How to choose the best stake pool for Cardano

There are a few of things to consider when choosing a stake pool to delegate:

  1. Low permanent fees and good performance – Maximizing rewards earned.
  2. Saturation equilibrium.
  3. Stake pool performance.
  4. Promoting decentralization.
  5. Stake pool rewards.

1. Low permanent fees and good performance

To maximize rewards earned you want to choose a pool with low fees. There are two components to a pool’s fee: fixed fee and a percent of rewards

The average stake fees percentage for Cardano stake pools are around 2%-5%. It is also important that the stake pool is reliable and does not change stake fees and percentages after you delegate your stake. Sometimes some pools will change their stake pool fees just before the next epoc, so you need to find reliable stake pools that promises not to change fees. 

The minimum mandated fixes fee for a Cardano stake pool to be registered on the network is 340 ADA for each block produced. The average fixed fees for Cardano stake pools are around 340-500 ADA.

Find stake pools with larger pledge from the stake pool operators. This helps cover most of the expenses that come in with the fixed fees and this helps smaller delegators receive a better reward. This also shows the commitment of the pool owners to maintain the stake pools top performance for the delegators. Read more about pool pledge.

2. Stake pool saturation equilibrium

You need to choose a pool that is not over saturated. The current implementation attempts to enforce decentralization by capping rewards at a specific limit to prevent pools from growing too large. Current state pool saturation threshold is around 64 million, so try to find a pool with a smaller pledge amount. Read more about saturation levels.

3. Stake pool performance

Consider pool performance. This is a bit difficult because the metrics displayed in the Daedalus can be wrong or at least misleading.

The performance percentage is calculated by dividing the number of blocks produced by a pool by the number of times it was selected. Ideally this would be 100% which would mean the pool node was always online and in sync with the network when its turn came. If a pool is struggling with staying synced it may miss its turn and not get to produce a block and earn rewards.

Additionally, small pools who my be performing just fine technically might have 0% performance since they simply have not yet been called upon to produce a block.

The Cardano stake pool software is being updated frequently. Especially with the mainnet staking, pool operators may have to perform a few software updates every week both to the stake pool and to the pool nodes. Delaying to implement an update may reduce pool’s ability to mine blocks and to generate rewards.

Plan ahead. Some pools are announced to be retiring soon so you should delegate or redelegate to pools that are here to stay. For example the 20 IOG staking pools run by the Cardano’s parent organization IOHK are announced to be retired in 2021.

4. Cardano stake pool rewards

Earnings are subjects to several network-wide parameters such as the number of tokens participating in staking and the individual configurations of your Cardano (ADA) stake pool.

With the launch of Staking in July of 2020, there are about 14 billion ADA reserved as stake incentives for participants. Each epoch (5 days) the protocol distributes 0.3% of this total reserve pool between all active stakers. Therefore rewards are being distributed every 5 days and compound automatically.

Read more: How to stake Cardano – complete guide.

When should you expect the reward payouts

We have created an infographic to help you get familiar with the payout schedule.

Stake your ADA and join the network.