Understanding the Delegation MechanismΒΆ

As Cardano is a proof-of-stake (PoS) system, owning ada not only allows you to buy goods or services, but also means that you have a right and obligation to participate in the protocol and create blocks.

The delegation mechanism is a process that enables ada holders to separate these two elements by facilitating participation in the protocol, regardless of their technical abilities and the amount of stake that they hold. Delegation gives ada holders the ability to keep their spending power, but transfer their rights to participate in the protocol to stake pools, rather than expecting them to continuously run a node that is well-connected to the rest of the network, in order to write a block on rare occasions. Some users might lack the expertise to do so and most users will not have enough stake to warrant running their own node. Funds can be spent normally at any time, regardless of how they are delegated.

The delegation mechanism ensures that less stake is held offline, making the system faster, and more resilient against an adversary in the process. It has been designed to keep the number of nodes that produce a significant amount of blocks reasonably small, so that effective communication between them is feasible.