What will be the impact on stake pools once Goguen launches? I expect staked Ada to go down as peole use them eon Dapps, but would stakepool transaction processing go up? So for example should a small stake pool expect their ROA to increase once Goguen launches or it’ll still be the same rewards and probability of getting those rewards as before ?
Hi @ReddSpark ,
To simplify it the total amount of Ada distributed to SPO’s each epoch depend on:
- the monetary expansion which gradually decreases over time until we get to max supply (but this will take decades)
- all transaction fees
The first one will not decrease if less ada is staked! The same amount of inflated ada is just spread among the remaining SPO’s. Now for a fun thought experiment, imagine there is only 1 spo left and all others have closed shop because people went to defi apps. What would happen now is that spo and its delegators are happy campers. Since the same amount of inflated ada is distributed amongst that single pool increasing its roi like crazy. This would immediately incentive some defi investors to move back to staking. This would level things out consequently.
The second one will just increase because of the defi transactions which will more so increase the total sum distributed to SPO’s and their delegators.
It’s an elegant system
So assuming that the number of SPOs stay exactly the same, would the additional rewards due to transaction fees mean everyone’s ROA increases ?
In short: yes.
Assuming the total number of staked ADA stays the same (this is the real metric not the number of spo’s) AND we get much more transactions this will mean that the number of ADA rewarded per minted block will increase since this also includes the transaction fees. And here I am also assuming that the transaction fees are not lowered and thus also stay the same.
I think its also an important question if staking is conflicting with using defi. Or in an example: can I stake and borrow someone the same ADA at the same time?
If this is the case not much will chance except the higher total transaction fees. Note: Transaction fees are currently just a very small part of the rewards.
In the other case what @ADA4Good said sounds reasonable.
I don’t think so, since when you borrow those ada’s are available to be spent/sent by somebody else hence it could not stay in your wallet which would mean you cant borrow and stake at the same time.
The same would go for liquidity mining. to be able to do that you need to send your ada to some other wallet.
Ok so we people will unstake their Ada and use it for DeFi
It’s not known what people that borrow the Ada will do with it , but it’s likely to remain unstaked by liquidity providers im guessing
So staked Ada probably will go down
As a result there will be less reward per stakepool and so over time there will be more stakepools closing down until equilibrium is reached again.
That sound correct?
No, read my first message again
The amount of ADA created (monetary expansion/inflation) will not change by this. The same amount of inflated/created ADA is now spread among a smaller amount of ADA staked, hence increasing the ROA of the people who keep staking. At some point the ROI of staking will get higher than the ROI of defi at which point people will come back to staking.
So let me see.
People will unstake to go use defi
Fewer delegators but same supply of rewards will mean more Ada rewarded per delegator
If the number of pools remain constant but they lose delegators then the probability of minting a block will go down. But assuming the loss of delegators to defi applies proportionally across all pools then pools ROA should not change
Therefore a pool will be getting the same reward with fewer delegators and each delegator gets a great share of the rewards as a result
Have I got that right?
I think it remains to be seen whether the assumption in 3) holds true or whether smaller pools lose their delegators at a greater rate.
My question is as all these increased activities kicks in, what happens to smaller pools still waiting for blocks for a few months now? Do they stand a better chance of getting their first block or they should close down if their Ada delegations don’t increase?
The chance to get a block assigned is active stake of the pool / total staked ada. If the total staked ada gets lower your chance to mint a block increases as long as the removed stake is not removed from your pool
1 and 2 yes correct
3. The average amount of staked ada per pool will decrease but the reward per block increases.
4. yes in essence the total amount of ADA decreases causing the rewards per block to increase, increasing the roa for the remaining stakers.
Defi, liquidity pools, and other smart contracts can have stake addresses that earn rewards, so my guess is that the overall amount of staked ada won’t change much, but that it will shift a bit from staking by individual wallets to staking by contract addresses.
One thing is for sure: the number of transaction and corresponding fees will increase, improving the Stake rewards.
This is great news. The majority of my delegates are very new to this space and won’t do DeFi. So Cardano’s transactions will go up, but my delegates and ADA pooled will as well.
As far as I know Solana offers staking and DeFi. At the moment 73.5 % of all SOL are staked (see stakingrewards.com).
This is wrong! The rewards ‘belonging’ to the unstaked ADA goes back to the reserve. So less ADA staked does not mean that there’re more rewards per ADA staked, it only means that the reserve will deplete slower.
Interesting @brouwerQ! never too old to learn. Can you please explain the following from your knowledge so I can learn this a bit better:
- Currently block rewards are about 740 ada (besides some changes because of a0)
- Currently the amount of staked ada is about 23b ADA.
Now imagine the amount of staked ADA would go down to 50% of the current value (so about 12b ADA). Would the block rewards change (currently about 740 ada)?
I agree with bwbush. The network depends on the pool operations to validate transactions and maintain consensus. Whether they are staked direct or indirect from defi apps this will be required.
The definitive impact is that 50% of the Total Active stake will lead to 200% block chance for the same active stake.Assuming everyone is losing half of his stake it would mean the ROA per pool stays exactly the same.
From this perspective, it should be neutral.
The new topic now is that @brouwerQ argues that the Total Rewards per Epoch are depending on the total active stake. My understanding so far was that wasted rewards are going back. So if a slot is missed based on downtime. But this would be a different thing.
Or to show it a little more visually:
Amount of Blocks → fixed 21600 Blocks
Less total stake → higher chance to get the block with (same active stake)
→ neutral if we assume that your pool is reduced by the same ratio as other pools
Less total stake → lower total rewards
→ lower rewards per block as the number of blocks ramains the same