How to pick a stake pool — time to crunch the numbers
Long story short, the only metric you should be concerned with is the reliabilty of the stakepool. Not the tax, not the fixed fee.
Sounds easy, right? But how do you pick a reliable pool? What does it mean for a pool to be reliable? Is there a magic number that tells you if pool X is better than pool Y?
Let’s start with the basics. As a delegator, you want to get a high ROS. In order to get that, you need to pick a pool that mints most or all of it’s assigned blocks.
What does the stake pool operator need to do in order to maximize your profits?
That’s easy! The stake pool operator needs to have a very good understanding of how the staking mechanism works and what components work together to ensure the pool mints blocks. Being familiary with linux is a must. Too bad Daedalus doesn’t show you how fast the stake pool operator can grep the logs, eh?
How do you find a reliable pool? How is the magic number calculated?
I’m really glad IOHK decided to run the ITN. It provided invaluable information for both stake pool operators and delegators alike.
The early days of the ITN were “a bit” rough. The software wasn’t polished and we had to improvise and create all sorts of monitoring scripts and other gimmicks.
Some pool operators (thank you papa carp) started to build tools for the community. Soon after, metrics started to pop up: current ROS, lifetime ROS, number of created blocks/number of assigned blocks, sync percent, delegator rewards, etc.
Even though pooltool is now fully focused on mainnet, historical ITN data is still available in JSON format for anyone interested.
I got the files, crunched the numbers and this is the result:
The spreadsheet contains a list of all the ITN stake pools ranked by ROS. It also contains pool taxes, created blocks and the number of active epochs.
ROS is calculated using compound interest, same as on pooltool (I got the formula from the dedicated telegram group).
Let’s talk a bit about tax. Somebody already did the math for mainnet.
Delegators are worried that a pool with 4–5% tax will give lower returns than a pool with 1%. However, if you look at the spreadsheet, you’ll see that there’s no correlation between tax and ROS. None! You’ll see pools with 10% tax in the top ranks and pools with 1% tax in the bottom ranks.
I cannot stress this enough. Stop worrying about tax. That’s the least of your worries.
Ever went to a job interview? The interviewer asks you about you experience and you get to talk about all the accomplishments on your previous jobs. ITN performance is simmilar to that, it’s your proven track record.
Bottom line, ROS on the ITN is a good metric for assessing the stake pool operator’s past performance. Just make sure to look at the block number to filter out any statistical outliers (at least 100 blocks should do it).
I am the pool operator of the Hexadecimal pool — Ticker HEX which is already up and running on mainnet:
As you can see from the spreadsheet, my ITN performance was very good. Here’s a snippet that filters pools with at least 100 blocks minted.
I will be providing the same reliability on mainnet. I’m pretty comfortable with the command line and can grep logs in less than 4.2 seconds. And for all you linux geeks, back in the day I spent a lot of time on CTF challenges
How to pick a stake pool — time to crunch the numbers was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.