Here’s how Cardano has the edge over its competitors in terms of staking
The world’s first cryptocurrency, Bitcoin, was envisioned and designed to follow a Proof-of-Work mechanism for transactions to go through, It was evident early on that this wasn’t sustainable for the environment in the long term. Most of the newer blockchains have thus opted for a Proof-of-Stake consensus algorithm, which allows for all participants to partake in the validation process while earning a few extra bucks on the side.
Even as most third-generation blockchains are now working on this model, the process and its results are not always even. Moreover, the staking process itself can be a determining factor in its participation, as is evident from the Cardano network’s staking infrastructure. According to cryptocurrency exchange Kraken’s latest report, 70% of the total supply of Cardano’s native token ADA has now been staked, worth around $26.3 billion, even as its annual percentage yield (APY) remains one of the lowest across the industry at 5%.
Source: Kraken
In comparison, rival blockchains Cosmos and Polkadot offer an estimated 13-14% APY, and still, only 62% and 53% of their native tokens have been staked, respectively.
So why does this disparity exist? Kraken noted that this might be due to the “unique” staking mechanism that Cardano follows, including the opportunity for less knowledgeable participants to stake their tokens through delegation. Stakeholders on the network can delegate their ADA to another validator, known as a stake pool operator (SPO) in return for a share of the returns that the validator will receive. This allows for greater participation in the staking process and in turn, a higher percentage of staked tokens.
Additionally, users can continue to delegate their ADA to an SPO of their choice
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