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

Staking & Delegation Stake Delegation
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102

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

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103

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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104

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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105

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.

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106

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.

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Where did you get this information from?

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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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109

It’s 2021 and you are running three pools right now…

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… and my offer of help is still valid :slight_smile: Thanks for your reminder @Jose_Carlos !

So far I was contacted by many SPOs, from Argentina, Brazil and Europe! It’s always great after helping to see a new pool growing (compared to my pools which are basically empty except one of them :wink: ).

Cheers!

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111

Being a small private pool operator really sucks, running Cardano network for free that’s not what decentralisation is about. On top of that I have to make marketing strategies to promote Cardano for free in my free time…i am starting to think this protocol will be a flop if things don’t change, the only possible outcome is a partially decentralised network controlled by whales like binance/coinbase/etoro etc… this is really a joke, those scammers are again in control of the market. I can’t imagine how hard for an African dude in Ethiopia would be to run his small pool (pay for the hw, electricity, internet, pledging, initial pool registration)… I am living in a supposed “first world country” and can’t make it I do not see how someone living in Africa earning 1$ can make it…unless of course sponsored by someone, but again this defeats the purpose of decentralisation and this technology is a flop. Am I crying out loud? Maybe, or maybe i am just stating facts and giving my feedback, after all i have invested like 6K of my money into it and in nowadays it is not that little, just think about it.

Anyways, I am running [FNBK] if you interested.
Take care ya all.

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112

exactly my point.

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I came to Cardano to write a piece for a digital rag and planned on a year long project. In the very beginning, I thought I was really becoming part of something larger than my article and myself, and perhaps make a few bucks to donate and cover mortgages for soldiers and first responders.

I played the game and I started soliciting colleagues, friends and family to put a stake in [9Line] and started receiving some really great commitments. As I lined up 10k, 5k, 500 and a 25k stake commitment I realized that unless I hit 1m there is absolutely no point.

The more involved I became with Cardano, the more I realized that small pools are never, ever, going to make it - and that should be made absolutely crystal clear by IOHK and Cardano. Something along the lines of, “Unless your stake pool is $1,000,000 or more, you should understand you’re not really going to make a profit and you are contributing purely to benefit the Cardano Project (thank you!).” That would manage a lot of expectations, and it would save a lot of folks a ton of cash.

Does anyone have any idea how many people are leaving Cardano on a weekly basis?

In my opinion, Cardano ‘decentralization’ simply replaced 1-for-1, institutional banks and their branches, with an equal number of large pools that will always, always, always dominate. All this has done is copy and paste the financial institution game of fiat currency, change the name and change the players.

There shouldn’t be programs for smaller pools either, with charity type stakes from IOHK or Cardano Foundation - this in my opinion, equates to nothing more than the equivalent of a government subsidy.

True decentralization is equality across the nodes.

Sooner or later, Cardano will run into the same issues with large stake pools that governments run into with too-big-to-fail banking institutions. Stake pools begin manipulating the currency value, dictating terms, revolting over changes that do not favor their large pools and crushing anyone truly interested in helping the project.

Maybe that is the problem with Proof-of-Stake.

So I’m shutting down my pool, and my project, 10 months early. I’ve met some great people, and I will be donating, not staking, my $500 initial investment to a pool run by an individual who in my opinion, consistently goes above and beyond every day in this project @Alexd1985 and [CHRTY] pool.

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114

Sorry to hear this my friend :(((
I hope this will change soon! It’s bad that all this cardano project became a bussiness for many PO;

Cheers,

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115

500 ADA are of lot of money and I could not accept them just because I share some free informations with you :slight_smile:

Sorry but I can’t accept them … it’s not on my character :wink:

Cheers,

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116

I’m sorry to hear that you decided to quit.
Equality across the nodes, as you say can work only if the nodes are a limited number, otherwise you would see an enormous increase in the nodes and a degrading network performance. If the nodes are limited, who decides who’s is and who’s out?
I prefer an open system with some natural guidance. Now the fixed fee and the saturation value drive the pool shape, in the future that formula will change and possibly be better and try do reduce the dominance of multiple pool operators.
I really hope that they enforce a minimum for the pledge and a maximum for the leverage. Most of small pools will fail because they started with a small commitment.
Until then small pool operators need to fight to gather support, but I’m ok with that, even if I’m a small pool operator with zero blocks so far.

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There is no such thing as a free lunch.

You either add value and attract delegators or you add capital (high pledge) and mint blocks from the beginning.

This is called capitalism. Cardano is decentralized, best blockchain architecture, best vision and best community on earth but luckily it still also is a capitalistic system.

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On a long enough timeline there will be only 500 pools (fully saturated).

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I’ve had three nodes running in a standard 2-relay 1-block-producer configuration, with all the monitoring and backup in place. I’ve never actually set up a pool because I’m a tech and can’t possibly pledge enough to compete with big players or exchanges. I try to help in other ways. It’s totally ok to say, “There’s not much in it for me and move on.” Presumably you learned a lot and had some fun.

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120

So very true. I was actually able to learn a lot about linux in the process and meet some folks.

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121

No, that would not make economic sense. As soon as all the available pools are saturated there is incentive for new pools to open since there is equal incentive for delegators to move to a better place, where unsaturation will increase their returns.

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