Hello. I wanted to respond to this thread with a question. What keeps a few large institutions from building several thousand pools and centralizing the entire pool? Even if k is raised, what thought is going into large, well funded groups from very easily out buying the smaller pools?
I’m new to proof of stake and have been in pow for awhile so I might be missing a lot.
As it stands now, proof of work has its problems but I can easily increase my earnings by investing more capital. In this model, it appears that there is a glaring hole in the logic.
As soon as one gets close to saturated they stand up another one and the delegators flock to it because they like the consistent rewads.
Not to mention the exchanges, such as Binance who has over 60 pools themselves that are all fully saturated. True decentralization for PoS is a myth. This is as close as we’re going to come. The only glimmer of hope is this recent article from IOHK which somewhat hints that they might be revisiting the entire way the rewards formula works… We’ll see.
One of the things that is going to make any solution difficult is the anonymity that crypto brings with it. You cannot easily tie multiple pools back to one owner if they start mixing up the names unless they scrape data from websites linking pools together or watch to see if a bunch of transactions/addresses leave the old pool for a new one in unison.
One other thing I could think of, which isn’t great or could be frowned upon, is to select pools to mint based on length of history for a # of epochs after a K protocol change. That way there is no incentive to move from pool 1 to pool 2, straight away at least. However if word got out these larger pool could set up “holder” pools prior to any change.
I feel like the best solution may be some sort of more pure randomization approach, putting less weight on the size of the pool and more on the uptime over x time period or something.
unfortunately this is aparently a bug in the cardano ecosystem: also here money / rewards works against gravity - searching it‘s way from bottom to top… a mechanism acknowledging users and not stake might help. Imagine your vote for governmental election has a weight according to your income- that is staking and SPO in crypto world. Make the world a better place but act as ancient aristrocats…
I think the protocol needs to incentivize small stake pool operators, and have some checks and balances to prevent extreme concentration of wealth. Personally I think Cardano does this better than most existing legacy government systems. Think about how $ influences politics today, with government lobbying, expensive election campaigns, propaganda is politics as usual… at least with Cardano we can all see exactly what’s happening by looking at the on-chain data and creating tools like https://adapools.org/groups and https://pooltool.io/ and you can voice your opinion here, or propose changing it through catalyst, (and eventually voltaire with on-chain governance) https://cardano.ideascale.com/ It will never be perfect for everyone, but it’s a huge step in the right direction IMHO
I just had a thought and I’ll be the first to admit I don’t fully understand how a block is being validated by the pool that is selected for a particular slot today. In order to throw a level of checks and balances on the whole process could the protocol also randomly select a smaller pool to validate the validator? the 2nd pool would not get the 340 ada base reward, but get a reduced fixed amount for making sure the more concentrated/larger pools haven’t gone rogue in some way.
Let me know if i’m way off base on this thought and maybe that doesn’t need to be done. I understand that it would like slow down the validation of transactions, but it doesn’t seem like it would take more than twice the time overall.
I am quite interested in this discussion as I am considering spinning up a staking pool as well. This youtube video (from 8:38-ish) gave me the impression that there is an incentive to decentralise and therefore a chance for small pools to be rewarding, but this thread suggests otherwise? Realising that the saturation level is currently around 64M, could this be reduced over time to help with decentralisation?
Hello all.
The distribution of slot leaders may not be ideal, but is not bad either and it simply isn’t favouring centralisation.
Lets take 14kAda holder’s choices
staking elsewhere can get you 5% = 715 Ada p.a.
or
running your pool with only your pledge.
With simple calculation 1MAda stake gives 1block per epoch = 70 blocks p.a. => with 14kAda you can expect 1 block/year = cca 1,2k Ada reward. Subtract stimated 500Ada running cost and you are breaking even to the choice 1 already.
From that point every delegation you manage to attract will increase your chance to mint another block, (very likely in other epoch) => additional min. 340Ada reward for you.
IMO the theoretical entry point stands around 14kAda, 40+kAda is a no brainer.
That’s one of the reasons I felt confident starting my own small pool even with little to no marketing/social media skill to attract delegations.
The concept of pool “Pledge” makes it prohibitively more expensive to run more pools beyond a reasonable number, and low pledge means less chance of earning rewards and running a profitable pool. Larger institutions can be profitable running many pools, but they cannot afford to buy the entire network.
The way I see it right now if you are starting a pool from scratch you have to put up a massive amount of your own investment to have any chance. You need blocks before people will stake with you and you need a lot of ADA to mint blocks. Right now 250,000 ADA is going to require over 250,000 USD of investment and you will hopefully get one block a month. Not sexy but given a few months you can get some blocks and then the delegators may follow. But this is a lot of investment and risk because ADA can fall by 60 or 70 % in price during that time who knows? I don’t know what the answer is but it would be really hard to start a stake pool right now and that cannot be good for decentralization. This is not a criticism of the network but more of an observation.
Well, it’s not that hard. Order 3 x VPS, follow this guide and you’ll be up and running within couple days. Also you do not really need a block every month from Day1, in fact if you cannot gather pledge or delegates, you don’t deserve it.
In my opinion what discourages delegators from small pools is the minimum flat fee of 340A per epoch.
For a saturated pool those 340A make a negligible fraction (1% or less) of total rewards, but for a small pool with 1 block minted, the same 340A reward for SPO eats up 30% of the total rewards.
Taking in account the recent Ada price soar I’d set the minimal flat fee to 60A.
Actually this is a very valid point and something that affects all small pool operators. The current 340 ADA minimum fee makes us very uncompetitive. We need to be given the opportunity to lower this as it does not make a lot of sense to delegate to a pool that will only ever get one block per epoch if such a big percentage goes to the pool operator. Maybe as a pool we can give things back to delegators of chain but how would you get their trust in the first place.
yea barrier of entry is a lot higher these days. The pools that have many delegators were established when ada was 0.05 - 0.15 USD, so 250k USD got you 1.6 million - 5 million ada. very easy to be an attractive pool with that base.
so, basically the decision to make is to avoid creating a new stakepool, because unless you have 1M USD you’re not going to get anything.
Here’s my solution: business move to make is to go through some M&A between this small-time stakepools and have 5-10 pools turn into a single entity with a bigger pledge, and THEN share rewards with the big boys like Binance, DIVY and so forth. It can be a bit complicated to rely on strangers or to meet new people to do this deals, but is the only quick way I see to really move up in the ecosystem. If the amount of SPs is reduced by 20%, but out of that reduction 20 new “big” SPs come up with over 1M in pledge that can guarantee them minting blocks and getting rewards, it still can benefit everyone and help to keep the decentralization going.
However a truer sense of decentralization would see no collaboration between pools, they would all act as totally separate entities from each other. It would also mean one pool per organization so nobody had too much of a hold over future ada coins. If Binance operated 90% of all the pools they would receive a large portion of the new ada minted (depending on how much was pledged to each pool), that isn’t a good thing.
There is something that can be done to help small pools without hurting anyone. Let’s call it “Keep-alive block”. A special block per pool and epoch without any financial reward.
What would it take:
Stake pool registration extended by a boolean value Keep-alive block with default set to false.
Slot lottery modified to assign 21600 regular slots + one slot for every pool with Keep-alive active per epoch.
Each minted block keeps information Keep-alive or regular
Reward formula modified to include transaction fees in Keep-alive blocks to the total reward pot, but exclude such blocks from pool rewards =>reward for regular blocks will not be affected.
Pros:
pool operators can verify they have their setting right and pool working fine.
delegators can verify pool performance on pages like pooltool.io - if you see a pool consistently minting its 1 block without rewards per epoch, you can assume when they win the slot lottery, they’ll successfully mint the regular block as well.
huge psychological boost for small SPO’s who would feel their contribution to the chain and ecosystem.
unlike other “free block” proposals it will not motivate anyone to start zillions of new pools.
Cons:
extra programming effort for IOG
higher chain density from 5% to upto 5,55% theoretically in the unlikely case if all 2500 active pools subscribed. I am 99,9% sure the current node software can handle it already, but
Together with lowering the minimal fixed fee, this could make the playing field more fair among all pools.
