What should you check to find the most profitable stake pool? Firstly, there are many variables, so the “most profitable” stake pool will change accordingly. Read the below article and choose the best place to stake your ADA in 2021.
Step 1 — Server Uptime
Hmm, on second thought, we may consider dropping this one. Unless there is an epoch with 0 blocks where there is enough stake to mint some, it’s hard to tell, given luck swings. The reader is going to need to be savvy enough to know expected blocks are dependent on stake size, and will throw the numbers around wildly… one missed block on a pool scheduled for 2 blocks is 50% whereas a pool scheduled for 50 is 2%. So the reader will need to take that into account. I know that we can accurately portray this, other to say that if a pool has a pattern of blocks and then suddenly drops to 0, despite plenty of pledge, something is wrong.
If the stake pool’s servers aren’t online when they’re scheduled to mint a block, you’ll miss out on rewards. You can’t directly see if a block producer is online or not… by design they are hidden behind relay computers for security. However, you can spot a block producer. You can see if a stake pool has missed blocks by analyzing its “luck” metric over time. If they’re CONSISTENTLY significantly lower than 100% (like 50% or less), they may be missing blocks. If a pool isn’t missing blocks, then they’ll average 100%. Of course, it is rarely exactly 100%. Some pools have much higher or lower values, especially when still new. But if a stake pool mints every block assigned, it will be 100%.
Step 2 — Low Fees
There are two types of fees. The first one is”fixed fee” which is a set amount of ADA the pool earns (min. 340 ADA) and the second one is “margin” which is a percentage of rewards the pool earns.. The lowest possible margin is 0%.
So ideally choose a pool with the lowest possible fees. Some pools offer a 0% margin, to attract delegators. But just be careful because some of them increase their fees later, without you knowing.
Step 3 — Low Saturation
The amount of ADA that can be staked to any pool is limited. When the maximum is reached, the pool is considered “saturated”. From this point, delegators receive lower rewards. This encourages delegators to stake with other pools, to promote decentralization. So avoid overly saturated stake pools
Step 4 — High Pledge
A stake pool’s pledge is the amount of ADA they lock to their stake pool. It’s important because if they pledge a large amount, and make mistakes, then they’ll lose significant funds. I suggest focusing on pools pledging over 1,500,000 ADA.
Find a stake pool that has a high pledge and operator(s) who do everything possible to maximize both yours and their rewards.
Top Recommended Cardano ADA Stake Pools
The definition of the best pool may change over time, but having a good amount of pledge in my opinion is one of the keys to being the best pool. There are a few pools with over 1.5M pledge, but AzureADA — ticker AZUR (https://azureada.com/ ) is one of the best Stake Pool Operators in 2021 based on their experience and performance.
Do your research
Know the available tools to help research pool performance. The main players are pooltool, cardanoscan, adapools, and poolrank.
Know the factors that are important:
- return on stake/return on ADA (RoS/RoA)
- over saturation (which means LESS rewards for delegators)
- pledge (how much ADA the pool owners putting into the pool themselves)
- active & live stake
- trends
Choose a solid stake pool
- It should mint 100% of assigned blocks, or very close to it, if they happen to lose slot battles
- It should have a resilient infrastructure to handle computer and network issues; 100% uptime with a perfectly running pool=more blocks which =more rewards
- It should have top-notch security to keep pool running
- It should be operated by people who understand the operating system it runs on, how the Cardano blockchain works, and how to recover quickly if something goes wrong
- Ideally, it should be communicative and transparent
- Ideally, it should be ran by operators who are active in the community
Put time on your side
- Never jump pools after an epoch or two if a pool is minting its blocks
- Realize that luck plays a role-some epochs will be “lucky” and some will be “unlucky” and some will be in between
- Look at trends. All pools will have a relatively bad epoch now and again, but look for trends over the last 10 epochs or so to get an idea of overall performance
Review adapools, pooltool, cardanoscan, and poolrank to research stake pool performance. Check out the websites and social media links of your short list. Make sure the operators have a sound infrastructure and skills. Ideally you want transparency from the operators and the ability to contact them. Don’t look at just the last epoch or three for performance… Staking rewards are LONG term and luck IS a factor, so individual epochs can look really good or really bad and not reflect the long term pool performance. I have seen countless delegators jump from my pool after an unlucky epoch to go to a pool that is earning 1% or less rewards than mine, so it is not a wise financial move.
Look at lifetime reward percentages. Bigger pools will have less volatile swings in percentages, but small ones can give bigger percentages (and lower). It takes at least 1.5 million ADA in a pool right now to have a reasonable chance to mint a block every epoch. So a small pool may miss epochs, but when they do, the payout return on ADA can be great.
In the end, a decently run pool will give somewhere between 5% and 6% annual interest.
Another factor, pledge, is “skin in the game” or how much ADA the operators promise to keep in the pool. Generally speaking, the more the better, but there are great pools run by amazing operators with relatively low stake too, as people come from different financial capabilities (a pool operator in a 3rd world country may not have the same amount of money to buy as much ADA as someone from a first world country). If you see multiple pools with the same ticker or with a number on the end (blah2, blah3, …bla20), and their pledge is low, this could indicate they are only in it for the money and are spreading their pledge thin for the express purpose to earn money. That’s not desirable for a decentralized blockchain.
One additional thing to consider is a pool’s cause. Some of the pools support various charities or humanitarian causes and give a portion (or all) of their profits to these causes. If that resonates with you, find one that matches.
Also, the difference between 0% fees and 2%, 3%, etc. is actually very negligible unless you have millions of ADA (like can be literally less than 10 ADA a year or less depending on how much you have), so look at the big picture and “what’s under the hood”. Pools operate on literally everything from a mobile phone, to a computer in someone’s garage to serious business class, professional setups. Each has their pros and cons. I can give example pros and cons if you’re interested, but the gist is to find out what you can about the ADA pool and it’s operators.
The operators themselves run from IT professionals who have run servers for decades to a doctor, accountant, or plumber who managed to make it through setup guides and get it running, but really have poor skills beyond that. There are documented cases of power outages lasting for days that brought home based pools offline, stake pool operators not versed un security getting their own ADA stolen (you as a delegator are NEVER at risk of losing your wallet ADA — just never give your recovery words to anyone), and other calamities that a more experienced and professional operator would not have. But again, that bright high school kid or person in a 3rd world country might not be able to run on the same caliber of infrastructure, so pick what you feel is important.
