Ada held on the Cardano network represents a stake in the network, with the size of the stake proportional to the amount of ada held. The ability to delegate or pledge a stake is fundamental to how Cardano works.
There are two ways an ada holder can earn rewards: by delegating their stake to a stake pool run by someone else, or running their own stake pool. The amount of stake delegated to a given stake pool is the primary way the Ouroboros protocol chooses who should add the next block to the blockchain, and receive a monetary reward for doing so.
The more stake is delegated to a stake pool (up to a certain point), the more likely it is to make the next block – and the rewards are shared between everyone who delegated their stake to that stake pool.
WHAT IS STAKE DELEGATION?Delegation is the process by which ada holders delegate the stake associated with their ada to a stake pool. It allows ada holders that do not have the skills or desire to run a node to participate in the network and be rewarded in proportion to the amount of stake delegated.
WHY INCENTIVES?Incentives are used to ensure the longevity and health of the Cardano network and ecosystem. The incentive mechanism is underpinned by scientific research that combines mathematics, economic theory, and game theory