Stake Pool GUIDE: How to Setup a Cardano (ADA) Stake Pool
Interested In Developing On The Cardano Platform Or Running A Stake Pool?
Pledging Mechanism
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.
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.
Desirability Index
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.
Decentralization Parameter
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.
WHAT IS STAKING?
Ada held on the Cardano network represents a stake in the network, with the size of the stake proportional to the amount of ada held. The ability to delegate or pledge a stake is fundamental to how Cardano works.
There are two ways an ada holder can earn rewards: by delegating their stake to a stake pool run by someone else, or by running their own stake pool.
The amount of stake delegated to a given stake pool is the primary way the Ouroboros protocol chooses who should add the next block to the blockchain, and receive a monetary reward for doing so.
The more stake is delegated to a stake pool (up to a certain point), the more likely it is to make the next block – and the rewards that it earns are shared between everyone who delegated their stake to that stake pool.
WHAT IS A STAKE POOL?
Stake pools may be either public or private. A public stake pool is a Cardano network node with a public address that other users can delegate to, and receive rewards. Private stake pools only deliver rewards to their owners.
Stake pools are run by a reliable operator: an individual or business with the knowledge and resources to run the node on a consistent basis. Ada holders can delegate to public stake pools if they wish to participate in the protocol and receive rewards, but do not wish to operate a Cardano network node themselves.
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:
How Do I Set Up A Stake Pool?
It’s important to remember the role of a stake pool operator: to ensure reliable, 24/7 operation of a network node. As a stake pool operator, you have a responsibility to the ada holders who delegate to you but also to the health of the network itself. This requires a stable and reliable network infrastructure and, ideally, system operation and server administration skills along with experience in development and operations.
Anybody can learn how to operate a stake pool, but a degree of technical familiarity and knowledge is required.
FREQUENTLY ASKED QUESTIONS
You can use the rewards calculator to get an idea of the rewards you will earn. It’s important to note that the calculator produces only reward estimates and shouldn’t be considered definitive or a guarantee of reward amounts. Over time, parameters may be changed that could affect reward margins. Amounts calculated are therefore subject to change, but represent a realistic and sensible level of return.
As a stake pool operator, you will typically have:
- Operational knowledge of how to run and maintain a Cardano node on a 24/7 basis
- System operation skills
- Experience of development and operations (DevOps)
- Server administration skills (operational and maintenance)
We support Linux, Berkeley Software Distribution (BSD), Mac, and Windows platforms. The following versions are required:
- Linux (2.6.18 or later)
- BSD (NetBSD 8.x and FreeBSD 12.x)
- OSX (10.7 Lion or later)
- Windows 10
Yes, this is technically possible. It can be achieved by registering a stake pool and setting the operator rewards percentage to 100%, so that anybody that delegates to your stake pool will not receive any rewards. This will disincentive delegators from delegating to you, but provide you with the ability to stake your ada and singly reap the rewards, while testing your stake pool operations.
Stake pools will be ranked by performance, so it is important that your stake pool is online and active when it is elected to create blocks. Stake pool operators can also pledge – through delegation – their personal stake to their own pool. By providing a pledge address when they register the pool, users will be able to see which pools have been pledged to by their operator. Additionally, stake pool operators can inform users about:
- Security: details of how a stake pool has been secured against hackers
- Team: information on the operator’s team and experience in managing stake pools
- Communication and social media: regular updates and support for delegators
- Website: stake pool information and marketing
Pledging refers to stake pool owners’ ability to delegate personal stake to their pool. 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. Read more on pledging on the IOHK blog.
Stake pool operators will need to be available as much as possible to respond to any network or performance alerts. It is important that pools ensure their node is running the latest software.
Stake pools are ranked based on their overall performance and other key information. The performance metric is a calculation based on the number of blocks the pool was tasked to create compared with the number of blocks it actually created, and is recorded over time. We recommend that ada holders also do their own independent research when choosing where to delegate their stake.
Rewards for delegation can be earned if you delegate to a stake pool that is sharing rewards. The amount you earn cannot be guaranteed and will ultimately depend on the stake pool, the amount of rewards shared, and its performance. It is worth noting that rewards will only begin to be granted from the end of the epoch in which the associated stake was delegated.
