340 fee paid by SPO - help me understand this please

Hello,

We’re working through the steps to create our pool but I’ve had a concern with this 340 minimum fee to be paid each epoch.

What if a pool is starting small and only has 50,000 ADA to start as pledge. From my research this pool starting with this 50,000 pledge amount can only expect to earn approximately 5% on this 50,000. And there is 73 epochs in a year so the first epoch this pool will earn:

(50,000 x 0.05)/73 = 34.24 ADA

Approximately 34.24 ADA. But this pool owes 340 ADA each epoch. From my math the number of ADA this pool needs to have to at least cover this 340 fee is around 500,000 ADA!

But what happens if it takes time for this pool to attract delegates? Does a pool operator need to keep adding ADA to their pool wallet to cover this 340 fee?

What exactly is this 340 fee for? This feels like a barrier to our entry to supporting Cardano by running a pool.

What happens if a pool can’t cover this 340 ADA fee…will the pool be removed from Cardano automatically?

Thank you in advance for helping me understand better how pools and fees work.

This is the minimum rewards a pool will earn before rewards against blocks made by a specific pool is distributed to its delegators by the protocol. Current protocol parameters dictate a minimum of 340 ADA as a fixed minimum cost. The fee is enforced to prevent a race to 0 fee pools that are not really sustainable for protocol in future. Note that this the fixed cost from entire reward pot against all delegators delegating to pool.

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Thank you very much @Zyroxa for taking the time to reply.

I’m sorry but I’m still not understanding. Does our pool pay 340 per epoch as a fee to run the pool or does our pool earn 340 each epoch as a minimum reward to running a pool?

And if our pool does need to pay this 340 as a fee to run the pool and our pool earns less than 340 Ada (because we are small and don’t have many delegates) do we need to make up this shortfall in ADA to pay this 340 fee?

Thank you.

340 is the pool cost… it will be taken by the pool operator once/epoch if u create at least one block. Basically u don’t pay it, u receveid it

If u will create a block for example
The total rewards is ~ 1000 ADA/block
1000 - 340 - margin goes to pool operator (pool wallet)

The difference will go to delegators

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Phew! Thanks very much @Alexd1985 for helping me understand.

So in my example pool we start with just our stake which is small at 50,000 ADA. If for the first few weeks that is all the ADA we have in our pool will our pool earn as a minimum 340 ADA?

So from my original post I figured out that our pool would need to have more than 500,000 ADA in it to be more than this minimum 340 pool cost. So once we have delegate contributions of more than 500,000 in total will our delegates start to receive rewards.

And is there any fees we need to pay to Cardano to run a pool?

Am I understanding this correctly?

Thank you.

In order to receive rewards ur pool needs to create blocks; u will need more ada stacked to ur pool to increase the chance to create blocks.

No blocks - no rewards!

It will be a hard work to attract delegators to ur pool; u must to make ur pool known (posting on social media, etc)

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Read this please

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Thank you once again @Alexd1985 for stepping in to help. So this 340 ADA is what we could receive if our pool creates a block.

In reading Martin’s scripts and coincashew I see we’ll pay 2 ADA to register our pool. Is this a correct statement?

Besides our own costs to run our hardware and support the pool, it doesn’t look like we need to pay Cardano directly to run a pool. But we are competing against other pool operators to make a block. And as the post you linked to me said:

“Pool operators basically fight for rewards and there are more interested people than the network actually needs.”.

So adding value to Cardano in some way can help us get more delegates which gives our pool a better chance at making a block.

What does the post mean that only one pool can make a block per epoch? If there are 73 epochs in a year does that mean Cardano makes 73 blocks in one year and therefore there are 73 chances for all the pools out there to make a block?

If the above is true, and if many pools are not able to attract delegates then I would think many pools may never make a block and earn rewards.

Also I’ve noticed big pools just doing up more pools so their delegates stay with them which further makes it tougher for small pools to get delegates.

Thank you once again @Alexd1985 for stepping in to help. So this 340 ADA is what we could receive if our pool creates a block.
340/epoch + margin/block will be the rewards for pool; also u will receive rewards for ur pledge which means ada delegated by pool owner

In reading Martin’s scripts and coincashew I see we’ll pay 2 ADA to register our pool. Is this a correct statement?
The tax for pool registration is 500ADA which u will receive them back in the same wallet when u will retire the pool

Besides our own costs to run our hardware and support the pool, it doesn’t look like we need to pay Cardano directly to run a pool. But we are competing against other pool operators to make a block. And as the post you linked to me said:
Once u paid 500ADA for registration no other taxes will be requested

“Pool operators basically fight for rewards and there are more interested people than the network actually needs.”.
The “fight” will be to attract new delegators or delegators from other pools

So adding value to Cardano in some way can help us get more delegates which gives our pool a better chance at making a block.

What does the post mean that only one pool can make a block per epoch? If there are 73 epochs in a year does that mean Cardano makes 73 blocks in one year and therefore there are 73 chances for all the pools out there to make a block?
wrong, In mainnet, there are 432,000 slots in an epoch (one per second). However, not every slot will have a leader, or chance to mint a block. This is referred to as active slots . Only 5% of slots are active , which means approximately 21,600 blocks (the actual number varies a small amount between epochs) will be minted per epoch. The number of slots a pool is elected for is based solely on the size of the pool. for more details read here

If the above is true, and if many pools are not able to attract delegates then I would think many pools may never make a block and earn rewards.
The second part is true, with a low stack amount a pool will have low chances to create a block (that not means can’t create)
Anyway can take more month… or not; it is a lottery but with less chances than a medium pool for example

Also I’ve noticed big pools just doing up more pools so their delegates stay with them which further makes it tougher for small pools to get delegates.
Don’t remember me this… I am tottaly disagree with this, but yes it’s happening; here delegators should understand that supporting more pools will be a beneffit for cardano protocol

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