Small pools are dying...what do you think?

Roughly 650k Ada combined pledge and stake with the currently 13 bn Ada staked is needed to produce 1 block on average per epoch. It could still happen though that no block is produced and 2 in another epoch. If more Ada in total is staked the number changes proportionally.

There is no combination of parameters that guarantees at least one block per epoch. You would have to change the protocol to achieve that and I don’t see a reason to.

One point missing from discussion, or only implied, selection of block producer is random.

It based on a random chance that is affected by the amount of relative stake.

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Haha, very good point! Cardano isn’t a get rich quick scheme… Which disappoints many in the crypto space

Dear community members,

You have regularly and consistently asked about the staking strategy by the foundation. Since we have so many channels, I am somewhat randomly choosing this one to outline (very) briefly our thoughts and next steps, as follows:

First, our initial strategy was indeed very simple, let’s call it “rough and handmade”, to serve as an initial iteration with the aim of safely deploying first.

Second, we will shortly publish our current staking - where and how much. Transparency is a good thing!

Third, we will shortly publish our first official draft (v1) of a more detailed staking strategy. While we will deploy this first official strategy immediately upon publication, we will take into account your feedback (I trust there will be lots!) and we will then iterate to a v2, and so on.

I want to manage expectations right away: It is and will be truly impossible to please everyone. Different people have different opinions, and different people weigh different parameters differently. Good reading on this issue here: https://en.wikipedia.org/wiki/A_Theory_of_Justice - best do read the book, though it ain’t easy reading… :slight_smile:

Have a great weekend!

— Nathan

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Thanks for the update Nathan

Looking forward to your updates and appreciate the transparency.

Re the link, yep interesting, think the ‘difference principle’ will be well debated !

Like the fact safety was your first priority, also being prepared to evolve is definitely the way forward with your v1/v2 etc.

I agree, you’re not going to please everyone !

Throwing my hat into the ring (with the thought to benefit all of us), for CF/IOG/Emurgo to share some of their funds around the pools (to support and solidify the eco-system) would be a good target to aim for.

How could that be achieved ? open to suggestions

multi_sig will fix this

Hi Nathan,
I love that you are addressing this topic and I also believe transparency is a good thing. As a stake pool operator I know the difficulty in attracting enough delegation to stay in the SPO game and I really appreciate when the foundation supports the SPO community by delegating to stake pools.

Cardano has some very amazing stake pool operators. It may be hard to delegate in a way that is fair, but delegating to the community will make the community stronger. Investing in your community is a win, win!

When the Cardano Foundation, Input Output, and Emurgo delegate to the SPO community it builds that community. The Cardano Foundation, Input Output, and Emurgo have every right to run stake pools of their own, but it feels like more like you are competing with the community when you do. I know that my small stake pool can’t compete with the three pillars of Cardano.

I’m hoping (at least in the short term) the focus stays on, or returns to building community as it is a community worth building and a community worth keeping!

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An important premise: Do what’s possible only if it’s just and moral.

This should be obvious:

  1. Charles should make available a turnkey PO system (code only) with ongoing support, free. This action would materially support Charles’ statements with reference to Cardano’s decentralization and stability requirements. The system (soft setup) should be immediately available to anyone who wants to participate in Cardano’s decentralization process.

  2. A delegation transfer from Charles’ pools (corporate pools and private) should be made to new pools that achieve an established verifiable performance/stability standard. It can be done.

Rebuttal:
Charles’ pools are needed for the network.
Response:
Prove it.

Rebuttal:
Charles has a right to make money as a PO.
Response:
We all know Charles’ stated ambition for Cardano. 1. Centralizing relatively (relative to civilian PO’s!) large ADA blocks is counterproductive. 2. The inappropriateness of capturing revenue from these large blocks of up to 7%, as PO’s struggle to the penny, well, I haven’t the words.

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Rob : Charles is moving his ADA farm to Coinbase later this year, according to Phillipe. Memory cite: Cardano Effect > 9/6 > a little over an hour in.

Another data point for Charles’ idiograph.

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Hi Nathan,

Thank you for addressing this.

Could you provide estimated timeframes for publishing current CF delegations as well as for publishing the first official strategy for community delegation?

Your friend,

FROG

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I think we are trying to measure the definition of shortly here, hope the new hiring can bring more breath to the CF team. :mechanical_arm:

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Small pools shouldn’t necessarily exist. With proof of stake the person with a lot of ADA has that much incentive to work in the best interest of the network. A small pool (one with small pledge) does not have the same financial incentive.
Cardano is suffering from too many small pools controlling most of the stake. 1PC #0-10 is an example of the underlying problem with the stake pool system. 1 operator is controlling almost 10% of the total staked coins with barely 1mil in total pledge. This pledge value will continue to decrease once delegators are onboard.

Saturation point needs to be tied directly to pledge - Low pledge, low saturation

1PC like pools (meaning accumulate power /w small pledge) will die out sooner or later (if not the protocol has failed, as there was/is/will be some market for this kind of Sybil attack, and Cardano will die accordingly by the time) or merge to a one pool setup /w their accumulated pledge they could gain playing dishonest/nasty etc. (hopefully the realistic outcome as that means protocol will survive for long term).

The issue is that, pledge only is impacted around 1.5% yearly delegators profit (ROI depends on the investment and in our case investment is the delegated stake and not pools pledge), e.g. two pools /w min cost=340 and 2% reward. If the full pledged pool could gain around 7.29% per year and a fully saturated but almost 0 pledged pools 5.6%, so that’s low impact (1.69%). But, to gain a full saturation /w 10k pledge should be and definitely challenged (by the reward schemes and ranking) for long term.

Unfortunately, only very few (non-IOG scientist) ppl (SPO’s delegators) fully understand the whole reward scheme and ranking, as it, as a whole, is complex. And almost every ppl just pick a puzzle of the whole context instead of trying to fully understand how the WHOLE works. What has impact to what etc. This is a multi variable function.

So, have a look at the following examples in the following table (what I have just made), that assumes equilibrium, and check what is the ROIs (which is return of INVETMENTS) of the Pools and delegators (pool member).

There is no real incentives for the Whales to fully pledge when they can have more benefit when they split their pledges and run multiple pools. One way is to solve this is like pledge weighted reward, which has similar impact as your suggestion but on the whales and not on the small pools.

As what you recommend is, that small (in pledge) pools will be more penalized and inevitably will die out. So, why a long lasting suffering instead shutting them down now? But, yeah this yearly pool ROIs are insane, but probably they will die out as they (or should) have some very negative consequences in the Daedalus wallet ranking.

Pool Pool Stake assuming fully saturated Pool Pledge i.e. investment Epoch Reward hit rate/performance assuming 100% cost (ADA) margin Pool Epoch profit Pool Yearly Profit Yearly POOL ROI Yearly member ROI Yearly members Profit
UNDR 23,000,000 1,000,000 31,000,000 100.00% 340 2% 1,427.95 104,240.43 10.42% 5.52% 16636.59
fp 206,000,000 206,000,000 31,000,000 100.00% 340 2% 205,693.79 15,015,647.03 7.29% N/A 4107.08
100m 206,000,000 100,000,000 31,000,000 100.00% 340 2% 90,110.42 6,578,060.66 6.58% 6.54% 94939.34
10m 206,000,000 10,000,000 31,000,000 100.00% 340 2% 11,180.13 816,149.30 8.16% 5.69% 152789.73
5m 206,000,000 5,000,000 31,000,000 100.00% 340 2% 7,313.93 533,916.89 10.68% 5.65% 155483.07
1m 206,000,000 1,000,000 31,000,000 100.00% 340 2% 4,260.35 311,005.85 31.10% 5.61% 157598.24
100k 206,000,000 100,000 31,000,000 100.00% 340 2% 3,578.12 261,203.10 261.20% 5.60% 158069.31
10k 206,000,000 10,000 31,000,000 100.00% 340 2% 3,510.00 256,229.94 2562.30% 5.60% 158116.32
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Hello, any updates on the strategy or publishing officially a list of current beneficiaries? It’s been almost four weeks since ‘shortly’… @steve.wagendorp @adatainment

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I think small pools have to wait till we reach a higher degree of decentralization. Charles explained in a video, that he is aware of that situation, and that decentralization comes incrementally.

I think Charles is planning to increase k to 1000, which doesn’t seem very incremental. I am not sure that has been decided yet though, but there is certainly a lot of talking going on about it.

Where did you get this information from?

I guess a combination of Charles talking about the parameters and a lot of talks on Twitter/Telegram mentioning k=1000 put that idea in my head - I think I might be wrong, but I think Charles said in one of his videos that they are planning a dramatic (significant?) increase of k. Can’t find the exact source now.

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