Cardano’s long-awaited Shelley era is rapidly approaching, with the company now launching an incentivised testnet which will reward ADA holders for delegating their stake.

As part of Cardano’s Shelley phase, which will see the third-generation blockchain protocol move to a fully decentralised state, researchers at IOHK – the engineering and development arm behind Cardano – are allowing users to earn real rewards for taking part in network consensus.

Launched in 2017, Cardano has gained a huge following in the crypto space largely due to its adoption of formal verification methods and highly scientific approach to building its protocol infrastructure. It’s currently the 12th largest cryptocurrency by market capitalisation.

As a proof-of-stake rather than a proof-of-work blockchain, blocks will be validated by users ‘delegating’ their stake or operating a staking pool. Pools are chosen to validate new blocks on the network according to how many ADA tokens they have staked, which in turn provides block rewards for users in the form of ADA tokens.

Wallet snapshot and testnet rewards

The first step towards incentivised staking will be a wallet snapshot held on November 12. The snapshot will check the balance of official user wallets, Yoroi and Daedalus, for users’ eligibility to take part in the incentivised testnet.

Users who delegate their stake on the incentivised testnet will earn real ADA which will be transferred to the mainnet once it’s live – in other words, those taking part in the incentivised testnet will earn real rewards for the first time in Cardano’s history.

How will staking impact Cardano?

Members of the Cardano community have eagerly awaited the start of the staking phase, as it will signal the first steps towards full decentralisation of the wider Cardano network.

For short-term traders, it’s worth remembering that Coinbase has indicated that it will be looking to list ADA once the Cardano network becomes fully decentralised. This will likely happen within the coming months.

This would likely see ADA undergo the ‘Coinbase effect’, which is a term used in the crypto space to describe the increase in the price of an asset once it launches on the Coinbase app.