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

Based on the 3 parts (leader schedules based performance, the reward function and the rankings) of the game theoretic model, I am quite convinced, but of course everything needs to be fully enabled and have some epochs to start converging to the predicted equilibrium, because it’s not a binary.
And, what you see today can and will be very different in some time later, as it was shown in the models how the system converged to the equilibrium (ofc by tuning some parameters here and there by the time).

If it won’t then the system has failed as it must converge to the predicted equilibrium as it won’t be sustainable for long term otherwise.

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This is the important thing to understand.

Are we going to truly have 1000 sustainable stakepools or are we just going to have 50-100 entities with 10-20+ pools each. If that latter occurs than Cardano will have become no different than all the currently available crypocurrencies.

Aloha Cardano
(ALOHA)

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Well as others have quoted in this thread before: The design spec leaves little room for interpretation:

Section 5.6.1:
“We predict that pools with rank ≤ k will eventually be saturated, whereas pools with rank > k will lose all members and only consist of the owner(s)”

Personally, I do hope for two things to happen (we need both!)

  • Increase of “k” to give more pools a chance (this is already in heavy discussion according to Charles latest Shelley Update YT video)
  • The community of delegators (including the whales!) will eventually gain the insight that delegating to just the top 5 marketing entities running eventually 30+ pools each is not in line with the goals of decentralization and stability, hurting the value of Cardano, as Cardano would then be no better than BTC in this regard. I do hope e.g. iniatives like SPA (https://cardanospa.org/) will gain traction, STR8 is a proud member of.
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Visited the site and I agree with the manifesto… all good here. But I don’t think this will suffice. As CH himself said, we cannot rely on humans to implement rules. The mechanism to prevent centralization should be baked into the system itself.

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Hey guys,

thanks for your infos and opinions in this thread. I think that is very valuable!

@ drucks: thank you for your posting with embedded youtube video. Is the SPO of this video also in this thread?

Over the years, I have followed many cryptoprojects and on some of them I have been running (master-)nodes till today.
However, what I asked myself when looking at all dPoS coins so far or other coins who rely on delegation algorithms: Is this real decentralization?
There are coins out there (and I don’t want to name any of these coins) which get their blocks produced by less than 50 nodes worldwide! When looking at these nodes you can see that 10% of these block-producing-nodes have more power than the remaining block-producing-nodes. You can see an even more disbalanced situation when looking at our number #1 PoW crypto-coin where basically all the work is done by not more than 5 companies!

It is absolutely clear to me that in our society there will be always some sort of hierarchic orders.

However, it is important that a coin like ADA who does marketing about “decentralization” also sticks to this promise!

To sum it up what I noticed when looking at all crypto projects so far:

  1. “decentralized” PoS nodes are running in “centralized” data centers. This happens when all node operators host their nodes at AWS, Microsoft, Google, etc…
  2. as mentioned above: only very few nodes have voting power or the power to produce blocks
  3. setting up nodes is too complicated (I know there are reasons why this installation process shouldn’t be too easy; you need to have professional administrators which possess a fundamental administration knowledge to run these nodes)
  4. communities tend to not share knowledge about setting up nodes because they don’t want to have competitors

When looking at item 4): Luckily, here in the cardano community this is totally different than at other cryptocoins: The community is very helpful and also the documentations are quite good so far!
This leads to cardano having a real chance to survice in the cryptoworld! Cardano is widely accepted and has a solid layer of confidence among all participants.

However, I know about many SPOs who quit running their nodes or who didn’t accomplish in finishing their node setup. As mentioned in this thread, many young nodes are forced to leave the ada-market because they don’t mint any blocks!
It is comparable to our situation on our real-life-markets: 80% of all newly founded companies become insolvent within their first 5 years due to missing marketing strategies and failing in business management.

This leads to our current real-life-market situation, too - comparable with cardano: there are only a few companies left who control nearly all of the market. Many of the newly created stake pools have no chance to compete. However, this is no decentralization! And when there is no decentralization, we have to ask ourselves if we gain the desired trustness by the people to invest and rely on cardano? To be honest, if a dummy user has to choose between banking a currency controlled by a state or a number of states and a cryptocurrency controlled by a single private company which is unknown to the dummy user and who holds 50% of all the currency: in which would he most likely invest?

I would like to do another comparison:
Think of small companies who do a lot of handcrafting, who serve highly qualified food, who create personalized items or who look at being most sustainable. Most of the time, these companies who focus at pure quality have difficulties in surving: They have to increase their prices to be competitive. We all know that not everyone is able to buy the high quality things. Sometimes we have to draw compromises between quality and price.
I know one collegue who creates handcrafted wood-kajaks with highest quality. Each kajak is a unique, personalized item with an insane amount of working hours spent in there. He has to sell these kajaks at an insane high price - but - neverthless, when I ask him if this is profitable, he just smiles, shakes his head and tells: it’s a hobby!

The curious thing when comparing this with ADA: In cardano network you can have all different layers of quality without paying anything. You just delegate your ADA! So why are most of the votes delegated to only a few pools?

And that’s the most important point: It is exactly the main big bad thing we have on our planet earth: when only a few big-company-nodes are allowed to produce blocks and many small stake pools have to quit the market because they can’t compete - allthough they might be have a even higher quality, more redundancy, more backups, more handcrafted servers (not hosted in big data centers) than the big stake pools!

Looking at item 3) and 4) of my list above: I am still here if someone needs help in setting up his own node. Cardano will be only different than all the other dPoS coins when there is real decentralization and when we can tell “yes, this currency is controlled by us! and not by a/few private company/ies!

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I just saw one additional topic in this thread I would like to comment on: https://cardanospa.org/

First of all: A few weeks ago I had nearly the same idea. I was thinking of creating a Cardano Partner Network (CPN) where pools together build a unique qualified network. The main goal was to create an automated system of partner pools which automatically suggests people to vote on as soon as one pool of the cardano partner network (CPN) is over-saturated. Let’s say ADA-CPN-POOL-A is oversaturated and ADA-CPN-POOL-B is on the verge of becoming oversaturated, then this automated system would suggest to vote in ADA-CPN-POOL-C because this has the highest chance of getting most of the rewards. There was also an idea to distribute votes accordingly to different pools of this network.

While I was creating the first drafts about this project, I noticed, that basically this is completely against the philosophy of cardano. And that’s also the reason why i abandoned this project.

Cardano itself should have the system that does exactly what I just described baked into itself. There should be mechanisms baked into it that help people automatically to distribute their votes equally. And there should be algorithms who help distributing the voting power to stake pools in a fair, efficient and economic way with focus on being decentralized.

So, I wish good luck to project cardanospa. But, to be honest, from my point of view, it would be more than questionable when it is required to have networks like cardanospa to be successfull as SPO. In this case I would ask the devs of cardano if that was in their plans? In a truly decentralized system everyone should have equal chances to be successfull - also without being part of any alliance or network!

Have a good day/night!

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I also got a weird feeling when Charles started suggesting stake pool guilds, stake pool portfolios and the like. My understanding has always been that the protocol and incentive mechanism is designed in such a way that things like this wouldn’t be necessary. It just felt to me that Charles was trying to make everyone happy (I think he even said that this is kind of his weakness) and in this case catering to a certain relatively small interest group . Don’t get me wrong, I appreciate the work SPOs like FROG and DIGI have done for Cardano, especially during the ITN, helping others setting up their pools, providing feedback, bug reports, etc. But for a network that is supposed to enable poeple worldwide to have their economic identity, it feels like we’re focusing on a very small group of people.
Anyways it’s late and I’m kind of rambling on without a point. Please everyone feel free to disagree on this.

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Thanks, I thought I was the only one thinking this is contradictory.

Proof? Who told you this that the pledge does not matter?

I think most of those 600ish empty pools will give up after not making a single block in the rest of the year and disappear and they should just die. We don’t need so many pools to begin with but you cannot tell people hey don’t make more pools we have enough so this virtually imposed natural selection (by not making blocks) will work and make them go away.

Exactly the same situation as with that 5000+ worthless shitcoins on CMC who have no product, no work, no accomplishment behind them they should just die but the owners of CMC apparently dont even want to delist them. Here as a pool operator you can say I put X hours into this and I want to make profit out of it but you didn’t code the software. You running somebody elses software and you expect to make money out of it so don’t come here and cry if you don’t.

Please tell me that this is true. IOG and Emurgo is huge pool, if they retire or at least reduce the number of pool, there will be a lot of small pool can be saved.
Thanks a lot.

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I’m a small pool owner and I get we have to pay our dues and bust ass or die off. I’ve managed to get to some delegators and 2 blocks, both blocks more luck than anything. The only complaint I have is the 340 fee, would be nice if that could be based on your live stake a little. I had a block in 212 and no one got anything. the 319 rewards pooltool says I got don’t even cover that 340. I get it’s natural selection and is what it is. Just seems like there is value in having real decentralization with the pools. It’s certainly marketed that way. I’m a newbie for sure, don’t even know if this adds to the conversation.

I like your post. I think all SPO must know this… If only Cardano only need 400-500 SPO I think it’s better to give limit when we want to apply as SPO. Therefore, we can save our money and energy, and buy more ADA, rather then we now paying for server, wasting our time and money just to died at the end.

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There has got to be some kind of value of me running my little pool in a major city like San Antonio, Texas and telling everyone I know about Cardano and trying to get people to stake with me. If not, I’d prefer they just come out and be honest. just say hey we have our X number pools and we don’t need anymore. Right now my only marketing strategy is “support smaller pools we need your help” lol I can’t say “hey stake with me i’ll guarantee you make NO return on your investment”

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Lol… Yeah… Actually I told my friends too that I cannot guarantee that you will earn anything, but at least you can earn capital gain in the future

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With current a0 the differences between someone who has 10k or 500k pledge are minimal. They currently don’t have any impact in Daedalus. This is supposed to change within a few epochs when more data will come in but it’s hurting the small pools meanwhile - and that’s a big problem because when a small pool starts losing stake it’s usually a death spiral. Currently my pool in Daedalus is at 285 place but yesterday it was at about 850.

Anyway it’s seems you misunderstood my post. I’m not crying. I just think I have the right to express my opinion and while I am keeping it on a respectful level you are obviously not. But I won’t be teaching you manners, life will.

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Exactly. There should not be an incentive to run 1000 pools if k = 150. The pledge should not only affect height of rewards but also the block production. This slaugther we are seeing is unnecessary. I know about another blockchain where top N accounts can run pools and others not. It makes it pretty clear for everyone what they can expect and if they qualify to run a pool or not.

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Its not properly implemented in daedalus at the moment. That is the main problem from my perspective, because otherwise we’ll performing pools with more pledge would be ranked much higher and over saturated pools would be pretty much at the bottom for new delegators.

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Well the pledge does impact block production as it counts towards the relative stake of the pool. More pledge means higher chance to win the slot lottery.

Yes exactly, but that chance is also affected by d, which has high impact on small pools. Also, we should keep in mind that the target is optimal number i.e. k number (currently 150) of pools, others will slowly die out that will be inevitable after some circles and assuming wallets ranking is fully functional. Though there will be (probably) long tailing of pools who will have only pledge in their stakes but still running a pool for hoping that Fortune will be merciful with them sometimes.

But this will be inevitable if the protocol is built to survive.

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I do not think that is contradict, as those selections should and probably would be based on the underlying ranking system as un upper filter layer. My concerns is that to achieve this that the wallet owner must have at least as many account in a wallet as many pool in a portfolio, which could fragment wallets much more than it is necessary. As I am an advocate of the account based wallets, meaning having one seed and having 3 accounts as an example one for day to day, one for savings and one for loan, but 20 accounts in a portfolio I am not sure.

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