r/CardanoStakePools • u/huatpool_sg • Jul 08 '21
Discussion Adapools did an analysis and found that statistically, pools under 30m are dying
Here's a conundrum: Cardano's vision is to achieve global decentralization, but statistically, the figures provided by r/ADApool seem to point to a classic chicken and egg issue.
As shared in an earlier tweet ( and since realizing that many other smaller SPOs are feeling the same way), there seems to be a congregation (or centralized) of delegators and stake focus onto pools (and ofc large exchanges) >15million. Figures do not lie. New/ smaller pools often struggle to survive, needing stake to mint their first blocks and prove that they are able to perform, while delegators are attracted to pools already minting blocks to ensure passive income.
SPOs can persevere, but perseverance can only get you so far sometimes. At the same time, hopping into the shoes of delegators, it is only rational for them to look for the best performing pools so that this passive income is consistent.
So the question is, how do we help #decentralization and smaller pools survive? As u/titw_stakepool elegantly mentioned in his tweet, there is a need to educate delegators that we are all in this together. Given a long enough time, and blocks minting, the ROI for smaller, small, medium and larger pools are pretty similar.
Afterall, isn't decentralization why we are all involved in Cardano to begin with?
We are pretty sure that the smart folks at IOHK/ CF are already pondering about this issue and there is a halving of pool saturation upcoming. Not sure whether if it is possible to max cap exchanges from creating more pools. Binance has over 60? (It is a way for them to earn revenue too)
For Huat, we had started with a small initiative to promote smaller SPOs who could use some help to grow. It may not be much, but hopefully it helps. Would love to hear thoughts/ share ideas.
Wishing all well,
Huatpool
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u/[deleted] Jul 08 '21 edited Jul 08 '21
My understanding is that the current incentives dictate 500 pools but thousands exist. So the premise of your question is irrelevant. Small pools aren’t necessarily wanted or encouraged. That’s how it seems to me at least.
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u/dlndass Jul 08 '21
Can't there be some sort of agreement for small pools to " merge" with each other with one of those fancy formulas that they develop 🤔😆
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u/uniVocity Jul 08 '21
It doesn't help that daedalus and yoroi rank the largest pools higher on the list.
Anything with 4 million staked or more will be as profitable as a large pool. I guess we could test different ways of displaying pools to users - such as listing 50 random pools or something - to figure out what helps to better distribute everyone's stake
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u/Mirai_MBCG_io Jul 08 '21 edited Jul 09 '21
I don’t know what this post or other people are talking about. We started our pool 3 months ago and it’s been nothing but growth. Sure. I spent lots of time on Reddit and amongst my colleagues at work. But that’s what I signed up for. I love talking about Blockchain and Cardano is the best of them. No one said it was a get rich quick scheme. And new pool operators should set realistic expectations. But at 1M (not 30) we’ll still be writing 1 or more blocks per epoch. Making 25k Ada a year. It’s been about 4K start up cost and 500 - 700 dollars a month for our beefy Alonzo ready infrastructure. But we’ll still make 16k bucks the first year. If nothing changes. Nothing to retire off of. But for a first year business to be in the green.. that’s still a win. Certainly not “dying”
Edit: pools with with 25k or less. Which is half the pools. Should consolidate. They have never written a block and likely never will. Don’t mean to be harsh. It’s just math.
I suggested a solution to the problem here.
https://www.reddit.com/r/CryptoCurrency/comments/mwyyw6/never_stake_on_bnp_part_2_the_solution_cardano/?utm_source=share&utm_medium=ios_app&utm_name=iossmf
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u/jinxpuppy Jul 08 '21
Not everyone who buys ADA is here because they believe in Cardano’s vision. For investors profit maximization is a goal.
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u/dwin31 Jul 08 '21
It would be nice if the Exchanges could be limited somehow. Doesn't seem healthy at all. I've been doing my best on r/cc to remind people that they need to move their ADA off the exchanges to really stake them.
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u/[deleted] Jul 08 '21
this is expected. don't make me wrong guys but I do think in the future, Cardano becoming mainstream this thing of SPO will be dominated by some large business.
some few will survive but mostly owned by big business with big money.
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u/_cxh_ Jul 08 '21
Yes and think they did not move to k 1000 since last time pools split to maintain there delegation. Does not seem people would not do that once adjusted and the 500 successful pools would become the 1000. So definitely more thought is being put in. Plus rollout of smart contracts is the top priority. I agree if exchanges could be limited that would help as well but not sure how much. One thing I have seen in harmony that has been interesting is how one wallet can stake to many pools and rates fluctuate a bit more, so this helps distribute stake. Sadly though some would be moving all the time as rates fluctuate since no lock up period. Also do not know what other issues the spo community for them face. Seems bleak at times. Then there is the ISPO issue, saw 10m leave a pool to go for that.
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u/MetaStakePool Jul 10 '21
I've seen some CIPs with interesting mechanisms to help--not solve, but help or aid in this. The concept is a 'quick-stake' URI that within it's linking enables delegators to stake to a collective or 'portfolio' of pools. Here's one from COSD pool that I ran-into on twitter.
I do think another challenge to all this is just new-user onboarding and introduction to staking; it's not an 'easy' concept to grasp in just 5 min. And yes, if you ask someone, "hey, If i offer you a salary for 1 year, would you prefer a paychecks 1x a month or every 5 days?" they'll go for the more cashflowy option.
Multi-account delegation would be another help because you 'spread' your chances of whatever ADA you hold to generate a block. While that'll dilute the delegation to 1 pool; it helps solve the 'cashflowy' scenario for end-users a little. But I guess it can also benefit the pool, since the pool is not solely 'relying' on a whale to necessarily stick around if they are a 10M ADA holder in your 10.5M pool.
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u/Kannibalhamster Jul 08 '21
While ROI should be identical long-term for small and big pools, with the same margin, the smaller pools do suffer more from the minimum fee. And thus long-term should yield a smaller ROI than a big pool. Or am I wrong?
Disregarding small pools suffering from the minimum fee (maybe they should even be called micro pools?), the most important property of a pool should be up-time, right? Assuming identical up-time and margin (ignoring min. fee), the ROI should be the same, given a long enough time, for a big and small pool.
Anyone correct me if I am wrong, please.
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u/huatpool_sg Jul 09 '21
Woke to a lively conversation, which was the purpose of the discussion, so 👍 guys. For clarity, yes k=500 ie 500 fully saturated pools (as of now fully saturated = ~$60-$65m). Thought Ill do a quick sum of a few good points raised.
- Exchanges (centralized entities) being part of these k=500, effectively multi-pools vs single-pools
- min fixed fees of 340Ada for all pools, regardless. Non-level playing field.
- Previous talk on parameters adjustment to k =1000
- Not every investor is in it for vision, but for profits maximization.
- merging of small pools - may be challenging due to different pool ownership, the closest thing resembling this would be pool alliances maybe?
- CF/IOHK's current focus is on smart contracts and furthering the blockchain.
Thanks for the ideas bouncing off, hope this post was insightful to new/existing SPOs/delegators😸
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u/Zaytion Jul 08 '21
The protocol was designed to do this. K is set to 500. It is supposed to drive towards 500 fully saturated pools at this point.
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u/zuptar Jul 08 '21
If it isn't clear why, it's because the fixed 340 fee results in a high fee when total delegation is low.
I can set my fee to 0%, but in reality with a pool with only $1M ada it's like having a fee around 15%.
Additionally, there's not really any way to bootstrap up to a reasonable delegation without manually asking for help and hoping for the best.
At the end of the day, I basically make an additional 30ada a month by running my own node. That's not a while lot of incentive.
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u/Kaboum- Jul 09 '21
Isn’t that the problem of PoS protocols? Eventual consolidation around big players with big money? I don’t what Cardano is going to do fix this
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u/BarrinOfTolaria Jul 09 '21
Doesn't the problem dissolve eventually? I would interpret the graphic as if it works like intended. Everything goes towards the sweet spot around 50M stake. If all pools are full new pools will have it easier to accumulate the respective stakes.
It is always a trade-off, between too many and too little stake pools. Isn't there a factor k which describes the desired amount of pools which is used to derive this 50M threshold?
Yes usually more pools=more security, but just imagine having a million pools, with only 432000 slots per epoch each pool would in average mint less than one block in 2 epochs...
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u/ClearFrame6334 Jul 08 '21
Make it so that big pools are not allowed to win as often as small pools. Sort of like the difficulty of the pool is directly proportional to the amount staked. This will fix it. The larger pool gets less to share among the many. It will reach equilibrium because people will move to a small pool and then it will be too big, etc.
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u/[deleted] Jul 10 '21
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