Although the Cardano blockchain operates through a consensus mechanism of proof-of-stake, it is also possible to delegate your stake power in the network to the entities that operate the nodes and produce blocks, the so-called Stake Pools.
The rewards distributed to operators are divided between the delegators in public Stake Pools. But at what point does this happen? How long does it take for the delegators to receive the rewards? We can answer these questions by understanding how the delegation cycle proceeds.
When a user delegates their ADA over a certain epoch (X), which lasts 5 days, the delegation will only be recorded at the beginning of the following epoch, in what we call a snapshot, the process of capturing information about the current state of delegation on the network. It works like we are taking a picture of the distribution of the delegated participation of each stake pool. The delegation needs to stay in the same stake pool for the entire X+1 epoch.
In the X+2 epoch, the slot leader election – the mechanism that defines which entities will produce blocks – will take into account the snapshot of the previous epoch. In other words, the delegation recorded in epoch X will have an influence on the stake pool two epochs later (X+2).
In epoch X+3, the reward of the previous epoch (X+2) is calculated. If the pool has produced blocks in epoch X+2, the delegator will receive the rewards in the epoch after the calculation, namely, at the beginning of epoch X+4. If the stake pool is producing blocks in every epoch, it is sure that the user will receive rewards between 15–20 days after the record of the delegation.
It should be noted that, although the delegated stake will only start to influence the election from epoch X+2, it will remain active in the following epochs. If the user modifies the choice of the stake pool, it may take up to 2 entire epochs for the new choice to become valid.
So, choose your stake pool properly.
Are you still struggling to understand the delegation cycle on Cardano blockchain? We made this interactive story to help you to understand easily. Check it in full screen!