Many Americans can’t tell you the name of their Congressional representative, but they can tell you an NFL receiver’s average depth of target over the past five seasons. A common criticism is that too much time and energy is focused on sports than politics or other areas of life often deemed more important. Perhaps this could be driven by the gaming aspect of the fantasy environment, often providing entertainment and a pleasant distraction from other facets of reality. Imagine if this culture of detailed interest in data were translated into Cardano; imagine the level of attention that could be embraced by delegators making informed staking decisions. Fantasy leagues based on the statistics of pools and operators would get delegators to research and become more invested in the network. Wouldn’t you join a “points per block” league and roster your favorite pools?
In order to play in a fantasy Cardano league, we’d have to have a scorecard of some sort - assigning points for certain attributes, parameters, and tasks completed. Luckily, Cardano’s epoch structure can easily serve as the season’s schedule. What’s left to do is define what makes a stake pool and its operator a strong candidate for delegation, which can be split into roughly two categories. A stake pool can be chosen for many reasons, but what exactly are the attributes that make a pool a good choice? There are actually quite a few, some of them being rather subjective but worth mentioning - the good news is many of these parameters are verifiable on-chain.
A potential delegator should start their review of a stake pool with the core parameters, as these can have a major impact on block production and staking rewards.
- Fixed Cost
- Lifetime ROA
A pool’s saturation and pledge can have an impact on block production, while margin and fixed cost impact a delegator’s stake rewards. The saturation level is controlled indirectly through the k parameter, which defines the optimum number of pools, and currently makes the saturation point just under 64 million ADA. A pool is considered oversaturated when its stake is above this value and this negatively impacts the pool’s block production and in turn rewards to delegators. The pool’s pledge, which can halt block production if not met by the operator, is often considered the operator’s “skin in the game” - the more self-bonded assets they have correlates to their investment in their pool.
The fixed cost defines the minimum portion of the stake rewards that go to the operator to account for the costs of running the pool. The minimum value for this fee is currently set to 340 ADA, but operators are allowed to set this higher. Additionally, an operator can set the margin of the pool, commonly found between 0% to 5%. This is an additional fee that the pool operator receives - the difference is that this applies to all blocks produced in the epoch, not just the first one. In some cases, the margin can be set to 50% or even 99% as MELD and other projects have for their ISPOs.
There are a few tools in the ecosystem that help outline these statistics in addition to other parameters like lifetime return and luck. A delegator’s ROA, Return on ADA, represents the percentage of ADA gained from staking over the year - think APY but ADA instead of fiat. The ROA of a pool depends on many factors but tends to be about 4.5% to 5.5% on average. Luck is a way to represent a pool’s block production. Each epoch, pools are estimated to mint a certain number of blocks based on their total stake. Sometimes a pool will mint more or fewer blocks than this estimate, being “lucky’ or “unlucky” respectively since more blocks mean more rewards.
In addition to these core attributes and trends, there are other aspects to consider. Some may consider these obvious factors, but they are important for the delegator to monitor. To mint blocks, a pool must be running the minimum software version and meet the hardware requirements. Additionally, a delegator expecting rewards shouldn’t be staked to a pool marked as retired. You might be laughing right now, but over 30 million ADA is currently delegated to retired pools.
In fantasy sports, there are some leagues that go into further scoring details than most. In our Fantasy Cardano leagues, we could count many other aspects of a pool, or its operator, that can pique the interest of a delegator. These are much more subjective qualities, but ones that can be scored nonetheless. Many of these pools don’t fit in just one category or only have one perk, so that is something to keep in mind as a delegator, especially if you want to maximize your interests.
Starting off the list of ‘extras’ is whether the pool/operator is part of an alliance or guild. There are quite a few in the ecosystem now and they widely vary in commitment and focus. A couple of examples are the xSPO Alliance, a group of pools with stake less than 1 million ADA, and the Climate Neutral Cardano group, a collection of SPOs that operate on 100% renewable energy and strive to make Cardano eco-friendly.
In your Fantasy Cardano rosters, you’d likely see a section for “mission-driven” pools. These are pools that have a foundation or organization that serves as a charity or public service to which they routinely donate a portion of the pool’s reward. If you can think of a charity, there’s probably a pool supporting it at this point, and some pools even rotate through a collection of charities or even poll their delegates to pick one. A few examples of these pools are [LHS], [USAS], [NIMUE], [VITAL], and [RADAR] - you can discover more of these charitable and altruistic pools throughout the network as well as in the Cardano MDP group.
Some pools offer perks to their delegates. These perks can be NFT giveaways or airdrops like what [HERO] does, bonus rewards and returned fees as [GNP1] or [TECH] do, minting services with [ATM] or [TAILS], or additional tokens like WMT with [A4G], among other benefits.
An attraction that’s newer to the system is of the pool is part of an Initial Stake Pool Offering (ISPO). So far this has been done two ways, the first being the project spinning up its own pools as MELD, Maladex and others have done and the second being through existing pools in the network. Depending on the project and pool, a delegate can receive ADA and/or the project’s governance/utility token.
Some operators have educational videos, channels on social media, and offer tech support to their delegates. These pools are often credited with attracting new users to the ecosystem and getting people to move their ADA off of exchanges. A few examples of these are [ADAOZ] and [DNEWS] among many others.
Some pools are directly connected to community tools like an NFT marketplace, wallet, or explorer. Many choose to delegate to these pools to support that tool or service, such as [SMAUG] the author of pool.pm, or [CRDNS] for ADApools.
Lastly, we may want to carve out a roster spot for a “bare-metal” or “low energy” pool. Some pools run “off the grid”, powered entirely by solar energy, such as [RSV], [BHMT], or [OTG]. In addition to scoring on energy consumption, one could also consider the node structure of the pool like for [PGWAD] or [BERRY]. The geodiversity of relays and quantity of redundancy, leading to the best uptime can be huge factors for delegates.
What about staking MELD, can that be counted in our fantasy Cardano leagues? The answer is not really, since it’s a different mechanism than staking ADA. By staking MELD, you aren’t delegating to a pool to validate transactions and run the network, as you do by staking ADA. Instead of block production, staking MELD provides protocol insurance from things such as a liquidity shortage or impermanent loss in exchange for a share of the protocol fees.
Go out and set your lineups!
Now you have the knowledge to review the available pools and operators and analyze their various attributes. The power of your ADA is staking. You can optimize your returns by making the best pool selection to fit your needs. You can support the best pools to make Cardano a strong network. You’ve now got the playbook to draft the best roster of pools to stake your ADA. Knowledge truly is power and it will bring you to the championship. Just like you back your teams, you can roster and cheer for your favorite stake pools as they produce blocks over the “season” of 10 epochs. Making a better choice in your delegation leads to better pools running the network, which in turn leads to a better network and thus better utility and value to your ADA and MELD.
Welcome to the exciting world of staking on Cardano, it’s much more than just a fantasy!
The opinions shared within this article are those solely of the MELD Ambassador. Note that the content within should not be considered financial, legal, or tax advice. Neither the author nor MELD Labs PTE Ltd. are financial, legal or tax advisors. None of this content should be used to make any form of financial, tax, or legal decisions. Do your own research and consult professionals as needed for official policies, restrictions, and requirements in your jurisdiction.
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