There has been much recent talk about decentralisation concerns with multi-pool operators. I thought I would weigh in by pointing out that small stake pools do have an advantage.
Small pools have a lower VRF score due to their lower controlled stake. Of course this means that they are less likely to be awarded blocks. However, it also means that when there are slot battles and single block forks, the small pool is more likely to win.
I am a small stake pool operator. I was awarded, and successfully minted, 3 blocks last epoch. Two of these 3 blocks resulted in a larger pool missing a block.
- One was due to a slot battle which my pool won.
- The second was due to a 1 block height fork. My block was produced only 1 second after the previous pools block and my pool hadn’t received the previous block in time. Therefore my block was minted with the same block number and conflicting transactions.
In both cases the competing pools had much larger controlled stake and my pool was awarded the win automatically by the protocol due to my lower VRF score.
For further explanation.
Now consider the following:
- If the minimum cost per epoch is reduced to something small or even 0
- If it becomes easy to do multi-pool delegation
- If block propagation times increase to closer to 5 seconds resulting in much more block conflicts
- If the public become educated about this small pool VRF calculation benefit
As a general Ada holder it would be smarter to delegate to multiple small pools if the fees are otherwise equal because:
- The disadvantage of irregular rewards would be mitigated by multi-delegation
- The lower VRF value for smaller pools would result in slightly increase rewards
- It would be uneconomic for larger pools to compete on the VRF calculation by splitting their pools as they would become too numerous to manage
It is difficult for small pool operators, but maybe we need to think more along these lines. Maybe there is some way that we can increase our VRF advantage aside from points 1-4 I listed above.
For example, if blocks were every 15 seconds instead of every 20 this would result in more awarded slots but probably wouldn’t increase the overall throughput of the Cardano network much because there would be more dropped blocks due to more conflicts. However, it would increase the percentage of successful blocks by small pool operators since they would win the conflict battles much more often due to their lower VRF scores.
Anyway, it is a different line of thought instead of just complaining about multi-pool operators.