Title
Proposal to Reduce minPoolCost from 170 ADA to 75 ADA
Description
This proposal recommends lowering the Cardano protocol parameter minPoolCost from 170 ADA to 75 ADA.
The purpose of this change is to reduce a structural barrier that disproportionately harms small and growing stake pools. Today, minPoolCost functions as a heavy fixed burden on pools producing very few blocks per epoch. In practice, that burden reduces delegator yield and pushes delegation away from smaller pools and toward pools that are already large enough to dilute the fixed fee over more blocks. This dynamic widens the viability gap for smaller operators and makes it harder for them to grow into sustainable competitors.
This proposal is a targeted and conservative stopgap to provide immediate relief while the ecosystem continues working toward the more complete long-term solution of minPoolMargin described in CIP-23.
Proposed Change
Change:
- Current value:
minPoolCost = 170 ADA - Proposed value:
minPoolCost = 75 ADA
Motivation
The current value of minPoolCost is creating a persistent viability problem for a large share of active pool operators. The recent IOR incentives report describes a mature but stratified equilibrium with 1,614 active pools, of which 873 operators (54%) remain below the roughly 3M ADA threshold associated with consistent block production. The same report notes that with current delegated stake, only 289 pools could theoretically saturate. That is not a picture of an ecosystem where smaller operators are merely “not trying hard enough.” It is a picture of a system where many pools are competing inside a constrained environment and a large percentage are structurally disadvantaged from the outset.
The key issue is the way a fixed fee interacts with low block production. When a pool produces only one block, or less than one block on average per epoch, the fixed fee consumes a very large share of the reward associated with that block. This acts as a “first block tax”, which is a burden that is steepest for the smallest pools and then falls rapidly as more blocks are produced. This does not merely create a temporary yield disadvantage. It creates a strong incentive for delegators to avoid supporting small pools in the first place, because once a pool falls below the threshold for reliable block production, the fixed-fee burden becomes punitive.
This matters because the harm lands primarily on the small pools that lose delegation, not on the delegators who can simply move elsewhere. Delegators can and do redelegate toward pools already making multiple blocks per epoch. The result is a feedback loop: small pools are less competitive because the fixed fee is too large relative to their reward flow, and because they are less competitive, they struggle to attract the delegation needed to escape that condition. In other words, minPoolCost helps create and worsen the viability gap.
Why action is needed now
This problem is getting worse over time.
As reserve-funded rewards decline, a fixed ADA-denominated fee consumes an ever-larger percentage of the shrinking reward available to small pools. The delegator penalty for pools making one block per epoch is shown as having been roughly 22% shortly after Shelley, then temporarily reduced from 56.5% to 28.3% when minPoolCost was lowered in epoch 445, but having since climbed again to 52.8%. The same analysis shows a predictable path to 100% penalty for single-block pools at around epoch 758 (February 2028) if no further adjustment is made.
That trajectory is the central reason for proposing 75 ADA specifically. The goal is to restore the burden on very small pools to something closer to the range Cardano experienced much earlier in Shelley, before the fixed fee had grown into an overwhelming share of shrinking rewards. In that sense, the proposed value of 75 is intended as a calibrated correction.
Why lowering minPoolCost is the right response
There is already strong precedent for treating minPoolCost as a parameter that can be lowered when it becomes misaligned with current network conditions. PCP-001 recommended reducing minPoolCost to 170 ADA, with the committee noting that lower minPoolCost expands the fee options available to SPOs without forcing any operator to adopt the new minimum. PCP-001 also explicitly tied the recommendation to the natural decline in rewards and the difficulty smaller pools face in remaining competitive.
That same logic still applies now, and in some respects it applies more strongly. The 2023 reduction provided temporary relief, but it did not solve the underlying problem because the burden continues to rise as rewards decline. Lowering minPoolCost again is therefore best understood as a continuation of the same line of reasoning, adjusted for present conditions.
Race-to-the-bottom concerns
A common objection is that lowering the minimum fixed fee will trigger a market-wide race to the bottom. The available evidence does not support that concern.
The recent IOR report shows that after minPoolCost was lowered from 340 ADA to 170 ADA on 27 October 2023, 340 ADA remained the dominant fixed-cost setting across all active pool sizes. The report explicitly states that the reduction did not cause a market-wide fee reduction. Instead, it created two broad tiers: incumbent pools continuing to use 340 ADA, and smaller challengers using 170 ADA as a competitive tool. This proposal uses this same evidence to show that a race-to-the-bottom is not a concern.
This is important because it shows that lowering minPoolCost expands operator choice without compelling all operators to compress fees. Established pools can continue charging higher fixed costs where their delegators accept that structure. Smaller pools gain room to compete. That is not a race to the bottom; it is a broader fee-design space.
Sybil-resistance considerations
Another objection is that a lower fixed fee makes Sybil attacks easier by making it cheaper to operate many pools. Recent research points in the opposite direction.
Section 3.5.1 of the IOR incentives report states that the IO Research team believes minPoolCost favors Sybil attacks and should be lowered to 0 or removed, ideally paired with the introduction of a minimum margin parameter. The underlying logic is straightforward: high fixed fees create an incentive for large entities to split stake across multiple pools in order to harvest the fixed fee multiple times. In other words, the fixed fee can reward fragmentation by well-capitalized actors rather than deter it.
That conclusion is notable not only because of its substance, but because it represents a meaningful update relative to older intuitions about the role of minPoolCost. PCP-001 already found no reason to regard 170 ADA as a feasible Sybil enabler. The newer IOR analysis goes further and argues that minPoolCost may actually favor Sybil behavior. Taken together, those points significantly weaken the case for preserving a relatively high minPoolCost on security grounds.
Relationship to minPoolMargin
This proposal should be understood as a stopgap, not the final destination.
CIP-23 proposes minPoolMargin as a new protocol parameter that would place a lower bound on the variable fee instead of relying so heavily on a fixed fee. CIP-23’s motivation is highly relevant here: it states that the current minimum fixed pool fee places a large and unfair burden on delegators to pools with smaller amounts of stake and incentivizes delegation toward larger pools. It also recommends introducing minPoolMargin initially at 0 to minimize disruption, with values to be chosen later through the standard parameter process.
That is the more structurally appropriate long-term direction. But until minPoolMargin or a similar mechanism is available, the network still needs a practical way to reduce the harm caused by the present fixed-fee structure. Lowering minPoolCost to 75 ADA is an immediate step that can be taken now, inside the existing framework, while longer-term fee reform continues.
Expected Effects
If adopted, this change is expected to produce several benefits.
First, it should reduce the penalty faced by delegators considering smaller or newer pools, especially those near the threshold of consistent block production. That should make it easier for viable small operators to attract and retain stake long enough to grow.
Second, it should reduce one source of structural centralization pressure. When delegators are pushed away from small pools primarily because fixed fees dominate the reward at low block counts, the protocol is not rewarding the best operator; it is rewarding pre-existing scale.
Third, it preserves operator choice. Just as with the reduction from 340 to 170, a lower minimum does not force any stake pool to change its fee structure. Operators who believe 170 ADA, 340 ADA, or another value best fits their business model remain free to use those settings, subject to normal market discipline.
Risks and Tradeoffs
This proposal does not claim there are no tradeoffs.
Some pool operators may worry that a lower minimum increases competitive fee pressure. That concern is understandable. But the empirical record after the 2023 reduction suggests that the effect is more limited and more nuanced than a simple collapse in fees. The market did not converge on the minimum; it remained differentiated.
Likewise, lowering minPoolCost alone does not fully solve the broader reward-distribution and sustainability questions facing Cardano. The IOR report notes that current rewards remain overwhelmingly funded by reserves rather than transaction fees and highlights the importance of a broader economic transition over time. This proposal should therefore be read as one targeted correction within the existing system, not as a claim that all staking-economics issues can be resolved by a single parameter change.
Recommendation Requested
I respectfully request that the Technical Steering Committee support lowering minPoolCost from 170 ADA to 75 ADA.
The case for doing so is straightforward:
minPoolCost is contributing to a persistent viability gap for smaller operators; the burden it creates grows automatically as reserve-funded rewards decline; the 2023 reduction showed that lowering the fee does not trigger a race to the bottom; and recent IOR research indicates that minPoolCost does not provide the Sybil protection often attributed to it and may in fact favor Sybil incentives instead.
For those reasons, lowering minPoolCost to 75 ADA is a prudent, incremental, and timely adjustment. It provides immediate relief where the current parameter is doing the most damage, while leaving room for the ecosystem to pursue the more complete long-term solution of minPoolMargin.
References
Primary references informing this proposal include:
- Ryan Wiley, “Proposal: Reduce minPoolCost to 75” presentation, especially the sections on the viability gap, delegator penalty trajectory, and race-to-the-bottom evidence
- IOR incentives report, especially section 3.5.1 Pool cost and the recommendations section discussing the viability gap, fixed-fee distribution, and the conclusion that
minPoolCostshould be lowered to 0 or removed and paired withminPoolMargin. - PCP-001, which previously recommended lowering
minPoolCostto 170 ADA and established the principle that reducing the minimum expands fee options without forcing all operators to change. - CIP-23, which proposes
minPoolMarginas the longer-term structural solution.