Delegating with fresh purpose

The deployment of Shelley on mainnet in July opened up a new world of staking and delegation for Cardano. Since then, we have seen a groundswell of support from the community, with the creation of 1,200+ stake pools. Many have thrived and taken an early vantage position in the community in terms of visibility or controlled stake – or both. Equally, some pools are yet to make their mark. With a sub-optimal k, the high saturation threshold has made it particularly tough going for pools yet to mint their first block.

This is starting to change. On December 6, we’ll raise the k parameter to 500 – it was set at 150 for the Shelley launch. This will encourage delegators to spread their stake, giving more stake pools the opportunity to make blocks and step into the spotlight. It’s an important move, just one of a number of changes in the evolving ecosystem and staking experience we can expect over the months ahead.

This week, we are also announcing that we’ll change our staking approach. Initially, we set up 20 public pools. This was partly due to our desire to monitor and test the network and technical dynamics of running a range of ‘real’ pools. Also, for operational and security reasons, we elected to stake the company’s own ada holdings across these pools, rather than within private pools.

In late December, we shall be retiring all but one of our (IOG) public pools, and moving the majority of our stake to private pools. We shall keep one pool open. This is both a symbolic and practical move – we want to maintain a public presence as a pool operator as well as benefit from the technical and operational experience involved.

Evolving our approach

IOG is a research and development company driven by a vision and missionary zeal that is arguably unmatched in the crypto space. We are committed to Cardano’s long-term adoption and success. We’re also a commercial entity and as such, we have an obligation to be commercially successful. So as much as we are bound together by our mission and purpose, an equally powerful motivation has to be in sustaining the financial success that will enable us to keep delivering on our objectives.

As the creators of Cardano, we have a wide and deep role to play. Alongside our technological investment, we want to invest in other ways to help nurture the ecosystem.

Our new strategy

As Cardano continues the journey to full decentralization, IOG is evolving its delegation approach. Besides moving our holdings to private pools, we will be taking about 15% of our ada holdings and delegating it to the Cardano community. We shall use this ada to support our long-term vision, support Cardano’s growth and reaffirm the values we espouse, while maintaining the financially responsible position required from us as a commercial organization.

Our delegation strategy will be based on two elements: supporting what we are calling purpose pools, and encouraging network security, technological excellence and decentralized innovation through incubator pools.

Purpose pools

Our primary objective here is to delegate to pools that we feel support our wider purpose and mission of economic inclusion – decentralization of sustainable technology, empowerment through education, and opening up economic identity for all.

These purpose pools might include operations hosted in developing countries, where blockchain can make a massive impact, or operations focused on supporting educational objectives. Purpose pools might also include those run on a charitable or philanthropic basis, pools supporting underserved or minority members of the community, pools committed to the use of sustainable energy, and so on.

These are pools that not only create tangible value today, but also aim to deliver societal impact tomorrow. That’s a bold ambition, but it is what drives us already, so we want to use some of our ada holdings to support ecosystem players who share and live by similar values.

Incubator pools

With incubator pools, we’ll focus on supporting smaller stake pools and their operators to maximize the diversity of our pool ecosystem, notably in terms of ownership, geographic location and decentralized block production. Such pools may or may not have an ambition to grow or deliver additional value beyond their network role, but we want to get them to the stage where they can take it forward themselves.

Of course, some pools may fall into both categories. These categories are not mutually exclusive, and, initially, our criteria will be flexible as we develop the program. We do, however, expect a certain level of performance and potential (along with a healthy dose of ambition) from every pool. We shall look closely at each pool’s track record, while community kudos and influence will be important factors to consider. We also reserve the right to make occasional awards outside these core categories in the early days. This program will be driven by clear objectives, but we are open to adapting the approach at this early stage of the ecosystem’s development.

Applying for delegation

We’ll launch our first ‘call for delegation’ on December 10 (we thought Ada Lovelace’s birthday was a suitable day to start), and we’ll keep applications open until the end of the year. Throughout 2021, we’ll run quarterly cohorts, inviting pools to apply for delegation, within a two-week window every quarter. We’ll also talk more about the program on our monthly update next week (December 3) so be sure to tune in for details.

Here's a summary. For both programs, pool operators will need to fill out a survey covering some details, plus other questions depending on which category a pool falls into. To register for a delegation award during our winter cohort (delegation during Feb-April 2021) operators should submit a form providing background information such as their pool’s location, technology set up, objectives etc.

On the incubation side, each quarter we will be looking to delegate to between 50 and 70 pools.

We shall also select up to 10 purpose pools each quarter for the program. We’ll publish full criteria as part of the registration process on December 10, but in short, we will be looking to support pools with a mission of economic and social inclusion, and geographical diversity. We recognize that pools located in parts of the world that would most benefit from blockchain also have some of the biggest barriers.

Initial three-month delegation

Each pool selected will receive a delegation for an initial three months – pools will be rotated every quarter. IOG will delegate enough ada to ensure that each of these pools produces at least one block every epoch. At k= 500, we anticipate this amount to be between 3 million and 5 million ada per pool. All pools selected will receive an equal delegation amount.

We’ll review all applications in early/mid January, with a view to start delegating by the end of that month. We’ll publish a list of all chosen pools for both programs for full transparency among the community, which may also help people with their own delegation choices. Initial delegation awards will stay in place till the end of March.

It is still early days for Cardano. Together, we’re building a decentralized ecosystem that will prove its value over decades, so it cannot be fairly judged over months. Yet we’re already seeing incredible momentum in a community that is passionate, committed, and skilled. We hope this new strategy will help identify and encourage some of those pools and ‘pioneers’ – a word we may have overused in 2020 but one we feel remains valid – and help accelerate our growth into 2021 and set us up for many successful years ahead.