Focus Group - SPOs - 3rd April 2025

Data Points

Installation is easy for experienced SPOs, but less so for newcomers.
Voting as an SPO is risky & labour-intensive (moving hot/cold keys); inconsistent methods add complexity.
Dead pools with inactive stake are a persistent problem — they reduce network efficiency and distort staking incentives.
SPO profitability is under threat:
- Decline in staking rewards faster than new fee mechanisms can compensate.
- Negative feedback loop: less staking participation → fewer rewards → less staking.
- Lack of users; difficulty attracting new delegators.
Competition from exchanges & other networks makes it hard to attract/retain delegators.
Staking is currently competing with dApps for user capital — staking being "risk-free" discourages capital use in dApps.

Profitability must stay above operating costs for SPOs; current reward trajectory is unsustainable.
Rewards should be more balanced across market cycles — current system makes it hard to sustain pools long-term.
Proposal to adjust reward calculation to eliminate negative feedback loop:
- Emit full rewards each epoch without returning any portion to reserves.
- Would stabilize rewards & improve short-term viability.
Compound rewards on lost ADA is a long-term risk — may require expiring delegation certificates to avoid distortion.
Pledge is seen as capital inefficient — ideas to de-emphasize its role.
Min margin vs min pool cost:
- Broad support for moving toward a min margin model instead of min pool cost.
- Both parameters could be maintained short-term and governed via DReps.
Reducing taxes from 20% to 10% suggested to help improve delegator rewards and attractiveness.

Partnerchains/sidechains could offer additional revenue, but concerns:
- Complex, requires matching ADA market cap for impact.
- Seen as potentially harmful (as with Ethereum’s fragmentation).
- Rollups (with settlement on L1) preferred over standalone partnerchains.
Direct fiat on/off ramps not seen as a blocker today — most SPOs already manage this via exchanges.
Direct stablecoin swaps (USDC/USDT) would be helpful for operational flexibility, but not critical.
Stake pool business model will need new revenue streams:
- Examples include staking derivatives, stable pools, rollup infrastructure, partnerchain security.
- Without new products, SPO business model may become unsustainable.

Paid marketing is not effective for SPOs:
- Low ROI; acquiring single users not worth the cost.
- Personal branding & visibility are the best tactics.
A better on-chain experience is needed:
- New wallets should better guide users toward staking.
- Better pool discovery UX needed (current approach too hidden/technical).
General Cardano marketing to new users (staking as utility) more useful than marketing individual pools.

Bare metal setups are preferred when feasible:
- More cost-effective in the long run.
- Avoids risks of cloud centralization.
- Hybrid models (bare metal + cloud failover) commonly used.
Cloud-only setups offer good block propagation but harm decentralization if used too broadly.
Future bandwidth demands (e.g. from Mithril, LAOs, etc.) may make bare metal more attractive.
Suggestion to allow optional node compilation (modular builds) to avoid bloated binaries & improve security.

Reduce saturation (K) or rethink how K is used.
Priority to improve delegator rewards.
Desire for more rapid iteration of key parameters (K, taxes, reward models).
Governance process (DRep voting) currently seen as suboptimal for managing operator-specific parameters like fees.

Last updated 24 days ago