Cardano (ADA) staking pools are all great and encourage passive and residual income. Although, what are some of the concepts and technicalities of maximising the number of tokens in rewards you are earning? I have been looking into the differences between fixed rewards in a staking pool in comparison to variable rewards some of the Cardano Projects offer their delegators and all of the information I have gained will be from THE.ONE.OR₳CLE report of ‘Initial Stake Offerings in Cardano’.
Below is a table from The One Oracle’s Report of a few Cardano projects that offer a stake pool, and it shows you the different rewards scheme of either variable or fixed rewards. I will be summarising both approaches and expressing my opinion of preference for either fixed rewards or variable rewards in a Cardano staking pool.
Variable or Fixed rewards?
Choosing the right Staking Pool for your Cardano (ADA) delegation can help you to reach your financial goals sooner, and understanding the difference between fixed rewards and variable rewards can help you on your way. Here’s a quick summary:
Variable rewards show that the rate of rewards can go up or down as seen in Figure 2, meaning that you have an opportunity to earn more rewards if the rate increases, but at the same time, you hold a risk of earning fewer rewards over time if the pool starts to fill up its saturation. Variable rewards can be a good idea for some in the short term as they feel like they can earn high rewards and then leave the pool, but after Cardano network fees, this may not be worth it, and leaving the pool could result in a loss.
As seen in figure 3, we can draw a clear picture of the chart, which expresses consistency in the number of rewards distributed by projects with Fixed Rates. Fixed rates are always a safer option as projects like Flickto do not decrease the number of rewards given to their delegators. Flickto also rewards their delegators with a higher distribution for being long-term delegators whereby Flickto refers to this as a ‘bonus’. A fixed reward approach also means that as a delegator you can calculate your rewards from the first day of staking until the end of the final EPOCH before the ISPO (Initial Stake Pool Offering) ends. As long-term delegators are rewarded with either a 10%,15%, or 20% bonus depending on how many EPOCHs you have delegated, you will be able to understand the value of your earnings from the moment you delegate your Cardano (ADA).
If you would like to read further on how Flickto utilises an Initial Stake offering, click on the link below:
https://medium.com/@Berkay-Flickto/3308c30c9c40
All data was obtained from THE.ONE.OR₳CLE’s medium. If you would like to access their full report, I will provide the reference below.
THE.ONE.OR₳CLE (2022). INITIAL POOL STAKE OFFERINGS IN CARDANO: a critical overview. [online] Medium. Available at: https://the-one-oracle.medium.com/initial-pool-stake-offerings-in-cardano-a-critical-overview-acf85fac5eca