How to find the best Cardano Staking Pool
Staking Pools are the heart of the Cardano blockchain. Despite providing the exact same service, they can be quite different from each other. Each pool is characterised by a number of different factors. In this article we will examine the most important parameters of a Cardano Staking Pool and, by the end of this article, we will be able to quickly find the Staking Pool that best suits our need.
At the moment of writing, the Cardano network counts more than 1,500 staking pools, some of which are not suitable for staking for a number of reasons that span from saturation, pledge not met, retired, inactive, etc.
Before digging into the details of every single aspect of a Cardano Staking Pool, let’s briefly refresh how Staking works.
Quick Staking explanation
Blockchains are decentralised ledgers running on distributed nodes. A ledger consists of records called blocks that is used to record transactions across many computers over the internet, so that any involved block cannot be altered retroactively, without the alteration of all subsequent blocks. This means that if Bob gave Alice 5 $ADA, these tokens now belong to Alice and Bob cannot spend them again.
Now that we know what a blockchain is, let’s briefly dive into how this is achieved in the most prominent blockchains. In order to permanently record a transaction, a blockchain needs to implement a consensus mechanism, also known as Consensus Protocol. There are many different protocols currently in the blockchain panorama, but the two most famous ones are Proof of Work and Proof of Stake. We will discuss the differences of these two protocols in another article, for now it’s important to know that Cardano implements the revolutionary Proof of Stake (PoS) consensus protocol that goes under the name of Ouroboros.
As mentioned earlier on, the Cardano blockchain is composed by interconnected nodes. Nodes can be of two types: relays and block producing. Both relays and block producing nodes maintain a full copy of the blockchain, but while the relays are mainly responsible to propagate transactions happening in the network, the block producing nodes are the ones persisting the transactions. Persisting one or more transactions on the Cardano blockchain is called minting. A group of one or more relays and exactly one block producing node constitute a Staking Pool.
Now that we know what a staking pool, let’s discuss what characterises a staking pool. A staking pools has a number of parameters some of which are decided by the Stake Pool Operator (SPO) such as name, ticker, pledge, variable and static fees, and other characteristics like saturation and pool performance that depend on the amount of $ADA delegated to the pool.
Let’s start by discussing the SPO defined parameters:
- Name: is the full name of the staking pool. SPOs can use all their creativity to define their pools name, here at Easy Staking we have simply called our pool “Easy Staking Pool”
- Ticker: it’s a 5-digit friendly name used to quickly find a pool during the delegation process. At Easy Staking we adopted EASY1 as ticker. In both Daedalus and Yoroi you can enter the ticker name in the search functionality to quickly find the pool of interest.
- Pledge, is the amount of $ADA that the SPO will commit to lock in the pool. Higher pledges are usually better as they contribute to two main things: pool with higher pledge usually correlates to the level of experience and confidence an SPO, the higher the pledge is, the more trustable and expert the operator usually is. The second aspect is related to how the pledge affects reward (learn more about this from the official documents). Higher pledges lead to higher rewards, unfortunately though, at the moment of writing, the pledge required to really make a difference is extremely high, and there aren’t many pool out there with such high pledge. At Easy Staking we currently have 44 thousands $ADA pledged. This is way above the average.
- Fees: there are two types of fees: static and variable. Both of them are decided by the SPO. The static fee has been designed to cover pool running or hosting costs of the fee. Static fee has a minimum value of 340 $ADA (this was established by the Cardano Foundation) and there is no maximum. The variable fee is a percentage of the total rewards produced by the pool. It usually ranges between 1 and 5% with 100% being of course the maximum. At Easy Staking our variable fee will never be higher than 1%. Promotionally until march 31st, our variable fee will be 0% so that our delegators will earn maximum rewards.
Let’s now discuss pool saturation and performance.
- Pool saturation is a parameter that affects all the pools in the same way. It depends on the total amount of $ADA in circulation and affects the amount of rewards produced by the pool. In general a Staking Pool produces an amount of rewards proportional to the amount of $ADA delegated to the pool. If the amount delegated exceeds the saturation value, the rewards produced will not be proportional anymore and will cause delegators to earn less. At Easy Staking we currently have plenty of space for new delegators, so delegate to us without any concerns.
- Pool performance: pool performance is a statistical value representing how much rewards, in percentage, our delegators have generated over a certain period. The network is designed to generate about 5% yearly rewards. The actual percentage fluctuates around the 5% mark but it will usually even out over time. For this reason is in general discouraged changing the pool you’ve delegated after a couple of epochs with bad rewards (under 5%) because it usually means that next epochs will most likely have higher returns. Currently at EasyStaking we have an outstanding Lifetime ROS of 8.5%. But it won’t last long, so start delegating with us soon!
You can check Easy Staking pool details on adapools.org
Now that we have all the information we need, let’s proceed to how to find the best staking pool.
Let’s put it all together
First you need to find a pool that is not saturated, or your rewards will be penalised. The second most important thing is to find a pool with low static and variable fees. Most SPO will have 340 $ADA as static fee and variable between 1.9 and 5. Last but not the least you want a pool whose SPO is committed in, and so take a quick look at the pledge, anything under 10 thousands $ADA is usually sign of a less experienced SPO. At Easy Staking we are committed to offer a nice smooth and rewarding delegation experience to our delegators. We have low fees and high pledge to maximise delegators rewards. Take a moment to observe how the different pool parameters appear in the Daedalus wallet.
As you can see:
- saturation is 2% perfect for minting new blocks as well as welcoming new delegators
- the pool margin (or variable fee) is promotionally 0% until March 31st 2021
- our pledge is reasonably high: 44.5k $ADA
- and we have the smallest possible cost per epoch (static fee)