Can anything be done to help small pool operators as the ADA price rises

Hi there - I just wanted to get the view of others on potential difficulties in running a small pool as the price of ADA rises. I think at the moment having around 1M ADA staked will give you a reasonable chance of minting about 1 block per epoch. However let us say for discussion purposes that the price of ADA went to $2 then you would require around 2M USD worth of investment to be staked into your pool to be able to mint the same block. Now of course rewards are greater but for the pool operator it could be more challenging to get the critical mass of stake to be functional. It is the old chicken and egg scenario where you need to mint blocks to get stake but you can’t get stake if you haven’t minted blocks. With increasing ADA prices it will be more difficult to get that first block minted.

Appreciate the views of others on this?

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It’s definitely a tough challenge to attract delegators. You have to consistently grind on marketing and maintaining technical performance. It would also help if you provided some kind of value to the community too.

One thing you could look into is applying for the next round of IOG delegation. This could give you a boost as well:

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Hi there,
I don’t think the probability of minting blocks is related to the price of ADA in USD
The number of blocks is proportional to the amount of ADA staked. Be 1 ADA = 6 cents or 6 dollars the odds of getting a block in a given epoch does not change for the same amount of ADA staked

Yes agree that the probability does not change. I was more or less saying that as the price of ADA gets higher it is takes more investment in USD to have sufficient pledge and stake to make minting block realistic. Yes it is still down to the number of ADA you have but to have delegation of say 1M ADA to get about 1 block per epoch soon will require 1 Million USD in pledge and delegation. A few months back this was only 100,000 USD. I hope that makes sense.

Yes indeed, I agree with you :+1:

Yes, that’s the issue that I’m also facing. I have small pool [LOTUS] with just 1k pledge and it’s lot of money for me (@80 cents per ADA). As a single small pool operator I’m not able to get much delegation and also is not able to mint any block. Whereas if I see other pool operators having multiple pools with 3-5M pledge their luck is pretty much higher.

I’m hoping that I can mint at least one block per month to keep the expenses zero.

I’m on the same boat with bro… I’m about to pledge 500 buy I’m thinking adding more if I can…

Please be aware that you have to pay 500 ada to register a pool. (To be precise this is only a deposit but it does not count to your pledge)

So, if you have “only” 500 ada then it might make more sense to delegate instead of running a pool.

Thanks for your inputs, so 1500 or 2000 is a good way to start for a small debutante pool owner…?

you can start with any amount. If you want to pledge let say 1000 then add 500 for pool registration fee and ~1 ada for transaction fee. So overall for 1000 pledge put 1505 for safer side. Similarly for pledge amount 0 put 505

Thanks, so are getting any reward so far??

I have to say, i’m very skeptical of the pools with the small pledge amounts and small stake; the directory is full of pools like that which have never had a block: ever. There is not a direct relationship between active stake size / pledge / blocks… but there is a strong relationship. If you look through the listings at adapools.org, you will find lots and lots of low ranked pools with low pledges and low stakes that are completely unsuccessful. As I said, many of them have never earned a block, period.

In my opinion, the rewards algorithm favors centralization. That is, it favors pools with huge stakes over those with smaller ones. That concentrates the production of blocks across a smaller number of pools, which centralizes the chain. It is very undesirable, and I think this is one area where the Cardano team needs to do some thinking.

That ties into this discussion in a practical but not very encouraging way. And that is to say this: low pledge and stake = no rewards. None. It’s really important to understand that going in, because it makes it clear that the hard part of running a stake pool isn’t getting the pool running, it is marketing the pool so as to get delegators. That’s the only way you will get blocks right now.

I guess I’ll add one more observation: Proof of Stake implementations may be more efficient than POW, but at least with POW mining, a miner can be guaranteed of getting at least some rewards. That’s just not the case with Cardano’s block delegation algorithm at this time; it is perfectly possible to run a pool for multiple years and never get a single block. I have seen pools like that in the listings.

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ADA has now gone over a dollar in price. I am running a pool with around 250k staked which I am hoping will give me at least one block a month while I try to develop more stake. The problem for new Stakepool owners is that 2 months ago 100,000 USD would get you 1M ADA which could get you started minting one block per epoch where that is now 1M USD. You need to be able to raise the capital yourself to get through this first step and here lies the issue. This tends to create a barrier for true decentralisation. The only way I could see this changing was if there were more blocks produced that paid less to allow some contribution by smaller pools. However I doubt that this is possible

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Wow! Great share. Thank you.

It’s good to see that people care so much about the ideals of what all this effort really stands for. You are a wise one indeed.

And yes, I am kicking myself for not finding this opportunity soon but that is how fate played out. Now, I just must out play the fate LOL

I hate to be a downer on this topic, but here’s the reality: the algorithm makes it pretty clear that the small pools are not a priority. In fact, I’m not sure what the views are in the Cardano foundation in actuality, but just looking at the current network parameter values suggests that the number of pools out there presently is multiple times higher than desired, and that decentralization isn’t really a priority. They are as follows:

a0 (pledge influence): 0.3
decentralizationParam: 0.16
nOpt (Desired number of pools): 500

On their face, these numbers suggest that decentralization is the smallest influence in determining who gets to be a block leader, while pledge is greater, and pools over 500 probably won’t do very well. So, unless your pool can attract large stakes… it’s not going to do well.

I think that this is an area where the ADA team needs to do some more thinking. The current network params reward centralization and they reward the deep pockets. That’s actually true in all of crypto… but I had hoped ADA would be different.

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I don’t think there is a simple solution to this problem. It is more important than anything to implement a provably secure blockchain (i.e. no double spending, no bad forking, …). I believe that the Ourobouros algorithm requires block assignment probability to be proportional to stake. If you change that, you need to redo 60 pages of mathematical proofs.

No matter how you adjust the parameters, 1000 ADA pledged/staked over a total of 22 billion will always represent the same probability. You need to change the whole POS model if you want to give better chances to small pledgers. So I don’t think that the Cardano team doesn’t care about this - I think it’s just the model that is built this way. The number of desired pools will probably increase over time, but very likely, they’ll all be saturated quickly.

At least it’s not like POW where people have bought many ASICs, wasted lots of electricity, and never solved a block.

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@ttupper I’m with you too. I was hoping Cardano was different too. I was hoping PoS was an idea to get everyone involved, even the little guy working in his garage. But the more I look into it, the more I find the rewards go to those with money. Not to mention, I very much like the idea of decentralizing and taking ownership, but it looks like that’s not going to happen the way all the PoS works.

I do mining now. (small-time, in the garage) I was hoping I’d be able to transition to something like this. I don’t trust the idea of joining a pool. I like mining, though I realize its faults, it does one thing well, it lets one with some technical knowhow and a small investment get some return for that and grow it over time.

I’d like to point out that I only just got into mining. I had thought only huge mining farms were able to profit from it, but I was wrong. Even crypto worth pennies makes money. Mining or PoW has one advantage over all the PoS I’ve seen so far, anyone can do it , and anyone can get a reasonable return. Actually, that creates another advantage, way more people involved doing the work, much more decentralized.

Why can’t there be a PoS that’s somewhere in the middle? I stake 0.x tokens (not whole, whatever I want) and I take on the technical hassles of running a node/validator, I get reward for validating. I know, that’s a whole other discussion. I’m just disappointed in what I’m finding in PoS, there’s no incentive to operate a node, unless you’ve already got a lot of tokens. Also, I don’t want to run a stake pool and try and get people to join it and take on that responsibility for others too. I just want to operate a service that validates transactions and get rewarded for it all on my own, but part of the network. (like mining, except you don’t need power hungry GPU’s)

Keep in mind I’m not arguing that IOHK doesn’t care about decentralization, nor to imply that Cardano is centralized. It is not; Cardano is more decentralized than probably any other token. What I’m suggesting is that decentralization is not, in and of itself, a thing that gets rewarded. The algorithm for choosing block leaders doesn’t, for an example, appear to do things like deliberately focus on a more vastly decentralized model. You can see that just by looking at who is minting the most blocks. If the primary focus of the algorithm were to reward decentralization, then blocks would not be most consistently spread across the top 50 - 100 pools. Keep in mind that 50 to 100 is actually more decentralized than most crypto, which is dominated by a handful of big pools. But it’s nowhere near where it could be if the block leader algorithm really focused on rewarding decentralization. What if, for example, having extra relays was factored in? I operate 3 relays. I receive essentially no rewards for doing so. Yet it benefits the network. To me, that sort of thing is more important than how much ADA I possess and am able to pledge, and I’m disappointed by the appearance of how the algorithm actually works.

I agree, I’d like to be able to run my small pool with 10K pledge and have something that pays for itself. I don’t think this will happen anytime soon, but it’s interesting to think about how the PoS system could be modified to achieve better decentralization.

I don’t think you can get rid of the proportional reward per stake system. So big players will always have an advantage and we should embrace it. But perhaps the rewards accumulated during an epoch could be distributed to all the pools in operation, in proportion to their stake. So even if you have 10K, you’re still guaranteed a small amount each epoch. Of course, this leads to other problems : you need some form of validation - you don’t want pools doing nothing to get rewarded. So perhaps every pool should handle every block in parallel, and the one that gets appended to the chain is one that gets elected as done currently. But you’d still have the history of who actually worked and know who deserves its share of the reward.
That would be a waste of global computational power, but certainly not as bad as PoW.
Not sure how well that would work - there are probably problems with this idea but it’s the best I could come up with.