Fact or myth

Demistifying the myth for delegators

Most delegators think that low stake pool fees will deliver them a better return on stake. But is this true?

That is not exactly how it works. The stake pool performance will deliver delegators better rewards, not a lower stake pool fee percentage. The amount of pledge, delegation and the infrastructure of the stake pool plays and important role in this.

Many pool operators are taking advantage of the limited understanding of the delegators. They are running a stake pool at the start with very low pool fees, 1 – 2%, to attract delegators only. In fact a pool fee of 1 or 2% is economically not viable for a professional run stake pool with many relays.

Delegators who are not aware of this are delegating blindly into these low fee stake pools in the hope for more rewards on their stake. In fact they are staking with a bad actor. A pool operator can change the stake pool fee at any time, so it is not even said these stake pools keep their fees this low in the future.

Another thing we noticed is, there are many stake pools with a high pledge but in fact these stake pools did not pledge that amount of ADA at all. By having a high pledge in their stake pool configuration they suggest they have pledged that amount of ADA in the hope that delegators fall for this trick and delegate with them.

There is a saying when things seem too good you better keep your fingers from it, since they might get burned.

Do not get tricked by stake pool operators that are not playing a fair game and just want to get hold of your ADA in delegation, to grow their stake in the network unethically . If you can, verify the amount of pledge they really added to their pool or ask someone that can do this for you.

Be mindful choose trusted stake pool operations that are open in their communication and transparent about their plans, now and in the future. Stake pools that have locked their pledge for multiple years and take a fair share of fees to be able to finance their stake pool operation. After all you want the operation you are delegating to not to go out of business.