Cartesi Staking Pools. How to choose yours?
If you’re a Cartesi token holder, you may be interested in staking/delegating your tokens to earn passive rewards, the biggest question that will arise in your mind is, which staking pool should I stake with?
As you may know, we are a Staking Pool operator in Cartesi network, and though we are happy with anyone delegating to our pool, this is not an article to encourage you to do that, its aim is to shred some light on what to look when choosing a staking pool.
Staking Key Factors
Usually, the most important factors that a delegator take into account when choosing where to stake his tokens, are the following:
Economic: this is the most obvious one, the more profit you can get out of your investment the better for you. So for almost everyone this is a very important factor to take into account.
Reliability: this factor is part of the economic one but not so obvious. The more reliable an operator is, the more profit you’ll get in the long run. Why? We’ll look deeper into that later.
Customer Support: it is also important for most delegators to have some support when having questions to be answered, actions to be taken, announcements to be made, or issues to be solved.
Project Support: usually delegators are firmly believers in the project they are investing into, so it’s a clever decission to give support to the project to help it succeed in the mid and long term. So choosing a pool that can help with project healthy development is important and even more in crypto, where decentralization and communities are the foundations of a project’s success.
What to Look
Having in mind the key factors above, we’re going to mark down some things to look into when selecting the pools that fit your needs the most.
Commission: this is the most important economic aspect when selecting a pool. The commission is the economic incentive that a staking pool receives for running servers and being part of the network. A key thing to know is that the commission is applied on the overallrewards obtained not as a separate reward. For example, if the rewards of the network are 40% at a given time, a staking pool with a 10% commission would receive a 10% from the 40%, so from that 40% the pool would get 4% and the other 36% would go to the staker/delegator. If the commission was a 1%, the pool would get a 0.4% and the delegator would get 39.6% from that 40%.
You can look at the commission of each pool in Cartesi Explorer.
Uptime: this is the most important factor in terms of reliability and in the end also a economic one.
How does uptime affect in the rewards obtained? If a pool is given a block to be mined but when that happens the node is down or not working properly, then It will miss the opportunity and the block will be given to another pool, thus not getting the associated rewards of mining the block. So a pool that has a low uptime will miss more blocks on average than a pool with a high uptime, and that equals to more rewards for the one with high uptime.
By the moment that info is not available in the explorer, but probably soon will be. In the meantime, the best option would be to learn more about the pool operator (team experience, other networks they support, technical articles, how much trust they’re given by the projects, etc.). Some of that info should be obtained from the pool operator’s website and blog posts.
Communication Channels: the most important thing when looking at a staking pool operator customer support is their communication channels. Checking them will give you a clear picture on how is the support provided to their delegators. Typical communication channels would be: email. telegram channels, twitter accounts, or through the project community channels such as discord or telegram official channels.
Staked Tokens: the number of staked tokens in a staking pool dictates how probable is for that pool to mine a block, so the more staked tokens the more frequently it will mine blocks and get rewards for that. But also will receive fewer rewards per token, becuase the rewards are shared between all the tokens staked, so the more staked tokens the fewer rewards for each token. On the contrary, a staking pool with fewer tokens will mine blocks less frequently but the rewards per token will be bigger on each mined block.
As this process is handled by a probability function within the network protocol, in the long run all pools should get the same rewards percentage wise. So if the protocol staking rewards are a 40%, all the pools should receive a 40% of how much stake they have in the long run.
Decentralization: this is a very important factor in crypto projects and it’s related to staked tokens and the project support. Being permissionless and trustless are probably the 2 most important features in blockchain technology and the key of its success nowadays. For a blockchain network, to embrace those 2 features it is necessary to have some grade of decentralization, mainly for security reasons, if the network is not decentralized enough it may be subject of attacks, putting at risk the network operations and the integrity of its data.
What’s decentralization? This is a broad topic, but in short, It’s how well the voting power of the nodes is distributed throughout the entire network. In Proof of Stake networks such as Cartesi, the voting power is related to the staked tokens of each node, so the more tokens a staking pool has the more voting power it concentrates. If few nodes concentrate too much voting power the network becomes more prone to attacks. Imagine that between 2 staking pools they gather 60% of the voting power, then if the attackers manage to hijack those 2 nodes they could perform some kind of attacks to the network, like a 51% attack. On the contrary, if that 60% is distributed let’s say throughout 30 nodes, then it would be much harder for the attackers to execute any attack because they would need to hijack many more nodes.
So when delegating to a pool it’s very important to have decentralization aspects in mind, and do not delegate to the staking pools with the more delegated tokens, just because “if this pool has lots of tokens delegated it’s a sign of it being a good one” kind of thinking.
You can look and the number of staked tokens of each pool in the explorer, you can even order the table records by that value, just by clicking on the title of that column “TOTAL STAKED”.
Now you should have a nice understanding on how to choose your staking pool to get benefits out of your investment and help the project succeed.
If you’re intered in learning more about Cartesi check out our previous articles on different topics.
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¡Hola comunidad de Cartesi hispano hablante!