Random stakes to Pool Operators

I understand that there are large random stakes made to small pool operators every second or third epoch. Can this be confirmed and if so what is the criteria for selecting the pool operator? Does everyone have an equal chance?

Now the K parameter is changing, strategies need to change:

IOG strategy

CF strategy

This is interesting and I can understand the philosophical ideology behind the new delegation process. However at the risk of sounding a little pessimistic what are the chances of a sole operator like me who has spent considerable time and investment setting up and maintaining a pool actually getting a delegation. I cannot raise enough money to stake sufficient ADA to realistically mint blocks and I cannot compete with larger pools that have the social impact and connections to charitable organisations etc to put them in line for delegation of stake. At the end of the day are you saying pool small pool operators like me who do this out of interest and belief in the project are simply just never going to get any support. I cannot see how this can help towards decentralization if everyone is not given a realistic chance of delegation of stake. In addition to this how can subjective evaluation of the social value of a Stakepool help towards decentralization when the whole concept of who gets awarded stake is in itself centralized. This is a concern to me.

Your comments started off asking a question, then you spoke yourself into a hole where you have given up already. Let me throw you a line to climb out :wink:

The CF delegation is random, it only asks for certain requirements which they set out in their initial communication here

Within this article, they lay out the terms of a pool to be included for a chance to receive delegation:

  • Hold between ₳25,000 and ₳2mn as a pledge,
  • Operated by a stakepool operator that only runs one pool (difficult to verify but best effort attempt),
  • Have a normal operating cost of less than 5% variable rate, and a fixed rate of around ₳340,
  • Does not have a high number of ada already staked (less than 5% saturation),
  • Have validated blocks successfully in the past,
  • Have not been delegated to by the Cardano Foundation in the last four rounds.

Obviously the CF need to make sure their ada is contributing to the eco-system so need to have some reassurances that a pool has been set up correctly and able to produce blocks. Fair if you ask me. Can’t expect them to delegate to a pool that doesn’t work.

In regards to IOG and their delegation, if you read their article it states people need to reach out to them (when available) to apply for their delegation and why your pool should have it. Don’t put yourself down so quick, if like you say, you have spent a considerable amount of time and investment setting up and maintaining a pool, you clearly have enough interest and care for the system. Don’t rule yourself out before you even try. You will become your own worst enemy!

So to answer you question, unless your pool is already successful, you have no less chance than any other operator at getting some delegation from one of the entities.

Just a side note to your comment also, IOG is an independent for profit company, contracted to create cardano. They are not cardano. IOG can do what ever they want with their ada, I consider it very good of them to make the decision to close 19 of their 20 pools down and put trust in the community and their pools. They certainly wont earn as much ada.

Binance on the other hand, they hold a huge amount of ada too, yet have created multiple pools which they just delegate to.

1 Like

Thanks - I appreciate your time with your response and I will admit I do not really understand the structure of how IOG, IOHK, the Cardano Foundation etc all work and who all the players are. I think I do speak for a lot of crypto enthusiasts however that like to get involved in these projects and invest time and money. The thing is I have staked around 10,000 USD in ADA and will probably increase my stake to around 20,000 USD. This level of stake will give me maybe an 8% chance of minting a block each epoch. Realistically this could take many months before I get a chance to mint a block. If unlucky it could be much longer. How do you keep the smaller operator involved when they may not even be considered for a delegation for months or even years but yet they have invested 10 or 20 thousand USD not to mention the time and investment of running a Stakepool. You may think I am digging my own whole but I have been involved for crypto for years and I have mined Bitcoin, Litecoin and Ethereum in the past. Each time I could always see my reward with minimal investment but Cardano now worries me as it is becoming more apparent that the system is only going to favor those that can afford a significant investment. If that is the model then fine - it is what it is I suppose - but somewhat disappointing from my point of view and I am sure for many others.

2 Likes

I understand your concern Graham,

The bonus with cardano is that everyone who holds ada can receive rewards from staking, they do this by delegating their ada to a stake pool.

Running a stakepool is a different cattle of fish entirely, this is similar to starting a business, you start a brand (your business), you will charge fees for a service, which depending on where you live, you may need to pay tax on that. Like any business, if you do not have the capital to join at a place you’re comfortable with, then you may need to consider partnerships or have someone invest in you. You also need to consider marketing… why should someone delegate their ada to your pool? No pool operator is entitled to any delegation, including from whales such as the CF and IOG.

Comparing mining on a PoW block chain to Staking on a PoS block chain is comparing mining to delegating ada. Running a stake pool is different.

Not all stake pools will last, that is nature with any business. I would spend some time researching to establish whether running a stake pool is for you, or if delegating your ada for rewards would be more profitable and better suited

2 Likes

Just remember nothing in life is free and many businesses require many months / years of real hard work and sweat to start being profitable.

Many of the ‘smaller’ pool that have found themselves reasonably successful have been running a stakepool for pretty much a year now, or longer. With the shelley test nets, then the incentivised testnet - that whole time they were building their brand and customer base

Thanks - I appreciate what you are saying but I never expected to be making money from this. Yes most may treat it as a business and yes you have to put in a lot of work into it to develop a business. I have experience of that from the past. However my objective this time was to understand the process and set up a node as a learning experience. I have done that successfully and enjoyed the process. Realistically nobody will make much money at the moment given the amount you have to stake just to get one coin minted per epoch. ADA will have to increase significantly in value before many will make any money but that is not the point. I think we should be encouraging smaller stake pool operators to be involved in the process as this truly promotes decentralization. Yes most won’t mint blocks but given enough of them some will and we need this. I know you may disagree with me but these are views that I think a lot of people will support and we need to keep this in open discussion in order to maintain the integrity of the management of the Cardano network. Just because we are small doesn’t mean we don’t matter.

1 Like

There you go again. I do agree with what you are saying there. The more stake pools run by different people the better. It’s good to know people can learn how to set a node up and more importantly, enjoy it. You never know, you may get a block at some point, or delegation from other people.

I just want to jump in and say that these are just descriptive of the pools being considered initially, to set expectations, not hard guidelines. For example, higher pledge than 2MM is certainly not going to disqualify any pools, there are just fairly few pools in that region that aren’t generating blocks most epochs. (There might be a couple)

By the same reasoning, we are actually pretty indifferent if a pool has a lower variable fee and a higher fixed fee: we are projecting cashflows and discounting them to present value to determine a “real” return for pools and what we are actually looking for is pools that look like sustainable businesses. Most of the pools we are considering do in fact have a 340 fixed fee, but that’s just because most pools do, not because we have an spreadsheet with a filter than says “fixedFee <= 345”.

Is it possible to get any further clarity on how Stakepool operators with a modest investment of say 20,000 or 30,000 USD will be granted any consideration. These stakepool owners are unlikely to mint a block and therefore cannot get the consideration because of the 5th bullet point in the list above. Again I reiterate that my understanding was that the Cardano Foundation wanted to have as many Stake pool holders as possible but I cannot see how this will attract smaller operators when they cannot even get a start.

Hi Colin, that list is for the CF, not IOHK. Just to clarify

Hi Graham, I am a stake pool operator with less investment than yourself, after a lot of work for nearly a year I have managed to get 8m delegation to my pool.

You should build up a reputation in the social channels, certainly can’t just rely on the entities to subsidise your pool

Thanks I understand what you say. However getting enough delegation to have a realistic chance of minting blocks is not something that most stakepool operators will realistically be able to do. There needs to be some proportional based reward system where the stakepool operator is rewarded for running a stable pool that contributes to the network. Having many stakepool holders contributes stability and integrity to the network and they need to be rewarded even without significant delegation to their pools. If not then there is the real danger of larger pools dominating and decentralisation failing. Nobody is asking for small stake pool owners to be given a free ride but they should be given some reward or recognition for assisting with keeping the network operational.