One day it comes Google or Windows or Facebook or Apple or Samsung or others like them. They find a use case and launch an ISPO which will offer the ADA rewards from the network plus some other coin with a high potential for growing. Everyone jumps on the project because everyone is looking for yield farming and eventually for projects with high potential. At that point long are gone the days where a small pool can attract the people to stake with them. I’m thinking that at that point we can call the centralization status of Cardano as activated.
We already can see this migration of stakers from some pools to the others based only on the potential earning. As Charles often mentions: the incentives always win.
I have a more optimistic outlook. At this point the biggest threat to decentralization are the exchanges in my opinion. Currently the ISO’s that are happening as well as the defi protocols that are launching will be incentivizing people to get their Ada off the exchanges and into their private wallets so they can participate in the fun and potential profit that they offer. Going forward wallets will give users the ability to stake to multiple pools which will be very helpful to smaller pools. With all that said there will always be pressure for smaller pools to offer some sort of value in some shape or form. That value could be in the form of giving back to the community or charity or just good marketing.
Well, if that will work so well than we won’t have such a dominant player in the world of search engines, or a huge player in social media or so on and on.
To think even further, the users are not even earning anything from Google or Facebook or Netflix or other dominant players, they just enjoy the service. Yet, when you come with a bussiness like Binance (because you like this example) where they can enjoy a service and than Binance can pay a bit more than the default ADA rewards for staking, than you have the people piling up to get the both benefits. Binance instead can borrow that ADA and earn themselves plus that they are getting allot of voting power in the Cardano ecosystem. It is becoming like their own chain and they don’t even have to buy and risk allot of Cardano, they just use the others money.
Maybe they won’t be the only ones but for sure just a small number of players can get a huge power. A scenario like on the S&P where just a few players have a market cap equal or bigger than the rest of the market it can make you understand where this can go. We are much more decentralized by just having governments controlling the money that going down that route where a maximum of 10 players can get a power bigger than all the others.
People will stake in the place where they can get the bigger amount and if you play nicely because you want to be a nice player helping the small pool, others will play just for the money and by earning more than you they will get more power over time and their decisions will become dominant.
The game is like this: you even join them in the game for power and stake with the big fish or you are choosing clearly to loose.
Unfortunately to me it does not look like Cardano has solved the tendency to centralization which can be seen in Bitcoin and others, but it created just another model. I raise this issue around here because we should look for solutions.
I can only speak from my personal experience. I am staking to a total of 5 pools at the moment. Of those 4 are ISOs (Initial stake pool offerings) Meld, Mrqur, Ray, and Minswap. Minswap is doing something interesting and picked smaller community pools to work with which is definitely helping decentralization. More on that here: https://fiso.minswap.org/
I will be staking with Sundaeswap when their ISO goes live. In my opinion anyone who is currently leaving their coins on an exchange is either actively trading or ignorant. I think the ignorance will dissipate over time as people realize the opportunity for profit that exists elsewhere. There will also be more opportunities for stake pools to provide profit for themselves and value to their stake holders like sharing fees from oracle services, and babble fees. (Babel fees - denominating transaction costs in native tokens - IOHK Blog ) So to summarize I can certainly see how it might be discouraging for some small SPOs now I think the future is rich with possibilities.