I am concerned.
I need to understand part of the staking pool design and until I do I am concerned. I understand how Cardano plans to encourage 100 or 1000 or however many “physical staking pools” (staking pools that are different as far as the Cardano protocol is concerned) is desired for decentralizaton. What I don’t understand is what prevents a a single individual from creating 2 physical staking pools, but really being in control of both of them.
Holders will tend towards pools with low staking pool fees. Once people figure how to run a single pool well, the next step in lowering fees is running multiple pools efficiently. Over time you could still have 1000 physical staking pools but if many are run by the same group, does it really matter that the protocol thinks they are different? They would effectively be the same pools with the same cons that would come with such centralization. Delegators will tend towards the lower fee pools that are dependable. They have an economic incentive to pick the lowest fee pools that are dependable. Anyone who can establish the tools and machines to run multiple pools will be able to have lower fees than anyone running a single pool. Thus the system would tend towards fewer and fewer “logical pools” that appear different to the protocol but are run by the same individuals. If there is already something in the design to prevent this I haven’t read it.
The only thing I can think of, and what I propose here, is a minimum leverage that each staking pool must hold relative to the other delegates in their pool. This forces them to have some minimum stake in Cardano to create pools, and thus safeguards us from those who could just be zero-stake efficient pool operators. Efficient pool operators with little to no ADA at stake only have so much incentive to keep the pools honest and free of coercion from outside forces. We cannot stop logical pools from being established, but we can force them to have more stake in Cardano. More stake encourages better behavior. Without it they could be enticed to hurt the system in exchange for other financial incentive and then move onto something else.
To allow for anyone to run a pool, the leverage should be established as a percentage of the entire pool. For example, if the leverage was 10%, the staking pool operator would need to hold a minimum of 10% of all of the ADA in the pool at their staking address. The other 90% could come from the delegators. This system wouldn’t prevent people from creating a pool of just their own ADA because they would hold 100% and still be allowed.
What does the community think? I’m not trying to impose anything on ADA for my own means. I have no current plans to run any staking pools. I am a concerned future delegator that wants to prevent Cardando from creating a system with holes. The sooner we solve any problems the better.
I am concerned and I don’t want to be.