Hot on the heels of Ethereum, Cardano is often dubbed an "Ethereum-killer." After fully implementing smart contracts and with its fast transaction times and low transaction fees, Cardano is an immensely popular alternative to Ethereum.

But the big question is, can you stake Cardano to earn passive income? And if so, what are the best places to stake ADA?

Ethereum vs. Cardano: What's Best for Staking?

Looking at the market share of blockchain platforms with smart contract capability, we immediately see that Ethereum is way ahead of the game. As of June 12, 2022, it holds around $65 billion worth of crypto assets locked inside its smart contracts. Even though this figure is down on its high of $158 billion, the chart below illustrates just how Ethereum dominates the market.

To briefly recap the importance of smart contracts, they are a revolutionary financial innovation because they replicate all the banking services—borrowing, lending, exchange—without governments and banks being involved. So it is no wonder that within a short period, since the summer of 2020, decentralized finance (DeFi) had at one point amassed over $220 billion worth of crypto assets across all smart contract blockchains. At the time of writing, that figure has fallen to around $100 billion, but the long-range forecasts for DeFi predict a bright future.

The question then is, where is Cardano in this highly profitable picture? Should you stake ADA instead of ETH?

It's an interesting question when you look closely at each cryptocurrency and its blockchain. Ethereum and Cardano have followed different development paths but are closer than most people realize, with more unity set to come.

In short, Ethereum currently uses the proof of work consensus algorithm, similar to Bitcoin, in that it requires a huge amount of power to keep the network running, secure, and processing transactions. However, this is due to change with the long-awaited Ethereum 2.0 upgrade that will switch Ethereum from proof of work to a proof of stake consensus.

Cardano was, in one sense, a step ahead of Ethereum. It already uses a proof of stake consensus algorithm, helping to keep transaction fees cheap and fast—perfect for smart contracts and ADA staking.

In the words of Cardano's creator, Charles Hoskinson:

We need governance, we need certification, we need insurance, we need regulation on these things, metadata identity… at the same time, you need to decentralize. The way we constructed Cardano was for that second wave.

How Does Cardano Staking Work?

When it comes to decentralized finance (DeFi), staking is the key term to understand. In traditional finance, if you were to deposit your money into a bank, you would technically stake those funds. The bank would use your money to issue loans and make other investments. In turn, you would receive a small interest rate percentage for placing your trust in the bank.

Staking in blockchain finance follows the same principle but is more direct and yields much higher rewards. Specifically, by staking ADA tokens, you become a part of the Cardano blockchain network. Your tokens are used for validating new blocks (transactions) on the network, contributing to its governance and security.

After all, this is the core feature of blockchain finance—decentralization. And the key tool to make it happen is the use of tokens. While a PoW blockchain like Bitcoin uses the term "mining," this is called staking in a PoS blockchain like Cardano. In return for your service of securing Cardano by staking ADA tokens, you receive a staking reward.

Where to Stake Cardano (ADA)? The X Best Sites for ADA Staking

Here are the platforms where you can stake Cardano (ADA) and start this form of passive income.

1. Daedalus

Deadalus is the official desktop crypto wallet developed by the Cardano team itself. By downloading and installing the Daedalus wallet, you will gain access to the entire copy of the Cardano blockchain. In technical terms, it is a full node wallet.

This means that you can even run your own Cardano node. When you stake your ADA coins in the Daedalus staking pool, you give the network your voting power. But do not worry, as you will still have full control over your ADA coins. The staking reward is 5 percent annually, 83 times higher than the national average interest rate for savings accounts at 0.05 percent.

Because it is a full node wallet, Daedalus requires a lot of storage space, which is required for Cardano's entire blockchain history of all transactions, past and future. However, as an official wallet of IOHK (Cardano's developers), this is the most secure and advanced option to stake your ADA cryptocurrency.

2. Yoroi

Yoroi wallet is a step-down from Daedalus in terms of storage footprint. As a lightweight wallet, it is a more intuitive wallet to stake ADA tokens. Its lightness and user-friendliness extend so much that you can even download the Yoroi browser extension for all major platforms.

To simplify your potential staking rewards, you can filter staking pools by RoI (Return on Investment), staking cost, and pool size. The staking reward is similar to Daedalus, at around 5 percent APY (annual percentage yield).

3. Binance

Binance is the world's largest exchange, which also serves as a web wallet. You can access it with any device capable of connecting to the internet. However, the price for that convenience is a custodial wallet, meaning Binance holds your private key, effectively controlling your funds instead of you.

Nonetheless, Binance offers the highest staking reward. If you lock your ADA tokens for at least 30 days, you receive 5.09 percent APY.

You can also choose the lock-in periods of 60 or 90 days. Alternatively, the flexible option allows you to withdraw ADA coins at any time, but then your staking reward would only be up to 0.5 percent. Thankfully, the price of entry is just 1 ADA!

4. Exodus

Another great option for ADA staking is the Exodus desktop wallet. You can use Exodus to stake ADA and receive up to a 4.91 percent stake reward, giving you a decent passive return on your investment. One thing to note is that with Exodus, you need a minimum of 5 ADA to stake, and there is a first-time staking fee of 2 ADA plus the network fee. Exodus displays the full amount, but it's not expensive.

Staking Cardano Delivers ADA Rewards

As people seek alternatives to Ethereum due to its high ETH gas fees, Binance Smart Chain, Solana, and Polkadot benefit. However, Cardano has long been the most comprehensively developed PoS blockchain with hack-resistant smart contracts.

So, it is just the right time to begin staking ADA ahead of Cardano's further network upgrades. And while ADA staking doesn't come with the highest returns, Cardano's stake rewards offer a very reasonable return.