Choosing a Pool
Not so good
What is saturation?
The saturation point ensures that staking pools do not become centralized. It’s a point at which rewards are essentially capped (not being able to grow any further). Saturation point is currently set to 64M ADA.
Beyond the saturation point, rewards will decrease, encouraging new (and existing) stakeholders to actively seek other unsaturated pools. This is also a great method of helping smaller Pools grow.
What about owners with multiple pools?
By design, this is allowed, but if it really contributes to the further decentralization of the Cardano Network is really the question.
For now I don’t believe that the creation of multiple pools by the same owner really decentralizes the network. It’s really just a creative way of centralizing power.
So for example: if Stake Pool 1 (let’s say for example that the stake pool is called ADA1) is oversaturated, the pool owner then creates a second pool, calls it ADA2, and encourages stakeholders to move (some of) their stake to stake pool ADA2.
This reflects a very good business strategy to maximize ones profits (nothing wrong with that, so don’t get me wrong). Unfortunately this type of strategy shows no real concern for true decentralization.
What to consider before choosing the pool ?
Pool performance - This is the most important metric to evaluate. Your ROS can take a huge hit if the pool you have delegated to is missing the slots they have been scheduled for. Pools only receive rewards for the blocks they mint on the blockchain. Poorly maintained pools will tend to miss opportunities to mint blocks, causing the total rewards paid out to stakers to decrease. Try our Rewards calculator and find what's the best for you.
Supporting Decentralization - Supporting decentralization is critical to the long-term success of the Cardano network. In order to make sure the blockchain continues to run reliably and with integrity, we need to maintain a healthy distribution of stake across many stake pool operators. You can help by not delegating to groups that control a large number of stake pools, such as Binance
Communication, Transparency and Community - Very important factor in my opinion. Since determining how effectively a pool is running based solely on ROS is very difficult to do, pools that openly provide performance data should be given serious consideration for your stake. For example, PoolTool provides the ability for stake pools to self-report the slots they get elected for at the beginning of each epoch. These reports are then evaluated against the actual blocks the pool produces, and PoolTool publishes both of these values on the pool’s page. This provides real measurements of a pool’s performance over time. Also connecting with pool operators via social media is the best way to communicate. In 90% of the time, they will be happy to answer any of your questions!
Pool Fees - To maximize the rewards you earn, you will want to choose a pool with low fees. There are two types of fees stake pools charge: fixed fee and margin. The fixed fee is an amount of ADA taken from the total rewards the pool produces in an epoch (epochs last 5 days). Note: this is not a fee charged to each delegator. Minimum fixed fee is 340 ADA by design of the protocol. Margin is a percentage taken from the pool’s total rewards each epoch after the fixed fee has been deducted. These fees go to the pool’s operators to cover the costs of running their pool (more on this later).
Pool Size - It is important to choose a pool that is not over-saturated. The current Ouroboros implementation attempts to enforce decentralization by capping rewards at a specific limit to prevent pools from growing too large. In the current version of the network this value is set to 0.66% of the total ADA staked. So, if a pool has 6.6% of the total ADA staked, it will only receive rewards as if it had 0.66% of the total ADA staked. Therefore, stakers in this pool are receiving 1/10th of the rewards they would be in a smaller pool. Smaller pools will not run the risk of being over saturated, but they will on average mint fewer blocks. Pool rewards need to be considered as averaged over time. A smaller pool will divide bigger shares of the reward amongst its stakers (since there are fewer of them), but they will statistically get chosen to produce less blocks. A larger pool will find more blocks but payout smaller rewards.
Pool Pledge - Pledge is the amount of ADA the pool operator(s) have staked in their own pool. This effectively lets delegators know how invested the operators are in the success of the pool. Pledged ADA earns rewards just like if it were staked, so if a pool goes down, its operator will not only miss out on collecting fees for the missed blocks, but they will also lose rewards on their pledge.
Supporting Small Pools - This is something very important I'd like to point out. If you are here for long term and you honestly care about Cardano's main vision (to reach full decentralization), you should also consider supporting pools with stake <1M ADA. Cardano network needs those pools to survive, and by delegating to them, you are increasing the chance to mint a block. Which will be beneficial for the SPO and you!