July 31, 2025 | Parameter Committee Triweekly - meeting notes

Governance Parameters Committee Updates
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Triweekly parameter committee meeting - July 31, 2025

These are the minutes of the PCs (Parameter Committee) triweekly meeting. This is a summary based on automatically generated notes and may therefore contain inaccuracies or errors.

The purpose of the Parameter Committee is to provide technical advice and recommendations relating to protocol parameters. It discusses all parameters relating to the Cardano protocol including network, technical, economic and governance parameters.

Summary

Alexander Moser informed the group that the Plutus team wished to withdraw their request to update cost model parameters (PCP00003 and PCP00004), to which Samuel Leathers and Neil Davies suggested separating PCP00003 (Max transaction execution units and max block execution units) and moving it forward sooner. Alexander Moser also introduced a governance proposal to set the minimum pool cost to zero, which had been discussed in the SPO call. Kevin Hammond suggested providing all stake pool operators with a fixed income, but Karl Knutsson warned that a fixed income for SPOs, especially small ones not producing blocks, could remove the incentive to keep nodes running, jeopardizing network stability.

Details

  • SPO Call and Disaster Recovery Kevin Hammond welcomed participants to the SPO call, noting a discussion about conducting a disaster recovery “fire drill” on SanchoNet, rather than mainnet, to simulate and recover from potential disasters like setting bad parameters or burning the treasury. Neil Davies expressed satisfaction that the drill would not be on mainnet.

  • Jonathan Kelly noted that one individual was strongly pushing for changes that could lead to centralization, prioritizing rewards over decentralization. Kevin Hammond emphasized that rewards should incentivize good behavior, while Neil Davies suggested rewards should disincentivize bad behavior.

  • EMUGO Representation and Governance Change Alexander Moser moved to the official agenda, noting Peter’s departure from EMUGO and the need for a replacement, ideally someone from EMUGO to fill a seat within the group or as an economics subject matter expert. Kevin Hammond clarified that with the ongoing governance change, EMUGO’s historical role of signing off on recommendations is changing, making their technical presence less necessary but socially desirable.

  • Constitutional Committee (CC) Invitation Kevin Hammond suggested inviting members of the new Constitutional Committee (CC) to be aware of discussions, especially regarding major parameter changes. Samuel Leathers and Nicolas Cerny affirmed that some CC members, including Samuel Leathers and Nico, were already present, and suggested inviting all new CC members, particularly Tingvard due to their experience. Alexander Moser confirmed the intention to extend an invitation to future CC members to observe.

  • Role and Challenges of the Constitutional Committee Kevin Hammond raised concerns about the CC not yet being elected and the potential for governance halts if existing members time out before new ones are in place. Neil Davies emphasized the need for any committee with power over parameters to understand and trust the governance process, expressing concern about indirect veto power and the “scaling problem for decentralization”. Samuel Leathers questioned the term “rules lawyers” used by Kevin Hammond, who clarified it referred to nitpicking over details and rejecting proposals based on technicalities rather than intent.

  • Severity Levels and Security Council’s Role Nicolas Cerny inquired about which council of experts defines severity levels (one, two, or three) according to the constitution, noting it was never clearly defined. Samuel Leathers and Neil Davies stated that the security council should define and categorize these issues. Kevin Hammond explained that severity one is critical, severity two is major, and severity three is minor, acknowledging the process is ultimately subjective and can change with further investigation.

  • Plutus Cost Model Parameters Update Alexander Moser informed the group that the Plutus team wished to withdraw their request to update cost model parameters (PCP00003 and PCP00004) because new primitives would be introduced in the next intra-era hard fork, making it more sensible to change existing parameters closer to or after that fork. Samuel Leathers and Neil Davies suggested separating PCP00003 (Max transaction execution units and max block execution units) and moving it forward sooner, as its three-month constitutional clock had already begun.

  • Three-Month Constitutional Requirement for Parameter Changes Samuel Leathers questioned the technical reason for the three-month clock on parameter changes, to which Kevin Hammond explained it was mandated by security researchers to prevent system security from being fundamentally affected without sufficient awareness. Kevin Hammond clarified that this requirement applies to security-related parameters and those that could derail the governance system, such as those impacting pool takeovers. Samuel Leathers sought to confirm that the requirement came solely from security researchers, not engineering or the community, which Kevin Hammond affirmed.

  • Guardrails and Constitution Script Samuel Leathers proposed removing technical parameters from the constitution’s text and having them only in the contract script, but Kevin Hammond and Neil Davies argued against this, stating that the constitution committee enforces rules written in the constitution. Neil Davies added that the constitutional script has limitations, unable to look into the past or future or capture relationships between parameters, making a human-readable form necessary. Kevin Hammond emphasized that if a rule isn’t in the constitution, the CC cannot enforce it, and a script alone might allow unconstitutional actions if it contains bugs.

  • Stake Pool Cost Setting Proposal Alexander Moser introduced a governance proposal to set the minimum pool cost to zero, which had been discussed in the SPO call. Jonathan Kelly reported mixed feedback, with support for the zero cost but a desire for a minimum margin in its place, which would significantly reduce revenue for small SPOs. Kevin Hammond suggested a rethinking of incentives, while Jonathan Kelly believed many proposed changes would centralize stake distribution and harm smaller pools, particularly those in Africa, by disproportionately impacting their saturation based on pledge.

  • Fixed Income for Stake Pool Operators Kevin Hammond proposed providing all stake pool operators with a fixed income, but Jonathan Kelly raised concerns about “multi-poolers” who exploit minimum income to gain inflated earnings despite low saturation. Kevin Hammond clarified that a guaranteed income for blocks would not be subtracted from delegator rewards, serving as compensation for pool expenses. Neil Davies suggested a holistic stakeholder analysis is needed, as the current discussions often focus on individual segments rather than a comprehensive model of how all parties relate to these parameters.

  • Risks of Fixed Income for Small SPOs Karl Knutsson warned that a fixed income for SPOs, especially small ones not producing blocks, could remove the incentive to keep nodes running, jeopardizing network stability. Neil Davies supported Karl Knutsson’s point, stating that system integrity is a key stakeholder consideration, and questioned why a small operator would keep their machines on if not minting a block. Neil Davies concluded that the issue is a “policy construction problem” rather than a technical one, stemming from a lack of understanding of stakeholder interactions.

  • Lack of Metrics for SPO Quality Kevin Hammond questioned whether the current mix of SPOs is appropriate and if the mechanism is unfair, while Neil Davies highlighted the absence of metrics to judge SPO quality. Jonathan Kelly stated that people currently rely on Return on ADA (ROA) as a shorthand, which disadvantages smaller pools. Alexander Moser suggested documenting these discussions as a response to the proposal to reduce pool cost to zero, and the meeting concluded with a commitment to capture these thoughts in a document.

  • Reserve Depletion and Unclaimed Rewards Tommy Kammerer inquired if a fully pledged pool would deplete reserves faster or if the depletion rate would remain the same, with other pools simply receiving less. Kevin Hammond clarified that unclaimed rewards from pools that fail to meet performance targets are returned to the pot for future reallocation, not given to other pools, meaning operators cannot hasten reserve depletion. Neil Davies added that if all operators behaved perfectly, that would represent the maximum depletion rate, and any deviation means reserves are depleted less quickly.

  • Multi-Pool Operators and Centralization Jonathan Kelly elaborated on multi-pool operators who leverage minimum pool costs to inflate revenue, often using a single server with VMs, which he felt was cynical. Neil Davies suggested that if such actions make the system less reliable, they should be called out through a mechanism for appeal and public opinion. Jonathan Kelly and Neil Davies discussed how multi-pool operators centralize and may not run enough relays, impacting network quality and relay contributions, highlighting the need for a stakeholder map to quantify and understand these interactions.

  • Social Pressure and Bad Actors Karl Knutsson noted that social pressure has worked in the past to highlight poorly performing pools, citing an example of an SPO who called out bad actors on Twitter. Neil Davies emphasized the need for a stakeholder map, modeling, and performance metrics to identify bad actors and apply social pressure to make them disappear, acknowledging that some issues are due to poor performance despite full pledge.

  • Stake Pool Underperformance Neil Davies and Kevin Hammond discussed how stake remains with private pools despite the theory that it should move to other pools. Jonathan Kelly proposed a probabilistic methodology to assess pool quality based on historical block production, suggesting that significant underperformance could indicate connectivity issues, but this would interfere with the VRF (Verifiable Random Function). Neil Davies clarified that while the chain cannot be made aware of this for automated action due to the need for voting and potential security risks, social pressure could be created.

  • Quality Metrics and Network Integrity Kevin Hammond noted that a quality metric based on expected block production exists within the rewards calculation, which Jonathan Kelly affirmed is visible as “luck” in C Explorer, indicating setup problems if a pool’s luck percentage is low. However, Kevin Hammond stressed that underperformance does not allow for forced delegation movement to other pools, as there is no mechanism for such action. Neil Davies explained that automating meta-level actions like using “luck” to change delegation would introduce new security problems, potentially leading to attacks or unjust penalties if a pool was under attack itself.

  • Balancing Throughput and Attack Vectors Jonathan Kelly acknowledged that some degradation in block production might be acceptable to maintain a less attack-prone network, and Neil Davies added that such degradation does not necessarily mean a loss of throughput, only a slight delay. The speakers concluded that the current discussion involves fractions of percentages in terms of impact, and such numbers can be analyzed. The conversation shifted to figuring out what needs to be fixed, with Neil Davies suggesting the need to understand how everyone is connected and what should be measured. Jonathan Kelly emphasized focusing on network integrity over rewards, expressing concern that a fully rewards-based system could compromise integrity.