FAQ

Stake pools are run by stake pool operators. These are network participants with the skills to reliably ensure consistent uptime of a node, which is essential in ensuring the success of the Ouroboros protocol and the Cardano network as a whole.

The protocol uses a probabilistic mechanism to select a leader for each slot, who will be expected to create the next block in the chain. The chance of a stake pool node being selected as slot leader increases proportionately to the amount of stake delegated to that node. Each time a stake pool node is selected as a slot leader and successfully creates a block, it receives a reward, which is shared with the pool proportionate to the amount each member has delegated. Stake pool operators can deduct their running costs from the awarded ada, as well as specify a profit margin for providing the service.

It sounds tempting to go for the lowest possible fee, but just like very cheap items on eBay, it’s rarely worth it.

In order for a stake pool to generate the maximum rewards over time, you need a professional and sophisticated setup. You need to make sure that the pools are highly connected to the network, that the hardware is adequate, that the internet connection is optimal, that the software is configured correctly and that the pool software is updated frequently. You need to build redundancy and automation, to have multiple internet connections, to have UPS backup power for the hardware and protect against attacks. You need a high level of automation and monitoring, to always keep the pools running perfectly, and in case of any breakdown, have a backup server standing by, that will automatically take over.

The income from a 0% pool is simply not enough to cover the expense of the above mentioned setup. For this reason, the 0% pools do not have this kind of setup, but instead run a much simpler operation. This means that they will perform worse over time, and hence pay less rewards. If you do the math, a 0% pool will give you worse rewards, even though it looks better on paper.

You risk having the pool operator raise the fees after they’ve attracted enough stake, or having the pool simply shut down because it’s not profitable. You don’t want to constantly have to check if the pool is still at 0% fee and still running, and risk staking to a dead pool or suddenly paying a much higher fee.

Pools with 0% fee are not incentivised to perform their best. The operator only makes money from the first block each epoch, and he then has no incentive to keep the pools performing well. There is no reason for him to make sure the rewards are at the absolute max, since it means extra costs for him, but no extra income. A pool with 1% fee has a great incentive to make sure the pools are always at their very max performance, and is willing to invest in it.

Saturation is a term used to indicate that a particular stake pool has more stake delegated to it than is ideal for the network, and 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 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.

The goal is to avoid any single pool becoming too large – thereby disincentivizing delegation to other pools – and receiving a disproportionate amount of the rewards. The health of the network is partly determined by having a high number of active stake pools with a balanced amount of stake delegated to them. The more numerous and geographically diverse the network’s pools, the better.

There are many factors you should look out for, that indicates that a pool isn’t the best choice. Among these are:

-Pools with 0% fee (discussed in “Why should I not select a 0% pool” above)

-Pools with pledge below 50k ADA (Signals that they might not be serious about their operation, or have confidence in themselves).

-Pools that haven’t produced blocks yet (They might simply be new, but this can be a sign of bad performance).

-Pools without a website or option to contact them (Signals they might not run a serious operation)

Yoroi wallet – Click on the „Receive“ tab. In the left hand side panel, click on the „Reward“ list item. In the center page grid you will now see one or more addresses listed. Copy to the clipboard the address that begins with the word „stake“. Go to the website https://adaex.org and in the search text box located at the top right corner of that website (the area that displays „Address, TX or whatever“), paste in the „stake“ address that you previously saved and press the Enter key or click the search icon. The resulting page will show you the amount of ada earned from each epoch and pool that you have delegated to.

Daedalus wallet – Click on the „Receive“ tab. You will see a long list of addresses that are valid for your wallet. Click on any one of them. A dialog box will appear that shows a large QR code and underneath that code you will see the address that you selected. Copy that address to the clipboard. Go to the website https://adaex.org and in the search text box located at the top right corner of that website (the area that displays „Address, TX or whatever“), paste in the address that you previously saved and press the Enter key or click the search icon. On the resulting page, look about half way down and you will see a line that says „Stake Key“ followed by an address that begins with the word „stake“. Simply click on that „stake“ address and the resulting page will show you the amount of ada earned from each epoch and pool that you have delegated to.

AdaLite wallet – Click on the „Advanced“ tab. You will see a list of various addresses. Under the heading „Reward address“, copy the address that begins with the word „stake“ to the clipboard. Go to the website https://adaex.org and in the search text box located at the top right corner of that website (the area that displays „Address, TX or whatever“), paste in the „stake“ address that you previously saved and press the Enter key or click the search icon. The resulting page will show you the amount of ada earned from each epoch and pool that you have delegated to.