What is a Stake Pool?
What is Stake Pool?
A stake pool can either be private or public. In the case of Digital Underground Pool (DUP), we are a public pooling option that allows you to delegate to our pool for a nominal fee. Essentially a public stake pool is a Cardano network node with a public address that other people can delegate to and receive rewards in the form of ada as a block is minted within the blockchain.
Whereas, a private stake pool is a pool that distributes rewards to its owner or owners. Generally it is individuals or institutions that carry large sums of ada.
Stake pools are run by reliable operators: an individual or institution with the knowledge and infrastructure to run a node on a consistent basis. Investors in ada can delegate to a public stake pools if they wish to participate in the protocal and receive rewards, but do not wish to operate on their own due to portfolio size constraints.
The more stake that is delegated to a stake pool, the greater chance it has of being selected as a slot leader. Each time it is selected and produces a block that is accepted onto the blockchain, it is rewarded, and these rewards are shared between the stake pool operator and stake pool delegators.
Extensive research and development has gone into ensuring a fair, competitive marketplace that proportionately incentivizes participation, and rewards the investment of time, energy, and resources. The key technical parameters influencing stake pools and the rewards received are:
While there is no required minimum pledge amount, pool operators can optionally pledge some or all of their stake to their pool to make their pool more attractive. The higher the amount of ada pledged, the more rewards the pool will receive, which will attract more delegation. The a0 protocol parameter defines the influence of the pledge on the pool reward.
The desirability of a pool is calculated by taking the pledged owner’s stake, costs, and margin, and combining them with an influence from saturation and pool performance. This number will be used to rank pools in Daedalus and Yoroi, and indicates how ‘desirable’ or ‘attractive’ the pool is to potential delegators.
Saturation Parameter (K)
Saturation is a term used to indicate that a particular stake pool has more stake delegated to it than is ideal for the network, while k is the targeted number of desired pools. Once a pool reaches the point of saturation, it will offer diminishing rewards. The saturation mechanism was designed to prevent centralization by encouraging delegators to delegate to different stake pools, and to incentivize operators to set up alternative pools so that they can continue earning maximum rewards. Saturation, therefore, exists to preserve the interests of both ada holders delegating their stake and stake pool operators, and to prevent any single pool from becoming too large.
This tunable parameter will control the ratio of slots created by the federation of nodes compared to those by stake pool nodes. It will be used at the beginning of Shelley’s deployment to the mainnet. It’s important to note that all rewards will be distributed to operating stake pools and none to the federated nodes during this transition period. The decentralization parameter is being implemented to allow the network to stabilize.
STAKING POOL TICKER
Staking Pool ID