Staking/Delegation

Can you explain the relationship between ROA and “costs?”

ROA is the annualized fraction of …

YourRewards / YourStake

Cost is a very generic term and most likely in this context refers to the cost paid by the delegator to gain YourRewards.

If you run your own stake pool, this would be the effective cost of running two Cardano nodes (i.e. hardware/hosting, domain, electricity, working hours, etc.)

If you delegate your stake, this would be what the stake pool charges before your reward is payed out. Cost comes in two flavours: fix cost (e.g. 340 ADA) and pool margin (e.g. 2%)

A comprehensive analysis of cost for the operator is here and for the delegator here.

If you like to maximize your ROA, you would want to minimize your cost. Ideally, you would want to delegate to a pool that only charges what is actually needed, which is IMHO well below 6 x 340 x 1.8 => $3672 p.m.

Thanks. I’m just trying to do an apples to apples comparison. What I see on the Delegation screen is, e.g., “Estimated ROA: 5.15%” and then “Costs” 2.89% (2% + 340). The problem is, there are no units. Do I deduct 2.89 from 5.15?

A year has 365 / 5 => 73 epochs. If you delegate to a pool that is large enough to mint at least one block / epoch, the accumulated cost for all delegators is 73 x 340 => 24820 ADA. This goes to the owner of the pool - on top of that the owner get the pools margin. The remainder is distributed proportionally to all delegators.

A very good reward calculator is here (it takes a while to load). Eventually you’ll see a green bar like this

image

and charts like this …

image

The larger the pool, the lower the deviation for the red bars. i.e. Luck plays a much larger role for small pools. Also notice, the difference in “Pool Operator’s Return” and “Delegator’s Return”. This is the effect of cost charged to the delegator. With a non-profit pool, you only have one figure, which would be close to the “Total Pool Return”

Some folks may say the difference between 3.85%-5.58% ROA is peanuts in comparison with what is gained in ADA value appreciation over the same period of time. I’d agree, but it is still a 30% difference that also appreciates in value.

Thanks, but the link above did not take me to somewhere I could download the calculator. It took me to a description of how the calculator works.

Any reason everyone doesn’t just go to the pool operator who advertises 0.00% fees?

You have to scroll down to get to the input fields

Multiple reasons. To name 2:

  1. Some people are not just delegating for the absolute maximum rewards. Each pool has one or more people running it. Some are doing much more than to just operate the pool. Some are helping the community in various ways. Like education, programming, content, translation, charity to give a few examples. In my case, we donate 50 dollars a month as a minimum to save the children. But 50% of our margin fees also get donated. So you might like to delegate to a pool you like even if their margin fees are more than 0% or if delegating to them will not give you maximum rewards.

  2. The margin fee (the % amount) works like this: imagine you would get 100 ada worth of rewards and the margin fees are 3% you would get 97 ada. So not really much.

The calculator is a single web page. As @ADA4Good says, you have to scroll down.

Any reason everyone doesn’t just go to the pool operator who advertises 0.00% fees?

Not too long ago, the 340 fix did not cover the running cost of the servers, so almost all pools had some pool margin. I guess some folks just don’t bother to re-delegate because they are getting rewards at nicely regular intervals - the chosen stake pool operator (SPO) does a good job.

I can’t speak for other SPOs. However, a saturated pool may mint > 60 blocks per epoch. That is 60 x 750 => 45000 ADA. If such a pool only takes 1% that would be 6 x 450 => 2700 x 1.8 => $4860 on top of the 6 x 340 x 1.8 => $3672 per month coming from fix. An operator that runs such a pool will have little incentive to lower the margin unless delegators run away - I personally think they should :wink:

ASTOR charges 1% margin, so I can give that to charity. Specifically, we plant a tree for every ADA that comes in through this way.