. You can read more about the broader meaning of staking for society in our article Understanding Cardano staking.
Many people still stake coins on the exchanges. In this article, you’ll learn what people are missing out on if they don’t keep coins in their own wallets. You might be surprised that you can do a lot of things with ADA coins and thus you can actively support the development of the Cardano ecosystem. The success of Cardano depends on adoption. Adoption depends on the number of opportunities the ecosystem will offer people. Any ADA coin holder can influence the growth of the ecosystem and it is up to them to take advantage of it. Keep in mind that the market capitalization of blockchain projects will reflect the success of the entire ecosystem. In the long run, it will depend more on real adoption and the network effect than on speculation. So it makes economic sense for ADA owners to be interested in how to achieve success.
Pool selection and coin delegation matters
If you have coins in your own wallet, you can choose the pool you want to delegate the coins to. You entrust your stake in the network to that pool, increasing its overall stake. Once delegated, the coins will still remain in your wallet and you can spend them at any time. The more coins are delegated to the pool, the more chances it gets to produce blocks. Delegating ADA coins shouldn’t just be about finding a pool with low fees to maximize profit.
In a way, delegating coins to a pool can be seen as casting a vote for a particular political party in an election. In most cases, you will choose the party that you believe will provide the best future for you and your loved ones. Choosing a pool is a kind of democratic process that can affect the future.
It is smart to support pools that are time-tested and can be expected to continue to do quality work for the network. Pool operators who are active and going the extra mile for the ecosystem deserve attention. This extra work can be very beneficial to the network in the long run.
Writing articles or creating tools for users, as our team does, can bring new users to the network. Educating the community and spreading awareness is very important because with knowledge comes trust. The more people know in detail the mission, philosophy, and technology of Cardano, the faster and easier adoption will be.
Let me write a little bit about our team. Cardanians has several members. We have been building the community since 2018. Our team was part of the Friends & Family group that was at the Proof-of-Stake (PoS) deployment on Cardano. Our pool created a second block on the main-net after the transition to PoS. Since then, all of our pools have had a 100% block creation success rate. We are actively involved in community education and have written dozens of articles about Cardano. We are actively involved in developing tools for pool operators and users. The software developed by us is used in the Yoroi wallet. We would be grateful if you would support us and delegate ADA coins to our CRDNS pools. Our delegates can get NFT and other benefits from us.
There are many operators who organize meetups, upload video content, create tutorials and how-to guides, work on projects, are active on social media, educate, or in some other way actively participate in the development of the ecosystem. This will all bear fruit.
The adoption of blockchain networks should ideally go from the bottom up. This means that people will decide their own future and the authorities will be more or less forced to accept it. Adoption is a complex and long process and the more people involved in the process the better. Delegates should monitor the activities of operators so that they can support them by delegating coins to their pools. Without an active and engaged community, significant changes at the societal level are unlikely to happen. From the delegates’ point of view, it is wise to support those who strive for the success of Cardano.
If you stake ADA coins on an exchange, you have no direct way to support the Cardano ecosystem. Exchanges are primarily profit-driven and have little interest in participating in the growth of a particular ecosystem. Exchanges will create their own pools and fill those with your coins. This doesn’t help anything and it also hurts the decentralization of the network. The ADA coins are yours and each of you has responsibility for Cardano’s success. Do not stake on exchanges and delegate your coins responsibly.
If you stake on the exchange, you basically support a centralized point that will have a strong position in the network consensus. Exchanges are naturally motivated to behave honestly so that clients trust them and leave ADA coins on them. Exchanges usually have professional teams, so their pools are very likely to be reliable. There may be a few larger players in the network if they are trusted, however, it is always preferable to have a larger number of single pool operators. It is up to the ADA owners what kind of network they want to have. If Cardano is to be decentralized, smaller pools must be supported.
Voting in Catalyst
Having ADA coins in your own wallet is also important in terms of being able to vote in Catalyst.
Catalyst is one of the largest decentralized innovation funds driven by the community. With each funding round, the community presents challenges across a range of subjects related to Cardano. These challenges are then answered by the community who present project proposals defining solutions. The community then votes on the proposals presented and selects projects to receive funding.
Voting in Catalyst is another way for ADA coin holders to directly impact the growth of the ecosystem. Each individual may have a different opinion on what is important at any given time. Cardano is a global financial and social operating system. So people are essentially making decisions about the global infrastructure. People haven’t had that opportunity until now. Most of the time, we only vote in local elections or on social networks on some unimportant issue. In the case of Cardano, you can vote to support a project that can solve a specific problem in Africa. Never mind that you don’t live in Africa. The Cardano project treasury belongs to the whole world and the protocol does not care who votes from where and for which proposal.
You can vote for an environmental project that people everywhere are interested in. Imagine that it is possible for people across all continents to agree to support a particular project. Completely without politicians. Catalyst can be the project that shows the world the way to agree on solutions to global problems. For this vision to be realized, more and more people need to vote. So far this has been successful, with more people voting in each round. If this trend continues, we can gradually get to this stage. Imagine if millions of people from all over the world voted. That would have enormous political weight.
Cardano is a global platform to give people the tools to express their opinions. Catalyst will provide funding so that specific projects can be implemented. As soon as the first success is seen, wealthy people and organizations are likely to take notice and are happy to provide their funding to make other projects happen.
Let’s add that you get a small reward for voting, so you have an economic incentive to participate. Do you want to lose that reward and essentially donate the ability to get it to centralized exchanges? Should centralized exchanges decide for you what our world needs? Should exchanges be able to vote with your coins on their own projects? The power of decentralization lies in the fact that each individual has the right to decide to the best of their knowledge and conscience about their future.
There are some ways to prevent exchanges from voting. For example, freezing the funds of those who vote for a period of time. Exchanges cannot afford to freeze users’ deposits as they would be breaking the law. Only projects that are useful to the Cardano ecosystem will go through the processes defined in Catalyst. However, the safest solution is for people to keep ADA coins in their own wallets.
In the Voltaire era, ADA coin holders will not only make decisions about projects in Catalyst but also about the development of the Cardano protocol. The team will pass this responsibility to the community, and they will decide what specific things to work on and who will be responsible for it.
DeFi services offer interesting rewards
Passive income is a direct economic incentive for holding ADA coins. People enjoy staking, which offers the safest way to multiply ADA coins. Stakers can earn approximately 5% of ADA coins per year. DeFi services can offer much more interesting opportunities.
DeFi services, such as providing liquidity to an AMM exchange, can offer a higher annual yield than what staking offers at the Cardano protocol level. Taking advantage of this opportunity involves risks that ADA coin owners should be aware of.
If the annual yield of the DeFi service is, say, 10%, many ADA holders will naturally take advantage of this option. Staking on Cardano is handled elegantly. That’s why many DeFi services can offer the yield generated by their own service while making sure that users don’t miss out on Cardano staking rewards. So in our example, a DeFi service user can earn 15% per year.
If you stake ADA coins on exchanges, you can’t take advantage of opportunities in the DeFi sector. You may think you’d rather stake on the exchanges because DeFi is dangerous for you and you don’t want to take the risk. We’ll try to convince you that leaving the ADA on the exchanges is not a good idea.
DeFi services will become increasingly user-friendly and secure. Sooner or later there will be opportunities that will be a pity not to take advantage of. It is important to be very careful, but it is good not to be afraid to try DeFi services. It’s smart to split your ADA coins into multiple piles. You can stake a part of your coins on Cardano and use the rest in multiple DeFi services. That way you spread the risk.
DeFi services could be an alternative to traditional financial services. Many attempts fail, only a few of the best projects survive. At the current stage of adoption, it is difficult to predict the future and guess which projects will be the most successful. People should try DeFi services because they influence adoption and show that they are interested in a decentralized alternative. Go and try out DeFi services. Each new DeFi user increases the network effect not only of the service but also of Cardano.
Many exchanges promise greater rewards from staking than what the Cardano protocol offers. How is this possible? Maybe we can answer that for you. What if exchanges use DeFi services and profit from it? Exchanges can take advantage of your ADA coins and profit, say, 15% per year. They then give you 7%. Exchanges are profit-driven. If they are offering you more from staking than the Cardano protocol, the exchange must make some profit on your coins.
Having a higher profit means that someone has to take more risks. If an exchange uses your ADA coins in DeFi services, it means you bear the risk but the exchange benefits. If the exchange loses a large number of ADA coins, it can destroy it economically. You’ll lose coins. We strongly recommend that you decide the level of risk for yourself and not leave it to a third party. Your coins, your responsibility.
As you can see, ADA coins in your wallet give you many opportunities. Staking is not only about profit but also about supporting your chosen operator. At Catalyst, you can make decisions on projects that will support the growth of the Cardano ecosystem. What’s more, you’ll be rewarded for doing so. You can also use DeFi services. ADA coins aren’t just about keeping them in your wallet. They give you many opportunities. Don’t hold ADA coins on centralized exchanges. Make your own decisions about the future.