Thank you for the feedback on my original observations located in
Some interesting observations/analysis for Pool Operators and ADA Stakers.
I have watched a video by one of my favourite regular podcasters from the Cardano Effect, Phillipe, shown in this link -https://www.reddit.com/r/cardano/comments/ey8eoq/cardano_stake_pool_operator_perspective/.
As a high level summary of this podcast, Phillipe argues strongly, that the current Cardano model of a capped saturation point of 1% of Total Staking beyond which returns for both the Pool Operator and Staker begins to fall will not guarantee a truly decentralised system. As a Pool Operator, Phillipe’s experience is that it is unprofitable for the small operators. That in fact, there are some Operators who are creating multiple Pools to achieve a larger percentage of the Total Staking, and thus increasing their staking revenue…as sort of “corrupting or circumventing the equity model intended by Cardano Staking”.
Phillipe is convinced that current the egalitarian model of Cardano staking will likely lead to counter-intuitive centralisation through fewer, well resourced Pool Operators with large numbers of competitive sized pools that can win the right to create blocks regularly and also attract Stakers. Phillipe believes that a free market capitalist system will provide the best model to incentivise Pool operators to maximise their profitability through uncapped percentage of Staking.
As my observations in the previous posts had shown, that the reality of an open and free market always, without fail, will lead to what economist call “Market Failure”. This is why there are Government intervention programmes at all levels of Government to plug the cracks that the disadvantaged fall into, as well as to protect against the brutal and relentless exploitation by those who have financial, political and physical power over the weak in Western capitalist countries.
The answer to the lack of competitiveness of those lacking resources is not in allowing those who already have advantage to gain even more advantage by being able to have uncapped staking leading to immediate centralisation by them. Sure, some of the small operators might earn more, but only for a while so long as profitability of the model is below what the big players see as worth their while. Look at Bitcoin, original small miners have been smashed and are no more, as Bitcoin became lucrative.
I would say, rather it is by fine tuning the game theory models on which staking in Cardano is being developed and perhaps building a Smart Contract into the Pool registration system which will monitor and auto-penalise authenticated registers that seek to directly and/or indirectly aggregate a larger percentage share of the Total Staking than the limit set by the Cardano staking rules.
I believe, the mathematicians and scientists have already figured this out.
Phillipe, should not be discouraged, but during the Testnet may need to temporarily pull-out or consolidate with other Pool Operators to improve competitiveness. After all, that is the very essence of free markets, where viability is part of the survival of the fittest, otherwise its existential.
Look forward to your feedback.