A question we often get is, “what do I need to think about when choosing a pool?”. As part of that discussion, margin always comes up. If you look at adapools.org or pooltool.io, you can quickly see that margins range from 0% as high as 10%+. What is not well understood is how this number actually impacts rewards for you, the delegator.

One of the reasons that many pools set their margin to 0% or 1% is simply to attract delegators. On the surface it appears that a 1% or 0% pool is very favorable for a delegator. However, this may not be the whole story. If it were, then everyone would be at 1% and there would be a race to the bottom.

The Math

Here we’ll illustrate how the margin actually affects your rewards. Since we are focusing on margin, we will use a simple assumption of 5.5% total annual ROA for a pool. For a detailed analysis of the rewards equation see here.

In our example, we’re using a total stake of 40M ADA and an average ROA (return on ADA) of 5.5%. Also, we’ve set the fixed fee to the minimum of 340 ADA per epoch. Here you can see the Margin set to 1%, 2% and 3%. For a 1% pool, the net rewards (i.e., the rewards to you, the delegator), is approximately 5.384% of your delegation. For a 2% pool, that number is about 5.329%, and for a 3% pool, it is about 5.275%. As you can see, the difference between a 1% and 2% pool is actually only about 0.05% difference in rewards to the delegator. Similarly, the difference between a 1% and 3% pool is actually only about 0.1% difference in rewards to the delegator.

The So What

As you can see, a change in margin translates to a very small impact to the delegator, but enables the pool operator to invest in infrastructure, security and the ability to support its delegators. In fact, a very low margin pool is likely either subsidizing their costs through alternate income, or simply putting the bare minimum time and effort in managing their pool. There is nothing wrong with these cases, but it may influence the way delegators choose their pools.

K and what it means

With the launch of Shelley, IOHK introduced the notion of the “k” parameter. We mentioned it briefly in our September update. We described it as way of limiting the rewards a stake pool can earn based on its size. The intention of increasing key is to encourage decentralization of the network. If a pool exceeds the size limit, it will not generate additional rewards for the incremental ADA.

On December 6, 2020, k will be set to 500 and the new saturation point for a stake pool will be around 64M ADA. When a pool exceeds 64M ADA, the rewards per delegator will be reduced. The number 500 means that the network will be optimized for approximately 500 stake pools. The plan is for an increase of k to 1000 in March 2021.

As a delegator, you will want to ensure you are in a pool that is does not have 64M ADA or more to gain full benefit from your staked ADA.

This will result in a lot of movement from the pools that currently have more than 64M ADA to mid-sized or smaller pools. This is great news for smaller pool operators and the network as a whole. It will certainly encourage a better distribution of ADA, and allow the smaller pools to more consistently received and mint blocks. When k goes to 1000 in March, the upper limit will again be decreased to about 32M before rewards are reduced.

What CANUK is planning

Cardano Canucks have been looking at our long-term business plan, which includes considerations for “k” going to 1000 in March. At that time the saturation point will be 32M ADA. In order to build a sustainable operation, we believe that increasing our pool count to 3 will provide us enough capacity to continue building our community and contributing to the Cardano ecosystem, while not negatively affecting decentralization by creating too many pools. We will not be splitting our pledge, but rather pledging additional funds to create these new pools.

Our goal is to ensure that all of our delegators maximize their potential rewards. We also want to offer different options for different delegator risk profiles. For example, smaller pools may have higher volatility allowing lucky delegators to perhaps make greater than the average 5.5% ROA, where larger pools will be more consistent in rewards, but stay closer to that 5.5%.

We currently don’t have plans to open more than 3 pools, however we will continue to adapt as the network and landscape changes. As always, we will continue to focus on community, including delegators as well as our fellow stake pool operators.

September Updates


Rounding out August 2020

In August, we saw a lot of great progress. IOHK has been busy with improving stability and performance through updates to the node software (v1.19.0), as well as Daedalus. In addition, the team has been working tirelessly to get the exchanges up and running with the upgrade to Shelley. The only outlier at the moment is Bittrex, which was one of the first exchanges to list ADA and was running extremely outdated code.

Emurgo has released the new version of Yoroi, which now supports Shelley delegation, as well as Ledger and Trezor support. Yoroi mobile is also out, with Ledger support almost ready to go! 

It has been a tremendous month with a lot of action!


SEPTEMBER 2020 – What the team is working on


Partial delegation

This describes the ability to delegate to multiple pools from a single wallet. This capability will vastly simplify delegation in the future, while enabling people to more easily select exactly which pools they would like to support, and by how much.

Delegation portfolios – As mentioned in a previous post, IOHK is working on providing the ability to individuals to create groups of stake pools. This will be enabled by the partial delegation pool. People can then delegate to this group, similar to how mutual funds currently work. This is an exciting feature that many of us are eagerly looking forward to, as it will help to promote decentralization instead of encouraging people to only stake to the largest pools.



Presentation of stake pools

If you have been paying as much attention to pool rankings as we have, you would have seen pools soar and dive through the rankings. The ability to sort/rank pools by different criteria is somewhat limited right now. Addressing this will be a very welcome priority for the IOHK team for September. The idea is to improve the UX and allow people to rank pools based on different criteria. This is one of the updates we’re really looking forward to.

SMASH – the Stakepool Metadata Aggregation Server (not sure what the H is for…) is the service that Daedalus uses under the hood to aggregate all of the metadata about stake pools and present that information to end users. IOHK will be working on allowing more ability to customize the presentation and ranking so that people can view and rank pools the way they like


Ledger – the “Stake Pool Operator Update”

Vacuum Labs has submitted a proposal, which includes 1-to-many delegation from the ledger device, as well as a host of features aimed at Stake Pool Operators (SPOs) 

One of the primary features for SPOs will be the ability to store their pledge address keys offline in a Ledger device. This will greatly enhance the security of running a stake pool with a large pledge.

In addition, they are also looking into allowing KES proxy keys to be created / stored on the Ledger, but this is likely a future feature. We’ll keep you posted as we hear more.

As with most things, IOHK is moving things along in a timely fashion. They expect to work out the final details of the contract with Vacuum Labs and sign this week.



One of the biggest upcoming updates to Daedalus is the “Harware Center” which will enable staking from a hardware wallet (like Trezor or Ledger), similar to the capability currently offered by Yoroi and AdaLite.
Additionally, they eventually want to allow other hardware security devices such as YubiKeys to be used to enhance the Daedalus experience.


Multisig[nature] pledging

One of the more interesting updates coming up is the ability for people to contribute to the pledge of a stake pool from a multisig wallet, which alleviates some of the trust concerns with working with other parties. This will enable smaller pool operators to work together to create a larger pledge.


The “k” parameter

Ironically, centralization among several very large stake pools is emerging. The “k” parameter is intended to counteract this by limiting the rewards a stake pool can earn based on its size. This will encourage greater distribution to mid-sized and smaller pools. If a pool exceeds the size limit, it will not generate additional rewards for the incremental ADA. There is a big urge to increase “k” (thereby decreasing the pool size limit), from it’s current value of 150 sooner than later. 


The “d” parameter

Decentralization is the name of the game. Currently (as of epoch 215), 26% of the blocks produced are minted by stake pools. The network will continue to become more decentralized as “d” steadily decrements on autopilot.


New potential partner – Bison Trails

IOHK is in conversations with Bison Trails to implement staking as a service. Essentially this would make the management of staking much simpler. In addition, it would enable people to delegate directly from an exchange. It’s still early, but significant enough for Charles Hoskinson to mention.

There’s a lot going on. Technology and the community are evolving very quickly, giving us a shiny outlook in the months ahead. It’s astonishing to see the theories and discussions of the past few years finally become reality. There is greatness ahead.

Here’s the video where Charles gave his update:



“Become a stake pool portfolio manager.”

Currently, to delegate to a pool, you need to go into Daedalus (or Yoroi) and delegate an entire wallet to your pool of choice. This means, the entire contents of that wallet will be delegated.

If you want to delegate to multiple pools, you need to manually split to multiple wallets, move your ADA to those individual wallets, then delegate each to a different pool. This simplified approach that was taken to ensure Shelley could be released on time.

Most people are not going to do the split step, so they’ll likely delegate all of their ADA in  their wallet to one pool, which is tougher on smaller pools.

Delegation Portfolios

IOG is introducing one-to-many delegation. The concept is that you can create delegation portfolios in Daedalus which become user-created groups of pools. You can select your favourite ones, assign ratios to each pool (represented by tiles in Daedalus), creating a portfolio. The aim is to put that in a JSON file, which contains preferences of pools to amounts or percentages. You can delegate to that portfolio, and optionally export/share the portfolio, similar to how you might share a play list to a friend.


This opens the world up to curation of these portfolios (like a fund manager would), which can be “themed”. Examples are “small pool only” portfolio, or a “socially responsible” or “eco-friendly” portfolio, etc. 


Charles announced that Atlas – a next gen explorer – is coming out. It will include a portfolio explorer, which would aggregate metadata and portfolio descriptions, etc. This should help diversity in the ecosystem,  giving more exposure to smaller pools included in some of these portfolios. The most exciting part of this is that these lists/portfolios can be created and curated by the community.



IOG is working with a company called Vacuum Labs to enable the following functionality in offline devices Ledger and Trezor. Learn more about these devices if you are unfamiliar with them.

Update Ledger and Trezor

  1. One-to-many delegation as discussed above, except managed via an offline device
  2. Multi-signature pledge – many people can come together and create a pooled pledge governed by good access control, protecting participants
  3. KES (Key Evolving Signature) management – after a certain period, the key will evolve to a new key, increasing security. This will allow for further protection of private keys, as they will reside in an offline device, further reducing the opportunity for malicious attacks.

One of the absolute pleasures of participating in the Cardano community is the speed and effectiveness at which IOG and the greater community collaborate, producing tangible updates and results. These latest planned updates are a testament to that. 

See and hear the details directly from Charles Hoskinson:

What we should expect
Managing expectations as we enter the exciting unknown will make for a great experience.


We are all quite excited as we come to the end of the first epoch since the launch of Shelley, and we’re all looking forward to that first allocation of rewards. After all, it’s one of the primary reasons we jumped on the opportunity to find a stake pool and delegate our ADA out of the gate. So, what should we expect?


Decentralization will take time. Slow and steady makes for a strong network.


The first thing we need to be aware of is the d parameter. The d parameter represents the proportion of the block that is generated by stake pools, like Cardano Canucks. Currently, the network is supported by IOHK (i.e., it is centralized with IOHK). The goal is to decentralize the network, so that it is supported by stake pool operators. We started with d=1 (fully centralized with IOHK), and over time, d will be reduced to 0, at which point the network will be fully decentralized across the stake pools.

What’s the timing?

The rate at which we move from phase 0 through phase 3 has been a topic of considerable discussion over the last few days. The IOHK team will create and set a parameter called alpha (α), which represents the rate of decay of the d parameter. The example given by Charles Hoskinson is if they set α=0.025, it will take about 200 days to get to d=0, or end of Phase 1. The idea is that every epoch will decrement d by a minimum of α , so it’s possible that it’ll be faster, but likely they’ll keep the pace. Charles also introduced a notion of network health. The overall rationale is that they’ll monitor the network health at each epoch and reduce d by α to ensure the network is stable and there are no issues. If an issue occurs, they may stay at the same d value for a couple of epochs.

The  IOHK team will announce the  α value in a blog post scheduled for August 14th. We’ll definitely let everyone know the  outcome via our social channels, with a follow-up via email. In addition, we should expect d to remain at 1 for at least the next epoch. Part of this is because a bug that has been identified related to how some exchanges are using the Cardano APIs, delaying the ability for people to retrieve their ADA from those exchanges. Also, 1/3 of stake pools did not appear in the Daedalus wallet until a patch was released (2.0.1) several days after the Shelley launch. So, to resolve those issues and ensure that everyone has a fair chance to delegate their ADA, they’ve decided to wait one more  epoch.

Charles also mentions that the d parameter doesn’t substantively impact profits of staking. It shouldn’t matter if d=0.9 or d=0.



This is what we should expect:

  1. Decentralization will take time for a strong, stable network
  2. Starting decentralization (lowering the d parameter) won’t happen until one more epoch (the week after next)
  3. The d parameter doesn’t substantively impact payout of rewards

This is all by design, and the whole world is experiencing this for the first time. We’re all in this together and the best we can do is disseminate information as we receive it, as we did during theShelley launch.

All of this information is based on the talk that Charles Hoskinson gave yesterday:

Finding That Balance

Exciting times – Cardano switched over to Shelley yesterday and within seconds, people were downloading and syncing their wallets to move their ADA over. Within minutes, staking pool operators were registering and making the pools available for us to delegate to.


This is an unprecedented event, bringing us one step closer to the vision of a truly decentralized value network upon which many projects will be based in the near future. Everyone involved is very excited about the possibilities, and involved because of the shared vision of a better global future. On the flip side, this is new to everyone making it very difficult to know what to expect.

One of the difficult decisions for staking pool operators is how to set the margin. Like most tough decisions, there’s no right answer and there are counter-balancing factors.

Similar to any other industry, pricing is often driven by the market and competitors. If everyone else is selling the same product as you, then the further beyond the average market price you set your product, the fewer customers you will have. There is complexity around marketing and brand affinity, but for the purposes of this case, the pressure of “everyone else’s price” will have a considerable impact on your price.

In this particular case, If the vast majority of staking pools set their margin at 8%, then you need to set your margin at the same or below or you will have much fewer people staking to your pool. The problem with that is that a staking pool will be assigned blocks if they have enough ADA staked to them. So, to be a staking pool that will be valuable to those who staked to it, we need to have enough people staking.

On the other side of the coin, the whole purpose of the margin is to provide a way for pool operators to cover the cost of running the pool. The tough part of that is at the moment is no one really knows how much it will cost to run the pool, let alone tune it for performance. Once the operators start optimizing the performance of their respective pools, they’ll have a better idea of the longer term cost of running the pool.

Here’s a video that touches on the subject (about the 5min mark):

We are anticipating that it will be beyond the 3%-5% margin that we are currently seeing among different pools. As a result, we will likely see low margins as pools are trying to set up a base of people to delegate their ADA to their pool. Then we’ll see an increase in the margins as pool operators get a better handle on the actual operating costs.

The key will be transparency and understanding around operating costs and how it relates to the margin. We endeavour to maintain this transparency throughout this wild journey, and be available to learn, and share what we learn as we go. This is a great community, and we’re confident that we can sort through these things together as we make the stability of the mainnet a reality.

“It’s confirmed: Shelley arrives 29th of July at 21:44:51 UTC. “

We are on the precipice of a new world in which technology can deliver on the vision and possibilities of cryptocurrency on a whole. 

IOHK_Tim created a comprehensive post to cover all of the basics and answer questions that many of the community have. We’ll try to cover the most important information here.

First of all, let’s talk about what’s happening tomorrow. Tomorrow, there will be a hard fork, which is the release of a major upgrade to Cardano. 

This upgrade is called Shelley, which includes a new architecture along  with new functionality and features. Immediately after the hard fork, we will be in the new world where the Cardano mainnet will be running Shelley.

Rest assured, if you hold ADA, you don’t need to do anything and it’ll be safe in your wallet or on your exchange. If your ADA is in a Daedalus wallet, you’ll be guided to move your ADA to a new version of the wallet once the Shelley mainnet is live. Throughout this process, it’s a good idea to stay connected via Twitter and Cardano.org

Also, come back here and we’ll be providing information as we learn it.

Probably the most important part of IOHK_Tim‘s post was the inclusion of the Delegation Cycle. The question everyone has been asking is “when can I delegate?”, and the question we all want to ask is “when will we see the first rewards?”. Knowing this, the Cardano team has done a great job of showing us the timelines in which everything will be happening.

Here are the main points:

  • Delegation can start in Epoch 0, right after the switch-over to Shelley – Aug 29th
  • A snapshot will be taken at the beginning of Epoch 1 – the first one on Aug 3rd
  • During Epoch 2, the delegation that was done in  Epoch 0 will be active – Aug 8th – 13th
  • During Epoch 3, the rewards will be calculated – Aug 14th – 18th
  • At the beginning of Epoch 4, the rewards will be distributed  – Aug 18th

Cardano Canucks will be switching over to Shelley as early as we can to ensure people have the earliest opportunity to delegate and be eligible for rewards.

Pretty exciting stuff.