About Staking Cardano
UNDERSTANDING THE DELEGATION MECHANISM
Cardano is a proof of stake system, so holding stake, i.e. owning Ada, means more than holding Bitcoin means for the Bitcoin protocol.
You may choose to delegate your stake to a "staking pool". By being part of a larger pool all participants share in the cost of keeping a node up and running all the time and also share chances of being the slot leader. Rewards and running costs are shared with all participants in the pool.
CONTROL OVER FUNDS
As Cardano is a proof-of-stake system, holding stake, or owning ada, means that you can buy goods or services with your purchase and payment power. In addition, you also have the right and obligation to participate in the protocol and create blocks.
These two uses can be separated by the delegation mechanism, meaning someone who owns ada can keep the spending power, while delegating the power to participate in the protocol to someone else, a stake pool. It is important to note that funds can be spent normally at any time, regardless of how they are delegated.
WHAT A STAKE POOL IS
A stake pool is a reliable server node that focuses on maintenance and holds the combined stake of various stakeholders in a single entity. Stake pools are responsible for processing transactions and producing new blocks and are at the core of Ouroboros, the Cardano proof-of-stake protocol. To be secure, Ouroboros requires a good number of ada holders to be online and maintaining sufficiently good network connectivity at any given time. This is why Ouroboros relies on stake pools, entities committed to run the protocol 24/7, on behalf of the contributing ada holders. While Ouroboros is cheaper to run than a proof of work protocol, running Ouroboros still incurs some costs. Therefore, stake pool operators are rewarded for running the protocol in the form of incentives that come from the transaction fees and from inflation of the circulating supply of ada.