This thread is about the profitability calculation from an Operator Perspective.
I wanted to give an assumption on generated Operator Incomes. From this perspective, the difference is in my opinion still quite irrelevant.
The difference based on pledge is much lower than for example the level of Saturation.
<1M Pool: ~50% Rewards eaten up by fixed cost
Pledge of 1M vs 0 difference: 3% of the rewards.
The quote in my previous post explains that 3% difference so I did not hide this information.
Of course you are right that if you compare 2 full saturated pools with 0 vs 1M pledge.
One will generate 4.8% where the other will generate 4.94% on average.
Agreed, this compensates 3% variable fees meaning that the rewards of the following 2 pools are similar
- Full Saturated 4%Pool with 1M pledge
- Full Saturated 1% Pool with 0 pledge.
Again: From an Operators Profitability Calculation (which I assume is being done before setting up a new pool) this seems not a super-important difference to me but of course good to know as you also need to understand how desireable your pool is for Delegators (which is what you are pointing out of course correctly)
The game will look very different as soon as a curved rewards formula is coming into the game at some point of time which will make the difference much bigger!
And please do not offend my pool. Iâm not making a secret about the fact that a small pool is generating lower rewards than higher saturated pools (Which again is the much bigger impact compared to pledge). Also this thread is absolutely not about promoting my pool or putting it into any light. Itâs just about âStakepool Profitability Calculationâ
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Thanks for your reply.
Before finding your table, I found a calculation for the operatorâs award from this person stake pool - How is a stakepool rewarded? - Cardano Stack Exchange.
Based on his data, the pledge of 50% of the total value of the pool brings about 67.3% of the profit, provided the block is mined.
If you enter the data of 50% of the deposit from any Active Stake in your calculation table, then the total data will not change.
I want to understand in more detail, can you tell me the initial data that you were based on to calculate the pool ownerâs reward?
To understand the full picture you need to dig into 2 topics:
- Understand the rewards formula
- Understand what happens around the rewards formula
The second point is important as the rewards formula is only one part of the rewards distribution which starts with the reserve.
Letâs start with point 2 - the big picture:
I recommend you to take a look at Understanding Rewards Flow and how it will change over time
Them coming back to point 1 - the rewards formula:
Earlier in this thread I was reforming the rewards formula to this:
This explains that a 0 pledge pool is generating 77% of the maximum possible rewards.
The remaining 23% are depending on the pledge (100% pledge means getting the full potential 23%)
As a simple example:
If the block reward is 950.
730 (77%) you get in any case.
220 (23%) are depending on your pledge. (Maximum if pool is 100% saturated with pledge only)
This means the rewards can vary between 730 and 950.
The unused potential goes back to the reserve.
To dig deeper Iâd recommend you to take a look on:
Thank you, I will study your recommendations.
I updated the Sheet to now also consider pledge and also more accurately consider change for different amount of slots assignments.
Idea: 2 Epochs with 1 Block is not resulting in the same as 1 Epoch with 0 Blocks and 1 Epoch with 2 Blocks.
Here is the updated link: Cardano Pool Operation Calculation - Google Sheets
BTW: The Block rewards reflect the current status (14.03.2022)
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Thanks for the spreadsheet. How do I meet pledge? Currently 1.5 m staked and 1,000 pledge. I checked out your calculator and there is only a 9 ada difference between 1,000 pledge and 1,000,000.
The impact of 1M pledge is not really big.
0 pledge means you loose ~23% of potential rewards.
1M means you keep 1/~67 of those 23%.
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How much am I losing from only 1,000 pledge vs 10,000 pledge which would be the upper limit.
Mathematically it makes no difference.
So how much pledge do you need to get 100% of all the rewards?