The Cardano network has time periods called Epochs that last 432000 slots, and each slot lasts 1 second. That means an epoch lasts 5 days. On average, a pool node is expected to be nominated for block production every 20 seconds, with roughly 21600 nominations per epoch. The active slot coefficient determines this is currently at 5%, meaning that out of all the slots, only 5% will, at most, be eligible for the pool to produce blocks. This is also why the network health is sometimes reported in chain density, and ideally, this number is close to 5%.
For each successful nomination, there is a chance for a block to be produced on the network. Due to randomization and aso pool block production issues, each epoch is usually never 21600 blocks, as can be seen on Cardano blockchain explorers (https://explorer.cardano.org/en where the average hovers around 21000 blocks per epoch. Delays in block production can cause this due to latency issues, wrongly configured time synchronization, or hardware resource issues such as too low specs on memory or CPU power to calculate and report the block on the blockchain in time.
Delegation certificate
So let us say that we are currently in epoch N — for example, epoch 307 — and you decide to delegate your ADA to a staking pool such as ADA North Pool. Your wallet will generate a staking key with a delegation certificate at the cost of a transaction and a deposit of what is currently 2 ADA.
Snapshot, active, and live stake
Assuming you create a delegation certificate in epoch N, the snapshot of your wallet ADA amount will be taken at the start of epoch N+1 with the value held at the last block of epoch N (in the example, this will be epoch 308). It then becomes the active stake in epoch N+2. The live stake is the amount at any given snapshot you hold in your wallet and becomes the active stake in the next epoch after the snapshot. That means that if you move funds out of your wallet and back in again before the last slot of the current epoch, you will still register with the same amount, or for example, if you buy more ada your live stake will increase and will be registered in the snapshot in the next epoch and become the active stake in the epoch after this.
Reward calculation
Rewards are calculated in epoch N+3, in the example, this would be epoch 310. That means rewards are always calculated for the previous epoch. It will be based on such factors as blocks produced by the pool during epoch N+2 (the active stake period). The overall reward pool that is distributed will also be influenced by factors such as transaction fees collected during the epoch on the network. The pool will also collect fees before rewards are distributed. It is important here to know that there is a minimum fee of 340 (pools can choose to increase this but never under the minimum fee parameter) ADA is a cost spread out over all delegators of a pool, and also there is a % fee that each pool will deduct from each delegators reward.
Reward distribution
Rewards are distributed at the start of the epoch after rewards calculation (technically at the end of the last block of the rewards calculation epoch), so N+4 or. This means, at most, you will wait 20 days from delegating stake to your first rewards. In this example, this would mean epoch 311. Keep in mind these are the rewards for the stake that was active in epoch N+2 (in this example, epoch 309). These rewards are automatically part of the delegation of the wallet, but you will need to claim the rewards in a transaction to send them from your wallet. At this point, you will keep receiving rewards every epoch as long as you have an active stake amount.
This text is intended to inform and is not an investment recommendation.
