The Future is 0% and 100% Pools. Increasing k does not change this

Staking & Delegation Stake Delegation
1

The free market wins out. I posted several months ago how there is insufficient incentive for delegators to stake with pools other than 0%.

Look at where we are now. It seems that I’m right

As of 11/5/2020, All of the Top 10 Pools listed in Daedalus are 0% Pools. Look them up for yourself:

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Increasing k does 3 things

  1. Require delegators to check more often that their pool is saturated and switch over before its too high
  2. Require 0% Pool operators to make more 0% Pools under their management
  3. Make it easier for Bitcoin Suisse , Binance, and other whales to operate 100% pools since the saturation thresholds are lower.

Do you really think people are going to stake to a 3% pool just to avoid the hassle of monitoring their pool saturation? Dream on.

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2

0% and 100% indeed seem to be the only values for margin that make economic sense for SPOs.

If you run a fund or exchange, you stake your customer’s money and charge them using your own means, so you run saturated pools with 100% margin, because you neither want to waste resources by running too many pools nor want to deal with oversaturation.

Smaller players already cover their fixed cost with the currently at least 340 ADA per epoch shared between delegators. As far as I’m aware, there is no element of the cost for operating a pool that increases with the stake delegated to it, so there is no economic reason to take a fixed percentage of the rewards, even for very small pools. Therefore most choose a margin of 0%.

As a result, if you run a public pool, you differentiate from other SPOs by fixed cost and incentives (monetary or other) you offer delegators, not by margin.

Frankly, I don’t see why running a pool with 0% margin is seen by some as somehow harmful for the ecosystem. Am I missing something?

3

Only pools that are making blocks. The 700 something pools like mine that don’t have enough delegation to create blocks and are operating at a loss don’t get 340 ADA per epoch, partially due to too much centralisation to big pools. This why I am looking forward to this k increase.

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My pool ticker is GREEN, an eco-friendly pool running on servers located exclusively in countries with a low-carbon footprint electricity (nuclear, hydraulic etc…)
You guys are welcome to join the party anytime if you are looking for higher rewards involving little risk.

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4

Yes, but a a stake pool with no or very little stake is somewhat nonsensical. Such pools can set the margin to anything they want and they won’t recover their operating cost.

I’m all for having more pools rather than fewer, but below a certain stake it is simply not economically feasible to run a pool, whether we like it or not.

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