I understand the concerns surrounding the min Pool Cost argument and the challenges small pools face in the current system. The decreasing block rewards and the potential for the block reward to fall below the min Pool Fee in the not to distant future is a legitimate worry. It raises questions about whether the min Pool Fee, along with the lottery system of slot allocation, was designed to create difficulties for small pools attempting to enter the ecosystem.
The lottery system, while intended to ensure fair slot allocation, generally works against small pools, causing them to go several Epochs without slots even if they should theoretically average one per Epoch. This, in turn, may lead to Delegators leaving the pool, further reducing the chances of slot allocation in a never ending death spiral.
Asking why Proof of Stake can’t be more straightforward, with rewards directly proportional to stake size, is a valid inquiry. Large pools tend to have a more stable and predictable income due to their immunity to statistical variances compared to smaller pools. This disparity in reward distribution has been a topic of debate within the community.
It’s essential to continue addressing these concerns and finding ways to foster a more inclusive and sustainable environment for all pools in the ecosystem. Solutions that strike a balance between promoting decentralization and maintaining network security are key. Constructive discussions and continuous improvements are vital to building a stronger and more resilient Proof of Stake network that benefits all participants.
We need to be engaging in meaningful conversations and actively seeking solutions to this in order to create a more equitable and robust blockchain ecosystem that aligns with the principles of decentralization and fairness.
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Unfortunately, I think it is pretty clear that nothing is going to be done about this problem until we decentralise Cardano’s governance. The community is still somewhat divided on this issue while large multi-pool operators benefit from maintaining status quo. Unfortunately it is difficult to explain to the average token holder why disincentivising multi-pool operators is important for Cardano’s resilience. And, it is relatively easy to make FUD counter arguments justifying costs and regulatory barriers.
Nothing will happen until after CIP-1694 gets voted in and implemented. Then the community can vote on such issues and hopefully with better structured vote options than offered in the recent experimental SPO vote.
For anyone interested in changing current parameters like “minPoolFee”: I would suggest to focus effort on trying to come up with ways to:
- better educate the community about the problems of anti-competitive regulation
- develop strategies to expose how incumbents lobby voters (or use their delegated voting power) to keep various regulations benefiting them in place
- prepare to negate the strategy of including options which will result in splitting the vote of other SPOs that are aligned with your general philosophy and values
Regarding that last point: A common strategy used by well resourced opponents is to ensure that the options that are finally put to a vote result in dividing their opponents. We really need to educate the community and other SPOs and negotiate a vote option we can agree on first. Then when this is put to a vote, we will not be divided.
None of these strategies are new. This is exactly the playbook incumbents use in traditional finance to cement their advantage. Furthermore, here we are only discussing one small governance issue. Voltaire is going to make this about everything and there are going to be many opportunities for the Cardano community to literally shoot itself due to infighting, disinterest, short term thinking, and poor judgement.
We need to be better organised. We need to educate other SPOs better. We need to put aside small differences and be pragmatic to come up with a proposal that the majority will agree. Then we need to ensure that this proposal is what is put to a vote.
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Here is something I wrote on the matrix SPO channel yesterday:
I copped some pushback a while ago when I stated that we should head in the direction of making stake pool operation cheaper and leverage redundancy for increased reliability. My argument was that using redundancy to improve reliability has been the successful direction for most other technology. Disk storage is the obvious example where RAID is clearly superior to “SLED” (single large expensive disk). Furthermore, our own Ouroboros protocol has been designed with redundancy as it’s core philosophy. And, to top it off, having lots of independent small pool operators achieves our goals of improved decentralisation.
I don’t think that running a stake pool on expensive hardware whose primary focus is to get as close as possible to 99.999% reliability is viable in the long term. I think ordinary people should be pool operators using their home internet connection and cheap hardware, which still has around 99% reliability. Then we can leverage redundancy for increased reliability.
Well, here is another signpost: Over in Ethereum land, they are developing Distributed Validator Technology. They say the following:
“Distributed validator technology removes some of the single points of failure in validation. Should <33% of the participating nodes in a DV cluster go offline, the remaining active nodes can still come to consensus on what to sign and can produce valid signatures for their staking duties. This is known as Active/Active redundancy, a common pattern for minimizing downtime in mission critical systems.​”
I don’t see any reason why similar technology won’t be developed for Cardano eventually.
My strong belief is that stake pool operators will need to earn their money by providing services other than stake pool operation such as:
- arbitraging
- babel fees
- liquidity
- insurance (eg. providing bonds to guarantee earlier transaction finalisation)
- oracles
- side-chains / roll-ups
- data availability
- etc.
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