Many of you know that Cardano does not use mining to validate its transactions and secure the network, but instead, it has a Proof-of-Stake mechanism called Ouroboros. This protocol aims to provide stability, scalability, and security with minimal energy requirements and low fees. Cardano's native token, ADA, can thus be earned through Staking.
What is ADA Staking?
ADA's transactions are validated by slot leaders, i.e. stake pool operators selected by users for a 5-day period called an epoch. These pools are chosen by ADA holders who delegate them to said 'job'. Then stake pools have the power to validate new blocks and collect fees for their work; a percentage of the ADAs they earn is then given to stake pool members.
So it is very common for long-term ADA holders to stake their coins to some pool, in order to get rewards.
This is an amazing way to earn passive income and this is one of the main reasons I prefer staking over mining.
According to recent data, Cardano is the top blockchain in terms of staked value, followed by Polkadot. (Read more here).
So a lot of users all over the world are already taking advantage of Cardano staking, but today I would like to show you a better way to stake your ADA. Let's start!
Single Pool Alliance
Cardano's Single Pool Alliance (SPA) is a free and voluntary association of stake pool operators who commit to managing just one single pool.
The association has no leadership, no bureaucracy, and no board members.
Why SPA matters
Just like mining, even staking has its farms, that is when a single entity operates multiple pools. This way the network is not as decentralized as it should be. The biggest entities can coordinate an attack on the network or act in other malicious ways. Also, 'little guys' cannot compete with giant staking farms.
So, SPA was born to tackle that and provide more decentralization. Since Charles Hoskinson always says that Cardano's goal is to be the most decentralized blockchain project ever, then staking ADA to single pool operators is very important.
Running multiple pools means that a single entity can control 100's of pools, while with SPA you can be sure that 100 entities = 100 different pools. This leads to a huge impact in terms of decentralization.
Since Cardano is the king of decentralization, staking ADA to SPA is really relevant.
A more decentralized network is a stronger network.
I am not shy to say that I bought a lot of Cardano because I believe in this project. This is not financial advice because I don't care that much about ADA's price. I bought it because I like decentralization, and I want it to be the future.
Centralized systems have provided all kinds of problems over the years.
If you want more info about the differences between decentralized vs. centralized systems, click here.
As a nice side note, many single pools provide better interests and less fees, compared to the multipool owners, as you can see from the graph below (taken from here):
So, what are you waiting for? Stake your ADA in some of the best SPA pools and join the decentralization army!
