A lot of you know me here and I’ve been around for a while now, and I may have helped you in resolving your problems at the forums in the past. Anyhow, I recently came through a unique incident that I would like to share with you and get your opinion on as delegators.
I run a small charity staking pool, and I am offering a new program to encourage delegators to delegate to the pool in order to get the wheels going. The program states that if you delegate 250K to the pool, you will receive 200% ADA rewards every epoch according to a certain arrangement.
When the program was launched. It was accused by some delegators that it’s an attempt for a scam. Now my question is, how can it be a scam when you are delegating your ADA to an official staking pool? You will be in full control of your funds, and you don’t have to send them to anyone or anywhere.
Your CRS pool would have 250k active stake, which would on average give you 17.2 blocks per year.
According to this calculator, the delegator reward would be 3.37% the owner reward would be 516% because the pledge is so low.
200% ROA p.a. (I assume) would mean 500k ADA p.a. or 6,849 ADA per epoch. Even if you give everything away and run on 0 cost, you would only make 17.2 x 730 / 73 => 172 p.e.
Every epoch you would therefore make a loss of 6,849 - 172 => 6,677 ADA. At a price of $2 that would be a loss of $13,354 every five days.
This sounds like you are saying they will double their money every 5 days (epoch). So if they invest 250k in 5 days they will have 500k, in 10 days they will have 1 million?! So, the way you word this does sound like a scam.
What were you trying too say?
If you are trying to say that you will match the rewards of anyone that delegates 250k at 1:1 rate you need to make that clear and don’t use terms such as 200%,
If that is what you are offering then if pool returns 5% per year, then you have to match that from your own wallet. 5% of 250k is 12.5k.
Maybe it has nothing to do with ROI or APY. The SPO will be sending ADA to match the 250k delegate’s rewards every time a block is pulled. 200% rewards. It’s just worded incorrectly, I believe.
When you say “I’m doubling the 5% reward”. Do you mean “double of the total pool reward”, which is 5.42% ?
17.2 x 730 / 250k => 0.05
If you double that, you would loose 17.2 x 730 / 73 => 172 ADA => $344 p.e. plus your running cost - this isn’t sustainable and folks will not trust you.
If on the other hand, if you mean that you double the 3.4% delegator reward and keep the pool reward, you would have 17.2 x 730 => 5,848 ADA p.a. to give away, but this is only 5848 / 250k => 2.3%. Again, you have running cost on top, which means you’d still loose quite a bit - this is also not sustainable.
Remember, your potential customer could simply delegate to a large pool and have a cost per block of
340 / (50 x 730) => 0.9%
To be more attractive than that saturated pool, you’d need to undercut those 0.9% cost per block. From you documentation it is not at all obvious what you actually mean and how you’d want to achieve that.
Not true. Assuming that your pools has a 0% margin, you have a maximum of 340 ADA to give away, but only when your pool actually makes a block. Under no circumstances can this double the delegator reward unless you reach deep into your own pockets. If you have more than one 250k customer, you will still only have 340 p.e. to distribute among all.
The model is fundamentally flawed - others may call it a scam because there is no conceivable way that it can hold it’s promises. Perhaps you like to have a look at this post - it compares operator cost vs. just delegate.
He obviously doesn’t care about costs. I could make the same offer instead of running a pool for a year with 100,000 pledge and 0 blocks. Granted, If I doubled his rewards I’d be out ~12,500ADA, but 0 blocks/year is down even more ADA as far as 100k ADA pledge, marketing man hours, and opportunity costs. It all comes down to how valuable his time is.
Being an SPO may be his only source of income. It may be his 10th. What he is offering is sustainable to anyone with disposable income and looking to boost their pool. No difference than paying 12,500ADA/year for ads. However, an easier route would be to promote his pool donating 100% to charity and utilize all tax deductions if he’s in the position to do so, IMHO…
I am actually involved in different projects that I own and operate that are related to cryptocurrencies. Stepping forward to be a SPO has nothing to do with the income. I created the staking pool for three reasons:
My love for the Cardano community.
The technical knowledge and experience that I own to operator a pool.
Being a big fan of the “Giving back” concept.
My offer for extra rewards for delegators was backed by a good heart and intensions, but maybe I was too enthusiastic about it, and that led to wrong wording.
My sentiments exactly. Maybe pitch to family and friends. I know all of my delegators personally. They know how generous I am, so I don’t get accused of scamming. To some, this isn’t about money.
