The incentive for the pool operators to be honest is the fact, that they can not receive incentives without being honest.
Another post talked about Pos Delegation Incentives, recently.
No Competition Between Pools
An important consequence that comes out this structure of undistributed funds is that is means there is no competition between pools. There is nothing one pool can do to increase its rewards by decreasing another pools reward. There is no incentive for any pool to sabotage another pool’s work.
Classic attacks in Bitcoin like selfish mining or block withholding cannot work because the pools are fenced off from each other. The actions of one pool only affect its own rewards.
Because of the following formula: 1/k
Refinement 1:
The maximal proportion of the rewards pool that a stake pool can receive will be limited by 1/k
(k being number of desired pools, probably around 100)
Without this, pools would want to get bigger and bigger because they still get same reward, with lower cost since the overhead cost will not be much more than a smaller pool’s.
For example:
if k = 100
A and B with 0.3% and 1.2% of stake respectively.
A will receive 0.3% of rewards pool but B will receive 1/100 = 1%
In this example, no matter how high your stake is, you can never get more than 1% of rewards pool. The hope is that this will have the effect that pools won’t grow too large.
Also, it cost to register for a stake pool.
The above basically describes, that a stake pool can never perform a 51% attack because it is not actually rewarding to do so.
If I didn’t answer all your questions let me know!