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updated  2021-09-15

I am maintaining a stake pool [CZLO] on Cardano cryptocurrency.

Why Cardano?

Cardano (with code ADA) is a cryptocurrency based on peer-reviewed academic papers. Everything is always thoroughly theoretically analyzed before implementing it. Thanks to it many contemporary issues of other cryptocurrencies are taken into account during the ongoing development.

The cryptocurrency is based on so called Proof of Stake protocol, which guarantees much lower power consumption than is needed by Bitcoin, lower transaction fees, confirming transactions within seconds, and higher throughput.

The system allows its updating without splitting the network into two currencies of different versions. These days, smart contracts support is being started. In future, many technological improvements are planned. They include both resistance against quantum computers and the possibility of including some information about money origin into the transactions to allow better cooperation with classical bank system, which often rejects money from cryptocurrencies – even because of different state regulations.

The development is slower due to the lengthy theoretical analyses, but we can expect, that even the future issues will be solved. For an exhaustive overview of present issues of cryptocurrencies and their suggested solutions, see video describing the original proposal of this platform.

What is a stake pool?

A stake pool is a computer, which participates in a management of the history of transactions. Several thousands of such computers alternate in adding new blocks of transactions into so called blockchain and so mark the transactions confirmed.

As with other cryptocurrencies, they can only decide whether to confirm the transaction given by a user or not (or which one, if somebody tries to spend the same money twice); creating transactions is, however, still possible only by the legitimate owners of the money, or more precisely owners of the files with corresponding secret keys.

The decision who should confirm a block is not driven by computational power as with Bitcoin, but by the amount of stake delegated to the stake pools.

Everybody owning some money in Cardano can decide to delegate it to any stake pool and so increase its probability to confirm a block. Delegating has no impact on the right of paying with the money; the original owner can still spend it anytime and no other can. In principle, it is only the way of voting on who should control the network.

When a block of transactions is confirmed, a reward consisting of transaction fees and newly minted coins is generated. It is then divided into stake pool operator and owners of all the delegated stake by the rules which are known in advance and which are partially influenced even by the pool operator. Different stake pools thus provide different rewards for their stake delegators.

Why to choose [CZLO]?

It is partially even an experiment, whether it is possible for an individual with only a limited amount of funds to operate a stake pool which will earn for its costs. Possible reasons for delegating to [CZLO] are:

Beside the pools of large companies and projects, we cannot expect much of the delegated funds here nor great profit. Delegating here is thus more about ideals than finance.

In case of a sufficiently large delegated stake, the rewards are divided as follows: In one successful epoch (5 days), I will get 340 ADA (minimum required by the system) + 1 % of the rest; the remaining part is divided proportionally by the delegated stake.

Technical details of [CZLO]

The stake pool uses VPS of Wedos company, which is one of the largest Czech providers of these services. It guarantees high reliability and at the same time it is not a global company, which might centralize multiple pools. The data centers are located in the Czech Republic.

For better security and load balance it is recommended to use several machines for a stake pool. Here currently the whole pool uses only one VPS shared with other services, which is against this recommendation. On the other hand, it allows me to pay for it in the initial unprofitable period (maybe even years). It also doesn’t pose any danger for the network that time due to the low delegated stake. With increasing stake, I will improve the technical solution.

The cryptographic keys which are not needed for the server operation are always offline and secured by a hardware wallet. Even in case of a security incident on the server, it is thus possible to fully restore the stake pool.