Analyzing SPOs for ADA Delegation

Hey Riders, in this blog we are going to look at ADA staking on Cardano and how you can make better informed decisions when voting on which pool you want your ADA to be delegated to.

Why Delegate your ADA to a Cardano Stake Pool

Cardano is one of the most innovative and advanced blockchains ever created, with a robust Dapp ecosystem and a lively community.

In 2022, Cardano led the entire crypto industry in terms of development activity, taking the top spot, outperforming Ethereum, Solana and BSC.

Over the last several years, the Cardano network has developed dramatically, firmly establishing itself as a top ten cryptocurrency. Tens of thousands of users are holding Cardano and, naturally, want to stake it and delegate to a staking pool to earn ADA passively. That is exactly what this post will cover: how to stake ADA and what to look for among pools.

Due to its versatility, Cardano is one of the best assets to actively stake, since over 71% of all Cardano in circulation is actively staked.

Unlike other Proof-of-Stake cryptocurrencies, staking ADA does not impose any lockup periods, and what’s more, Cardano staked may still be transacted with, with full sending and receiving capabilities.

Cardano staking is distinct in that, unlike most other Proof of Stake (PoS) coins, Cardano users stake their Cardano address rather than their coins. As a result, your whole ADA wallet balance is staked at all times, there is no need to re-stake every time you acquire additional coins, and you can freely send out any ADA you have held at any point.

Staking Cardano also couldn’t be easier and can conveniently be done within multiple wallets and of course through the WingRiders DEX.

How Does ADA Staking Works on WingRiders

Unlike similar platforms where staking is synonymous with yield farming, WingRiders divide these two terms for separate functionalities. Staking means you are staking ADA on Cardano. So, by providing liquidity into Liquidity pools containing ADA, you are gaining additional rewards from ADA staking on Cardano blockchain of this ADA portion. These rewards accumulate over time and are redistributed back into the Liquidity pools effectively increasing the monetary value of your share.

All ADA locked inside the smart contract for the liquidity pools is automatically staked. The rewards from ADA delegation are automatically returned into the liquidity pools, increasing the value of the LP tokens owned by liquidity providers. This is a fully automated process — we have a staking agent controlled by the DAO. Delegation rewards for the whole pool are collected after one epoch and are added back into the given pool when the rewards become available.

There is a democratic process in place for liquidity providers to decide in which Stake pool the whole ADA amount in one Liquidity pool will be delegated. All the active Stakepools, over 3000 are present on WingRiders, for you to vote on where you want the ADA to be delegated to each epoch. There is a separate voting for each ADA Liquidity pool, which means that every ADA Liquidity pool on WingRiders can delegate its ADA to a different Stake pool. A single ADA Liquidity pool can be delegated to a single Stake pool for one epoch of indefinitely until the vote changes the winning Stake pool.

Each Liquidity Provider Token is counted as a single vote. Liquidity providers have to deposit their LP tokens if they want them to use for voting. You can decide how many of your LP tokens you want to deposit — the more you deposit, the bigger your voting power will be. Keep in mind that deposited LP tokens are locked in a smart contract and they won’t be available at your disposal until you withdraw them. Read more about the voting details here.

Start Your Stake pool Analysis Here

When selecting a Cardano stake pool to ensure you receive your ADA incentives, there are various factors to consider.

Keeping the following criteria in mind is a smart place to start in order to get the most out of your staking. Follow these guidelines when selecting a staking pool:

Choose a pool that has generated blocks. You can find this information from a site like Adapools.

It is a good idea to check on your staking pool on a regular basis to verify that saturation has not been reached. Staking pool rewards are currently only available for pools with less than 64 million ADA. A reasonable rule of thumb is to look for a pool that has 30 million or less ADA staked.

Learning more about the operator may help you create trust, assess expertise, and verify the pool’s mission aligns with yours. This will be discussed more below.

How to Choose the Best Cardano Staking Pool for Delegation

Some users like to be able to contact the stake pool operator. By clicking on the operator’s name, you will be taken to their profile, where you may find contact information and social groups.There are multiple places to search and delegate to pools, and over 3000 pools to choose from.The most common source for pool operators and data comes from ADAPools.org. You can navigate to this site if you want in-depth data such as scoring systems and additional filters to help you sort pools by various metrics, which will be covered below.

The Metrics

In this blog, we’ll use ADAPools to display various metrics, sort, rank, and give graphics to aid in basic navigation and to explain the various metrics. For this analysis we used the first pool on the list (GOAT).

ROA 1M / Lifetime
This image shows the pool’s current return on ADA over one month as well as its lifetime return. ROA is an abbreviation for Return of ADA. The current average return on ADA is 4.5 percent -5.5 percent.

This amount varies for smaller pools that produce fewer blocks.

Stake & Saturation

The staking value is the amount of ADA assigned to the pool. Pools with a stake level greater than the network’s saturation limit have a detrimental impact on the rewards pool, such as fewer or no ADA awards being paid out. This is where the previously mentioned 64 million ADA limit is shown.

As the Cardano network evolves, this is a means to encourage ADA stakeholders to delegate to smaller pools and more pool operators to launch new pools, which supports more decentralization.

Variable Fees & Fixed Costs

Stake pool operators are compensated for their efforts in managing, maintaining, and promoting the pool. The current minimum fixed fee is 340 ADA, however certain pool operators may charge more, so bear this amount in mind.

This price is neither paid in advance or invoiced directly to the delegate, therefore Cardano stakeholders are unlikely to notice the payments. Users do not see the fees enter or exit their wallets since they are deducted from the rewards that would have been allocated to the pool.

Pools may optionally charge an extra variable percentage fee, which is deducted from the total rewards distributed to pool delegates. Stake pool providers compete with one another to attract delegates, so when one operator decides to charge additional fees, stakers are more likely to select a different pool operator that does not charge the extra fee.

Pools can charge a variable fee ranging from 0% to 100%, with the most frequent being 0% to 5%. Pools with 100% variable fees should be avoided; these are generally private pools, therefore delegating here will not provide stakeholder incentives.

There are a few legitimate reasons why operators may opt to charge a higher price, and many Cardano aficionados may be willing to pay the fee if it helps with initiatives or causes, they believe in. This we will go through in greater detail later.

Luck

Yes, like in other aspects of life, there is always an element of chance involved. For ADA delegation, luck is defined as the number of blocks generated in relation to the quantity that pool is projected to produce.

Sometimes a pool generates more blocks than predicted, which is fortunate, but other times a pool is supposed to create 6 blocks but only produces 3 throughout the epoch. This would be unfortunate.

This value averages out over time and has little effect on your ADA results. Ones active ADA pool delegators may use staking like a slot machine and frequently shift pools, trying to get into some that have been unfortunate and expecting to get in when the luck is more likely to change. Most stakers are unconcerned since one of the nicest aspects about crypto staking is that it can be done passively.

Pool hopping is the name given to this approach. Some delegators will try to profit from the changing rewards from different staking pools by moving from pool to pool.

Because stake pool returns change with each epoch, a pool that is now yielding low returns will ultimately obtain a higher rate later on, and pool hoppers will try to play the odds through the pool’s luck.

Pool hopping may be entertaining and, if you’re lucky, produce somewhat higher-than-average profits, but keep in mind that each time you hop a pool, you’re incurring transaction costs, which might cost you money in the long run.

Pool Staking Pledge

The pledge represents the sum that the stake pool operators have staked in the pool as their own allocation.

Generally, the greater the number, the better, since it influences reward calculation and suggests that the pool operator has a vested interest in the pool’s upkeep and functioning.

Pool Delegation Costs

There will be a deposit cost of 2 ADA the first time you delegate to a pool, but there will be no cost if you move pools. When you cease staking, your deposit will be refunded to you.

When you delegate, you will also be charged a small transaction fee, which is equivalent to the ordinary network rates when submitting a transaction. Remember to keep this cost in mind, and keep in mind that you do not need to re-delegate every time you get more ADA, since your whole balance will always remain staked.

Now that we’ve covered the fundamentals and what all of the major indicators reflect, here are some additional, optional considerations.

Other Factors to Consider

Many of the pools will have distinct marketing characteristics. When you click on the pool name, you will be transported to the pool’s profile page, which offers information on the pool’s performance as well as links to relevant social networks or websites. Consider the following points:

Staking Pool Purpose and Mission

Aside from block production, certain pool operators will have an additional purpose or objective. Some pool owners promise to donate the revenues to humanitarian reasons, sponsor development initiatives like Cardano Dapps, or produce content. If you wish to assist support certain causes or initiatives, you may choose a pool based on your motivations and views..

Operator

This is where you may assess the operator’s capabilities and competences, as well as assist create trust. Participating in the operator’s groups or social media platforms might help you measure your feelings and collect additional data about the operator.

Track record

Seeing that the pool has produced multiple blocks over its lifetime indicates that the pool is operating well. This area will also show the pool’s registration date so you can see how long it has been active.

Relays

You can view how many relays a pool operator has by going to the “About” tab. Look for a pool with more than one.

Simply, the greater the number of Relay nodes a pool operator has, the more secure the pool is in terms of preventing malicious actors from entering. Relay nodes provide the proper individuals access while keeping those with evil motives out.

Pool Operator technical Details:

For those who desire a more in-depth look, the “About” section will reveal the technical features of the pool operator.

This will frequently include information including how many nodes a pool has, how much power the nodes are operating on, and what hardware is being used.

Closing Thoughts

Staking ADA on Cardano is a terrific way to generate passive ADA rewards while simultaneously contributing to Cardano’s future and it’s decentralization.

This is a win-win situation and an excellent way to expand your Cardano holdings. It is one of the simplest and most flexible assets to stake and costs nothing to get started if you use one of the free wallets. Be sure to be up to speed on the topic to select your pools wisely…