How To Build A Stake Pool With A Combined Pledge

This is a short, sweet and absolutely not legal advice note on stake pools in Cardano, both in the context of ADA and native tokens like the forthcoming World Mobile Token (WMT).

On more than one occasion the topic has been raised of whether a stake pool can combine the pledge of several people to become more competitive. The answer, at least for now, is “not through an automated process.” However, this does not mean you have to swing over to the “I guess we will just have to trust each other” side of things when considering a combined pool with other parties.

If there is one thing two decades in business has taught me, it is that this is a terrible, terrible idea. To prevent misunderstanding, to prevent conflict, it is far healthier for all parties concerned to do things formally. That means making a contract. And it is not something you should be nervous, shy or concerned about.

As long as you can find a lawyer who has an understanding of technology, and as long as you can explain the parameters of what you want to accomplish, having a perfectly fair and unambiguous contract should be short work indeed.

Below, purely for reference, I have created a short description of the type of things that might be important to codify in a contract if you want to make a pool with a combined pledge. The wording might sound legal, but it is intended as a map for a lawyer, rather than being a contract itself.

Nevertheless, I hope you find it useful.

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Example of combined pool owner terms. THIS IS NOT A CONTRACT. I am not a lawyer. This is just to help you think about it.

These parties [NAMED] are combining the following assets [ASSETS] for the sole purpose of running [THISPOOL]. The returns earned on the pool will be rewarded by [CALCULATIONOFDISTRIBUTION]. The pool will be regarding as an ongoing concern until further notice.

The parties can voluntarily liquidate this agreement with [NOTICEPERIOD] and at least [NUMBEROFPEOPLE] in favor. A single party can leave this agreement due to exceptional circumstances as recognized [LISTOFREASONS]. A single party may also sell their share in the pool with agreement of all other pool owners. The existing pool owners have first option on such sales. Otherwise the pool will continue to operate a planned.

This agreement does not supersede any rights under law. Any errors or items found to be invalid in this agreement do not invalidate the rest of the terms.

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Did I miss something? As a personal and a community exercise, why not try to catch it in the same form of language in the comments?

Thanks for reading. And thanks for exploring ways to make this community even better.