On the Cardano Blockchain,a cryptographic hash function called blake2b-256 is used together with metadata to form addresskeys from the public part of a key pair. In short, the key pair consists of a private and a public part (also known as the signing and verification key) based on Ed25519. The Cardano blockchain uses these keys in the operation of the nodes as well as the delegation of stake or movement of funds.
In summary, there are three parts: The key pair of a public/private key in ed25519 and the generated address key based on blake2b-256 hash + metadata created from the public part of the key pair.
With this knowledge of the keys, we can look at how addresses are used for delegation – so-called staking. A delegation address consists of two account elements with different functions,one payment part, and one staking part. The payment part has a prefix of «addr» while the staking part starts with the prefix «stake» (CIP 5), and both have a key pair of public/private keys together with the address key. The payment part is used to move ADA, while the staking part has a reward address that automatically gets rewards from the protocol when you delegate to a staking pool. This is why when you stake with NBX you actually have to get rewards from the rewards account to the payment account to use your ada, as NBX staking follows the Cardano protocol. NBX implemented this in a way that keeps customer funds safe while at the same time allowing customers’ funds to contribute to the validation of transactions the way staking is meant to do on the Cardano blockchain. You can read more about our staking here.
In summary, there are two account elements to a delegation address, one payment part, and one reward part,and they both have a unique address based on the public part of the key pair used to generate them. If you are curious about the steps of how delegation happens through a delegation certificate sent as a transaction on the Cardano blockchain, you can read more in our article on the subject. For more advanced reading, the guide by a user named iIap on GitHub gives a good overview, and cardano.org also has some documentation on keys in Cardano.
