Small Pool Economics - Pledged vs Delegated

When we talk about cost to the operator vs. cost to the delegator (i.e. is it more profitable to run my own pool). There is a break even point, which depending on cost for the infrastructure and how you value your skill/time - this is explored here .

From the delegators perspective, you’d want to consider “cost per block” - with luck and runtime stability all being equal. Cost per block is the share of block rewards that goes to the pool rather than to the delegators - this is explored here .

With your 500k you would effectively compensate interested parties for some of the loss that they had by delegating to your pool. This might work out for a while until your pool gets off the ground. Whether it actually does can be estimated with this calculator.

Here is an example for a 224k pool

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As you will notice, the delegator return is significantly lower than the pool return, this would not be the case for an almost saturated pool.

Quite a few operators now realize that the pool reward (and hence the cost to the delegator) is much higher than is actually needed to run the pool. In that case an operator may do extra payouts to delegators to lower the cost per block, so that even a small pool can stay competitive.

Currently there is talk to increase k from currently 500 to 1000 (i.e. the number of saturated pools that all stake will eventually cluster into). When/if that happens lots of stake will flow from 64m pools to smaller pools.

There has also been talk to modify the reward formula such that pledge will have a larger effect. Currently however, it doesn’t have any AFAIK (i.e. its not implemented) . Pools with a higher pledge are more attractive that ones with lower pledge, because it is an indicator of the owner’s commitment. Otherwise, pledge counts to active stake in the same way as delegator stake.

Whatever you decide - may this be helpful.
All the best.