340 ADA Pool Fee is becoming more of a concern

You seem to miss the point that pools will only get the fixed fee if they get to produce blocks. And they only get to produce blocks if they get enough stake delegated. But because of the fixed fee they are totally unattractive for delegators until they already have a certain amount of stake (since the fixed fee is substracted from the block rewards, before they are distributed to the delegators).

That should really be repaired to better allow pools to grow organically.

But, on the other hand, it won’t make small pools profitable at once. We still have to be honest that operating a stake pool will always be a more or less expensive hobby if you do not have a clear path to get millions of stake.

And I don’t think that that can be changed in a system that is supposed to be proof of stake. Blocks produced and, hence, rewards gained have to scale with stake. And if you do not have a relevant percentage of the total stake, you will never get enough blocks to pay the costs.

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I am sorry but as the post above has eluded to this is a massive point and I am not sure you have understood this. The 340 Pool Fee means the operator is forced to take over 50% of the Block rewards from the Delegators if they mint one or less blocks in an Epoch making it almost impossible to be competitive and get a start in the eco system. Right now the fee only serves as some kind of protection for large pools to ensure they keep getting this lucrative income at the expense of anybody else trying to enter.

A small pool should not be forced to take a fee and then they could have returns similar to larger pools and yes they will make no money but over time if they work hard and build up the stake they can gradually increase their fees to cover costs and make money. This is what decentralisation should be all about while right now it is nothing more that protectionism for large pools. Of course they don’t want the pool fee taken away and use the excuse that there will be a race to the bottom with fees - well that is how a free market works - if you run a good pool and work hard then maybe you will make it but nobody deserves a free ride.

Furthermore, there are potential compliance concerns with this as small investors have no idea how this works and many are getting smaller returns from small pools when the message being thrown around is that small pools pay the same as large pools over time. Unless they share the pool fee (which we do) then this is simply not true. We may think this is all unregulated now but with so many jurisdictions involved and a growing appetite by regulatory bodies to protect small investors then this Pool Fee issue needs to be addressed sooner than later.

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Thank you for the calculator. It is really clear what is happening. It seems that it generally evens out over time as long as you can create bocks. It’s quite a complicated formula.

Perhaps the 340 is needed so that there isn’t too many pools. Pool operators do need to get paid for the work they put into it. It’s miserable for those that can’t attract delegators.

Its not just about not attracting delegators - I now have gone 43 Epochs with only one slot allocation - I should have had around 10 given a continuous stake of around 300K - I have worked hard at this but I am getting pretty sick of just never getting an allocation and being told it is down to poor luck - how is this supposed to attract new pool operators or maybe that is what is desired - who knows?

That’s a pretty long time to go with only 1 slot. I completely understand your frustration.

However, I’m fairly certain that the protocol is working as intended. It comes down to probability, and the only way to increase your chances of being assigned a block is to acquire more stake.

Dropping the min fee may allow you to perceive your pool as a more fair entity, but it won’t help it stand out from the other 3,000+ pools you are competing against. Especially when they are all running the same fees. To attract more stake, and capture more slots, you have to do something to grab the attention and trust of delegation.

I know this is a tough road, and especially in a market slump. I’ve been running a pool for well over a year and I’ve got a whopping 25 delegations. Is this the protocol’s fault? No. I take responsibility for slacking on marketing and outreach. Its tough competing with other folks and standing out amongst the ever shifting crowd of SPO’s.

Again, I totally feel your pain. I truly hope your luck with slot allocation changes soon. I completely respect you as a person and operator, and I appreciate your contributions to Cardano. I hope you are able and willing to continue contributing. I am just having a hard time seeing how the min fee is the culprit causing all this woe.

If you find a way to easy delegations, please, let us know.

Thanks for the response and I appreciate your time to comment. I know you mean well like most in the Cardano community but I just wanted to make a comment on each of your points to maybe clarify why my frustration is growing exponentially the more I deal with Cardano.

Yes you are more than likely right about this but I do feel that it is getting to the point where IOG or someone could at least have a look at this. The odds of this happening are getting extremely small now and I have communicated with IOG who state it it just down to bad luck. However, it should be pointed out that I did mint 26 blocks in regular fashion all the way up to Epoch 320 and then the door slammed shut with just one slot allocation in 43 Epochs now. I do have justifiable suspicion that something may have changed at Epoch 320. All the configuration around my pool has been checked and checked again with nothing found wrong and the fact that a slot was allocated and minted at Epoch 351 (roughly mid way during this drought) would support the view that the pool is working OK.

Yes it wont make it stand out but at least I can be on a level playing field with larger pools and allow delegators to get a fair return on their stake - right now they are taxed over 50% when minting one or less blocks per Epoch. I share my pool fees with my delegators when I do get a block (to compensate for this) but this is a laborious and time consuming process. Then there are the compliance and reputational issues of small pool advertising similar returns to big pools which is simply not the case and I don’t know why more people are not seeing this as an issue.

Yes this is the challenge - at GNP1 we have done everything we could think of - we have designed minted and given away our own NFTs, we have given thousands (yes thousands) of dollars in Giveaways and Welcome rewards, we have shared most of the 340 Pool Fee with delegators, donated over 4000 USD to charity (from our funds and not delegators) and worked continuously to make this pools successful. Not only that but we run this as a registered company in the UK and report all this through our accountant, HMRC and Companies House. Yes we have lost money and yes many could critisize us about how we run our business and may want to advise how we could do things better but the point is there is literally nothing more we could reasonable do to make this work. Now when the protocol gives one slot in 43 when the expected number for the stake is around 10, I do expect that there would be more concern from IOG and the community that something could be amiss here.

I have been in this since the beginning and run this pool for 2 years now and I can quite honestly say that there must be many other Stakepool owners who are looking at the current model and just shaking their head. Right now unless you are an influencer who probably cares little about Cardano but have the followers or you are a technical developer that has established recognition in the Cardano community then you have virtually 0 chance of getting a stakepool to even return your costs let alone make any money. This cannot be a sustainable model or maybe it is but certainly not a fair one then.

I really appreciate your views and comments here and I know that you do mean well but we cannot just keep being told this is bad luck and we have to get more stake as this simply is not possible for most people.

As a small SPO, I totally agree the minimum 340 pool fee is not good for the small stake pool, delegators being punished for no reward just because they support our pool. More and more delegators change to the big pool just because of no reward.

Another concern is slot allocation. Our pool with 300k not getting assigned a single slot for more than 20 epochs, and they even want to cancel the slot battle advantage for the small pools. This makes the small SPO even more miserable. The small SPO checks the leader logs every 5 days and hopes to get one slot allocation, then even if we got the allocation we might lose the slot battle.

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The recent blog by Aggelos and Christina Ovezik confirms that the 340 min fee was not part of the original design:

“We note that the min cost parameter is not part of the original reward sharing scheme (but was included in its implementation in Cardano apparently as an add-on security feature).”

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Agree with you 100% on this - the 340 ADA pool fee is nothing more than a protected form of income for larger pools and totally noncompetitive. A small pool basically has to give this all back to delegators to have any chance to compete but by making it compulsory this is a slow and cumbersome process. Most small pools don’t of course and like you say there is no point in staking with them if over 50% of the reward for the occasional minted block is taken from the delegators. I also see this as a future potential compliance risk as small pools are advertising that they give similar returns to large pools but this is only the case if you give the pool fee back

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At the current price of ADA my pool isnt paying for itself if you include the time spent building/running it. Without the 340 base it certainly would not pay for the hosting.

Some pools are small, some pools are REALLY small like mine. I justify running my pool by telling myself I’m basically buying small amounts of ADA at a discounted rate (the hosting fees ) and contributing to network. Similar to a employee stock purchase program, I pay less and in a sense its already taken out of my check.

Events like the Sundea air drop really hosed the smallest pools by encouraging stakers to move to the largest pools to get free tokens. I doubt any of those stakers ever moved back to the smaller pools they came from.

It is a sad fact now that small pools can only run at significant cost to themselves and not return any revenue. If you do not share the 340 ADA pool fee with the delegators then you are basically taking over 50% of the rewards and so nobody will delegate with your pool (except mates and family members if you are lucky) The current system is broken for small pools.

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