How profitable is Cardano and Polkadot staking?

Staking ADA is possible through its proof-of-stake consensus mechanism called Ouroboros. It can handle around 250 transactions per second (tps), though IOG has claimed its new Hydra layer-2 scaling protocol could boost that number to one million tps.

How profitable is Cardano staking?

Cardano offers a staking reward calculator on its website to provide users with an estimate of how much staking rewards they can expect for delegating or running a staking pool. According to its calculations, a delegate staking 1,000 ADA would earn 46.08 ADA (4.61% APY), while a delegate running a stake pool could earn up to 77,185.05 ADA (7,718.51% APY).

At ADA’s 52-week high of $3.20, this translates to around $147.46 for delegating and $254,710.67 for running a staking pool. Overall, Cardano staking can be very profitable for those who are able to run a staking pool and can keep pool-related fees well managed. It's recommended users should check stake pools regularly and move funds around to ensure they are getting the best possible rates.

Polkadot (DOT)

Polkadot (DOT) is a blockchain interoperability protocol that connects several different chains together in a single network, allowing parallel transaction processing and exchanges of data between different chains. DOT, the native cryptocurrency of Polkadot, is primarily used for governance, staking and connecting to new “parachains.”

Polkadot staking requirements

Polkadot uses a nominated a proof-of-stake (NPoS) consensus algorithm, letting users earn staking rewards as a validator or a nominator. Validators are responsible for validating transactions on the Polkadot network, while nominators ensure that validators are behaving appropriately.

Slashing occurs if a validator acts maliciously and causes both validators and their nominators to lose a percentage of their staked DOT. This is carried out automatically by smart contracts coded into the protocol.

Nominators have less responsibility than validators do, and becoming a nominator has fewer requirements to get started. There isn’t a minimum requirement for staked DOT for nominators, and there’s no need to run a node or use specific hardware. But because the network is limited to a maximum of 22,500 nominators, there is an implied minimum of about 120 DOT in order to nominate.

Earning staking rewards as a validator is a bit more complex. The total DOT required to become a validator varies and requires about 350 DOT to get going. Validators must also run a node, which typically requires launching a cloud server on Linux. To do that, it's suggested that your computer should have an Intel Core i7 CPU @ 4.20 GHz or better, 80 to 160 gigabytes of solid-state storage and at least 64 gigabytes error correcting code (ECC) of memory. Staking rewards for DOT start to accumulate at the start of a new era, or 24-hour period. At the end of each era, your payouts from the previous era are available to claim. Usually, a validator or nominator will claim the staking rewards, which will cause all payouts to be distributed to everyone else automatically. Both validators and nominators can claim their staking rewards via the Polkadot JS wallet or through Ledger.

How profitable is Polkadot staking?

Nominators profitability depends on the validator. Validators can charge commissions for staking rewards, which is subject to change at any time. Further, only a validator’s top 256 nominators get paid out at the end of each era. Regardless of the total amount of DOT staked with a validator, nominators all split staking rewards equally. According to Hodlpolkadot, the average APY for a nominator in the top 256 is around 13.5%. Assuming you are staking the minimum 120 DOT, you would earn around 16.2 DOT over the next year. Based on DOT’s 52-week high of $55, that would hypothetically translate to staking $6,600 for a yearly profit of $891.

All validators split payouts equally, although they can vary slightly based on era points. Era points are rewards paid out every era for completing certain positive actions on the blockchain, such as issuing valid statements for parachain blocks. Validators can receive additional rewards via tips from users transacting DOT. One hundred percent of the tips go to validators and are used as an incentive for validators to prioritize certain transactions.

According to Polkadex, validators receive an APY of 112%. Additionally, validators receive a commission from the platform's nominators. Let's say you are running a validator that qualifies for Polkadot’s Thousand Validators Program, which requires 5,000 DOT staked and a maximum commission of 3%. Not including additional staking rewards from era points, you would receive 5,600 DOT from self-staking and 124.41 DOT from nominator commissions for a total of 5,724.41 DOT. With the price at the 52-week high, running a validator would require you to stake $275,000 and would yield a return of $314,842.55 in a year.

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