Pool Operators can now change pool fees

Staking & Delegation Stake Delegation
#1

I happened to be reading the Cardano Shelley Testnet & Stakepool Best Practice Work Group in Telegram today. You can read the conversation from here (a side warning, it has brought out some strong opinions and a reasonably long read) – https://t.me/CardanoStakePoolWorkgroup/207989

What I discovered is the update 0.8.10 has allowed pool operators to change their pool fees without delegates being made aware, unless they happen to check the pool they’re delegated to. This change in Fees does not reset their pool; it is quietly done in the back ground and takes an epoch or two to take effect. The only way the person delegating can see the change in fees, is if they actively monitor the pool regularly. – Some say you should be doing that anyway. This is absolutely not the point and in reality we all know that’s easier said than done.

From what I can see this feature was granted after a select number of pool operators requested the tool. Correct me if I am mistaken, but I did not hear or see any update which informed ADA holders of this, prior, or even after the update. Which means as of now pool operators can (may already have) change their fees without the ADA holders knowing.

Personally this type of feature, yes could be tested as we are in a test network environment, but I feel this update should have been made clear to ADA holders participating within the incentivised test network. There are so many scenarios now where operators can increase their fees. I will not go into details around my worries, I created this post to:

  1. Make ADA holders aware of this new feature the pool operators now have.
  2. To open a discussion / solution to such scenario.
  3. Give the community who have existing tools in place, such as Pegasus app, the knowledge so they can begin developing a feature to warn users of fee changes within the pools they are delegated to.

It’s one thing debating a concern, it is another coming up with a solution – I would like to see some form of warning implemented into the wallets themselves which notify people if the pool operator changes the fees. Personal responsibility or not, it shouldn’t be down to the end user delegating ADA to actively look at the pool on a regular basis. - ADA holders delegate their ADA to a pool so they do not have to be online or do work to get blocks.

One thing is clear, if this feature remains and is brought over to the Main Network, it definitely needs continued development.

From what I have read in Telegram, this topic has brought out some strong opinions, some edging on personal attacks to others. Please keep your responses structured and not targeted at any individual.

12 Likes
#2

How long till a change in fees is visible on pooltools.io ?

#3

No idea, there has been very little discussion or word around this new feature.

My guess would be, as soon as the change in fees take place on the blockchain, it is then how long it takes for pooltools.io to read that information.

1 Like
#4

Considering the extraordinary attractiveness of 0-1 percent pools, and the lack of the pledge factor, I dare to bet that there will be exactly one effect and trend: pools vying for delegations at discount levels.

2 Likes
#5

Changing pool fees is a feature that will be present on mainnet, and Daedalus is meant to signal it to you if it is less favorable than the previous fee structure. So the fact that this is tried on ITN is not really a surprise in itself, but I agree that some form of official communication around it may have helped …

5 Likes
#6

I agree with @werkof. Many stake pool operators may want to lower their fees for the sake of competition.

If a stake pool exploits this feature they are risking their reputation. (I bet we will see this at least once)

4 Likes
#7

In my eyes this is a really bad feature and will be abused hardly!

Delegators should have the chance to switch the pool before the pool operator is able to change fees!

3 Likes
#8

Yeah I agree this will be abused at least once.

The Online world is all about privacy, the people who abuse this will not be known to the community and therefore don’t mind about reputation.

My example was… I could create a pool called Beano (ticker Beano) - I am told pools don’t have names, so I apologise for my incorrect terminology for the words that identify a pool, most the community know beano as the pools name.

I start Beano at 1% … I allow the ada to build up.

One day I change the fee anywhere up to 100% and create an entirely new pool with a completely different name. This new pool again is at 2%.

Meanwhile Beano fee change has now taken effect. I am getting 100% of the rewards. A few people have notice this however it now takes them two more epochs to leave my pool; More rewards for me.

Not everyone notices so my pool now remains at a high percentage. Once too many people leave I close the pool or lower the percentage.

I repeat the process with my other created pools.

The registration fee isn’t an issue, operators quickly get that back.

My issue isn’t the ability to change the fee, it’s how it is done and the ada holders should be made aware when the fee has been put in for change.

8 Likes
#9

I am really not a fan of this change, as I already stated in the telegram group. I agree with @Lgbeano that as long as delegators aren’t made aware of the change of fee structure it shouldn’t be available. I also agree that we will see this being exploited as described above.

Another thing, other than maliciously exploiting this with a fee of 100%, is simply giving a start discount for new pool at 0-1% and then ramping fees up once a sufficient amount of delegators is found to something more sustainable which is imho around 4 - 7% in the long run. That might help smaller pools to bootstrap in the early days and maybe even help decentralization, so this could be seen positive.

What I would highly suggest is two things:

  1. Have a warning message in all wallets when the fee structure is changed
  2. Implement a waiting period of a couple of epochs starting when the warning message was displayed for the first time, until the change takes effect to allow delegators to switch

Looking forward to seeing this unfold over the next couple of epochs…

Wunderbaer

–
Owner of “Hermespools”
#HRMS & #HRMA

1 Like
#10

Just to make my stance absolutely clear. I don’t have an issue with operators being able to change their fees, in fact over long term this is probably a necessity.

I do however believe ada holders should be notified and thus have the opportunity to select to delegate elsewhere when a pool operators changes their fees. - this should be implemented prior to main net shelley release.

My own concern is why this update was put in place silently without any information being passed to the community. If there was an update, it was only touched upon and brushed away. I didn’t see or hear of any

4 Likes
#11

Yes agreed - and it was always planned that way.

1 Like
#12

that’s great to hear, is there anything official to read about this? and about this newly implemented feature? I haven’t found anything in the release notes so far…

1 Like
#13

Mask is now aware and looking to implement alerts for fee changes within pools on the Pegasus app. This is another reason why the community need to know about these updates

4 Likes
#14

It would be nice if Daedalus or Yoroi would let me set a secondary pool to auto-delegate to when your current pool sets his fee above a certain percentage. Sort of like a stop-loss

Maybe even make it visible for the pool operator, so he can calculate the most optimal fee settings for his pool.

5 Likes
#15

Lets see, who and how will change taxes. We are prepared :slight_smile:

2 Likes
#16

I have a little trouble with this formulation because it sounds like the well-known “bad companies, poor people”.

Note: This protocol is a blockchain, not Twitter or a messenger service.

The previous situation (new pool registration) has led to a permanent and complete separation of delegates and pools, whether the conditions for delegates have changed for the better or for the worse. Result: widely static situation, some pools ended up with double tickers.
The other extreme is now to allow changes silently and leave all delegations as they are. This new way is, in my opinion, the better option and only requires solution-oriented thinking and someone who provides the right tools.

If you cannot trust the pool and fear that it will change the conditions for its delegates for the worse, you cannot trust it to postpone notifications too. You should also not rely on other nodes/pools to take care of you and the other pool to which you have delegated. (the network is no infrastructure service as known by a traditional bank or public agency)

Each user could run his own watchdog and track his pool permanently. All data is available in real-time. But guess what: The delegate is most likely not able and not interested in running such a watchdog infrastructure. He expected the best conditions (possibly close to 0% pool margins) and carefree staking. nothing else.

So if not the pool and not the delegate, then, of course, you need third-party tools and infrastructure that can provide this “watchdog” service.
I predict that some capable pool operators, having either a lot of free time or a 4-8% margin to fund his efforts, will offer a notification service/application in the hope that he can promote his pool. The delegates will use this app and delegate to all pools that remain at a margin of <1%.

usually, this is free liberal market. so far so good.
But my fear is that no single delegator user is aware and care about the consequences: <1% pools will have way fewer margins to invest in their infrastructure, the own 24x7 devops team, security, development etc. not to talk about paying social security contributions and taxes for the own employees.
And so I don’t fear bad pools silently increasing the margins, but unconcerned delegators pushing the whole Cardano network at discount level quality who might run fine on calm waters, but is not prepared for rough sea conditions.

The solution I propose:
We have arbitrary treasury tax at 10% to fund future development
We have arbitrary TX fees to prevent DOS attacks and also fund future development
We should have arbitrary minimum pool margins to ensure certain network quality.

3 Likes
#17

the only instance who can issue such a certificate is the owner of the delegating wallet key.
So what you’re asking for means you either need to give your keys/funds to someone else (you know, exchange, not your keys not your funds …) and this one run the infrastructure and software logic for you.

Or you keep your home computer up and running 24x7 and use your own software to watch the pool behaviour and automatically react with a new delegation, created by your hot-wallets key.
please re-read: home computer, hot wallet, 24h online, all your funds. (hopefully)

2 Likes
#18

Yes of course, I think searching for “notify” should bring you to the relevant parts:

#19

Notification is mentioned in the specs, but has a clear and significant second part of the sentence:

“Stakeholders who delegated to this pool should be notified and asked to redelegate by
their wallet the next time they are online.”

This is not “when a pool operators changes their fees”

1 Like
#20

Yes, that is of course true. A wallet needs to be online to detect this change.