We appreciate the recommendations of the Parameters Committee in PCP-001 dated July 27th.
The actual mainnet poll took place in epochs 412-415 in May 2023.
From the currently about 3000 pools registered on mainnet, about 1100 regularly generate blocks. 796 of these pools participated in the first SPO poll on mainnet.
This means 27% of all existing pools and 72% of all producing pools have cast a vote.
Because the Cardano protocol and the block production are based on Proof of Stake, it is more important to focus on the stake participation.
From the active stake of all pools that could vote in epoch 412-413, 10,850b ada were counted in the snapshot at the end of epoch 415, which corresponds to a participation rate of 49.4%.
One goal in the planning and design of the poll was to allow delegates to respond to a vote from their current pool if they disagree with it at all. Therefore, after the two response epochs of the pools, there were two more epochs at which delegates could choose another pool.
A final analysis of the on-chain activities has shown quite clearly that delegators have not made significant use of this option, either in absolute or stake numbers. It is unclear whether confidence in the current pool or a certain passivity are the main reasons.
For this first poll, a single question with combined answer options was deliberately chosen. It would have been possible to ask two separate questions about the two parameters, which would make sense for a general survey of preferred values. In CIP-1694, this would correspond to an Action Type 7 poll without automatic on-chain execution. However, for real polls that are implemented automatically on-chain, it would be risky to poll the parameter values independently, because there could be individual parameter values that have mutual effects, correlations, and dependencies. To avoid this various parameter sets can be brought to the vote, taking care that the particular set with all its parameter values is coherent and does not pose any risk or harm to the chain.
The question asked and the answer options were:
Which setup would you prefer to be put in place from Q3 2023 onwards?
Keep k at 500 and minPoolCost at 340 ada
Keep k at 500 and halve minPoolCost to 170 ada
Increase k to 1000 and keep minPoolCost at 340 ada
Increase k to 1000 and halve minPoolCost to 170 ada
I would prefer to abstain
None of the provided option
The participating 49.4% of stake answered the question as follows:
A very interesting and helpful post also came in the form of a data analysis on the potential impact of increasing k. Community Member https://twitter.com/Ada4goodP combined 3 data sets
The goal was to try to get some sense of what would happen with the various pools if K would be increased. How many Single pools would saturate and how much stake would that be. The same for the Multi pool groups.
Read more about at https://twitter.com/Ada4goodP/status/1661493725393027074
On the initiative of some Stake Pool operators, individual responses were submitted with supplementary comments. So far, no one from the community grouped or ranked these opinions.
Since we don’t want the actual survey result to be mixed by comments with a second result based on individual comments, nor do we want blockchain to be used as a chat and comment platform, we list here only the unique comments without trying to summarise or interpret them in any way.
In fact, there are many interesting and important thoughts in the comments, which also represents the diversity of views.
A list of all comments can be found here https://github.com/cardano-foundation/CIP-0094-polls/blob/main/networks/mainnet/fae7bda85acb99c513aeab5f86986047b6f6cbd33a8e11f11c5005513a054dc8/comments.json
minPoolCost was introduced with the Shelley launch in August 2020 to fulfil two tasks:
- It should support the pledge factor a0 as a Sybil attack mitigation.
- It should guarantee the pool operators a minimum budget for the professional operation of the servers.
The next chart shows all 1075 stake pool fees for Epoch 415 (1075 pools produced at least one block)
Dark green is the part coming from the currently set minPoolCost (340 or more ada)
Light green comes from the configured margin % (0-100%)
It is important to note: By potentially halving minPoolCost we don’t enforce but allow the operators to reduce their “floor” income. We can clearly expect a high competitive pressure for small pool operators (right half in the chart) to go to the new minimum, and so halve their operational budget. The larger pools are not so much affected by it.
The next chart is calculating the current operator fees per month, assuming an ada price of 0.3 USD. It is likely that especially the smaller pools - which mainly demand a reduction of minPoolCost - will have to offer the new lower limit. The dotted line shows a new fee rewards curve that will probably result from this.
Since the rewards per block have decreased from 1800 to 500 ada nowadays, this 340 ada minPoolCost has a much stronger effect, especially for those small pools that generate only one or very few blocks per epoch.
The following table shows what portion of the revenue the minPoolCost collects, depending on the number of blocks generated by the pool per epoch. For this purpose, the current value of 340 ada is contrasted with 3 theoretically lower values of 170, 85 and 0 ada.
The same data in a chart looks like this and also shows the little but constant effect on the delegator rewards, if minPoolCost would be lowered.
The most frequently mentioned suggestion, within poll comments, to mitigate this significant competitive disadvantage of minPoolCost for small pools is to replace minPoolCost with a minMargin. This is therefore not a simple change of one of the existing parameters but would only be feasible by means of a hardfork and the introduction of a new parameter, which shall not be part of this analysis.
Reducing minPoolCost lowers the effect of the two original purposes, but in return clearly brings a significant improvement in competitiveness for small pools. One issue raised in the comments is that small pools need some time to improve their RoS (Return on Staking) value. This should be as good as possible when delegators are persuaded to seek a new pool. This could occur if the k-value is increased and thus the saturation point of currently filled pools is lowered.
The Cardano Foundation is in favour of respecting the decision that resulted from the SPO poll. Given the potential impact of these changes, we think that the recommendation of the parameter committee for a staged implementation is reasonable.We therefore support the halving of minPoolCost as a first gradual step, followed by an evaluation of the effects and further adaptations in Q3/Q4 .