I tried to do some calculation examples to get an objecte view on potential incomes which may be generated from operating a Stake Pool. I wanted to find out the required size to make a pool:
- Cost Covering
- Attractive for delegators (Continuous Reward, High ROA)
I considered the following parameters in my calculation:
- Avg Blocks / Epoch = 21.600 (including central calculated blocks)
- Avg Reward / Block = 1300 ADA
- Total Staked ADA currently = 22.3 bn ADA
- Centralization Factor = 22%
- All of the mentioned Variables may change over time
The calculation Example used 340 ADA fixed cost and 1% Margin.
- Below 1mio ADA the ROA stays stable, but the frequency of payout is not acceptable below 500k (e.g. 2 months at a 100k pool)
- Pools > 1mio ADA will improve ROA because the fixed fee is shared across a bigger list of delegators
- Interesting here: I assumed very small pools will even have worse ROA. This is not the case because there will be many Epochs were not even 1 block is minted, therefore also no fixed cost is taken from the Rewards.
I hope this helps the one or the other to get right on income expectations
Especially the effect on small pools which just are starting is interesting to me because I also initially ran into some wrong assumtions in my initial calculations. The key point here is that there is no income at all if no block is minted throughout the whole epoch. At a 100k pool there is currently a chance of 7,5% to achieve 1 block. So in 92,5% of epochs you will not get any Reward at all.
Find the calculation results attached
Let me know if you find any mistakes!