The Myth of Decentralization in Cardano: Why Small Stake Pool Operators Can’t Survive
As a Cardano Stake Pool Operator (SPO) for over 4 years, having minted more than 200 blocks with near-perfect uptime across four nodes, I’ve seen first hand how the promise of decentralization within Cardano is fundamentally flawed. The system, as it stands, is skewed heavily in favor of early starters, multi-pool operators, large established pools, and influencers who have the power to attract delegators at scale. For the rest of us - especially small or new pools - the playing field is anything but level.
The Imbalance: Large Pools Dominate
Once you break into the ranks of the large pools or manage multiple pools, it’s game over for everyone else. Stake rarely moves. Instead, it gravitates toward these well-established pools for one simple reason: they offer higher rewards. This is because of the current reward system, where the more blocks a pool mints, the smaller the impact of the 170 ADA minimum pool fee becomes. In small pools like mine, that 170 ADA fee significantly reduces the rewards delegators receive, making my pool - no matter how reliable or well - run - less attractive compared to a large pool.
Larger pools mint multiple blocks per epoch, allowing them to distribute rewards more evenly across delegators. When a pool mints 10 blocks in an epoch, they generate over 4,000 ADA in rewards, but the 170 ADA fee takes a much smaller proportion of that. In contrast, if a small pool mints just one block, the 170 ADA fee bites off a huge chunk of what goes to delegators. The result? Large pools become more attractive purely due to size, not performance or contribution to decentralization.
Gimmicks Don’t Work
For small pools, the only options to attract delegators are short-term gimmicks: giveaways, tokens, or sharing the pool fee with delegators. These tactics may work temporarily, but delegators inevitably leave once the giveaways stop, returning to the larger pools where they feel they’ll earn more reliable rewards.
With this system, there’s nothing meaningful a small or new pool can do to differentiate itself from the competition. It’s an uphill battle where the odds are stacked against you, and it’s leading to the centralization of stake into fewer, more dominant pools.
A Broken Reward System
The biggest flaw in the system is the minimum pool fee of 170 ADA. This is devastating for smaller pools. In my experience, and as the numbers show, this fee makes it nearly impossible for small pools to offer competitive rewards to their delegators. The Cardano network needs to rethink how it compensates small pools. One solution could be to separate the pool margin from the block reward itself. Instead, the pool fee could come from the treasury or a network subsidy, so delegators aren’t penalized for supporting smaller, more decentralized pools.
We recognize that such a solution may incentivize operators to run multiple pools just to siphon off the pool fees, but a hybrid system that prevents this kind of abuse could be considered. There must be a way to balance fair compensation for small pools while maintaining decentralization and preventing larger operators from exploiting the system.
Decentralization is a Myth
The reality is that Cardano’s decentralization is more myth than fact. Over 1,000 pools have never minted a single block, and thousands more have retired because they simply couldn’t compete. In addition to this only 4.96% of pools have minted over 10,000 blocks. The result is clear: a network where the vast majority of stake resides in a small number of large pools, controlled by those who either had an early start, managed to operate multiple pools, or had the influence to gather mass delegations.
As a small pool operator, you would have more success opening a coffee shop between Starbucks and Costa than breaking into Cardano’s reward system. The current design means that once a pool reaches a critical mass, it becomes exponentially harder for new or smaller pools to gain any traction and compete. This is a centralization of stake and influence - the very thing Cardano was built to avoid.
Time for a Change
For Cardano to live up to its promise of true decentralization, the community and the developers need to rethink the reward system. By finding a fairer way to compensate small pools - perhaps through treasury funding or rethinking the fee structure—delegators could be encouraged to support decentralization without sacrificing their rewards. Until then, decentralization on Cardano will remain a myth, with only a handful of pools controlling the majority of the network’s stake.
Let’s Be Honest About k
One final point: the parameter k is currently set to 500, which means the network is optimized for about 500 stake pools. So, let’s stop pretending that Cardano wants more than 500 active validators. The reality is, if you’re running a pool outside of these top 500, you’re essentially doing it as a hobby. While there are technically over 3,000 stake pools in operation, most are simply unable to mint blocks or attract delegators due to the way the system is designed.
The truth is, Cardano’s reward mechanism doesn’t support real decentralization. Instead, it ensures that the top 500 pools thrive while everyone else struggles to survive. If that’s the goal, let’s just be honest about it instead of pretending otherwise.
