Understanding Cardano's Staking Rewards System
Have you ever wondered why the staking rewards for Cardano have been steadily decreasing? It can be confusing, but don't worry, we'll break it down for you.
Staking on Cardano is like planting a seed. The more seeds you plant and take care of, the more rewards you get in the form of a harvest. In Cardano's case, the harvest is in the form of money. However, as more people start staking on the Cardano network, the rewards for each individual staker decrease. It's like a big garden where everyone is planting, but there's only so much room for growth, so the rewards are spread out among more people. This is why the rewards for staking on Cardano have decreased over time.
The ADA Value
The rewards on the Cardano network are paid in a digital currency called ADA. Cardano is working to make sure that the demand for ADA increases, and therefore its value increases. This is like making sure the price of an item goes up by making more people want it.
One way Cardano is doing this is by creating a new way for people to use ADA, by creating a vastly growing DeFi ecosystem. It's like creating a new store for people to buy and sell items, which increases the demand for the item.
Even if the rewards percentage goes down, the increase in the ADA value will make up for it. It's like getting paid less for an item but the item is worth more, so you still end up making the same amount of money. Through these plans, Cardano makes sure that the rewards system stays balanced.
The Gradual Decrease of Rewards
The gradual decrease of rewards can have two effects:
People may not realize it at first, but when they do, it might feel like a big change. Like water droplets falling slower and slower, people may not notice the change immediately, but over time it becomes more apparent.
Some people may think that something is wrong with the system, and stop staking their Cardano, like closing the tap when the water droplets are falling too slow.
However, Cardano has thought about this, and has a plan to counter it. It's like having a backup tap to make sure the water flow is steady.
Cardano's staking rewards system may seem confusing at first, but it's important to remember that it's designed to ensure that the rewards pool lasts for a long time. The rewards may decrease over time, but Cardano is also taking measures to increase the demand and value of ADA, which will compensate for the decline in percentage. This way, stakeholders will receive the same value of rewards in the end, if not more.