Many stake pool owners with large amounts of stake are currently anticipating on the k-factor being changed. On the 6th of December 2020 it will be changed to 500 and in March 2021 to 1000.

The k-factor has a direct influence on the saturation threshold of a stake pool. In case of k=500 it will go down to ~64M ADA and in case of k=1000 it will be ~32M. Current saturation level is ~210M ADA. Raising the k-factor is increasing the decentralization of the network by allowing more stake pools to become part of the network and produce blocks on basis of their stake.

Stake pool owners with large stake as a result are creating more stake pools. They are informing their delegators to move their stake over to a newly created stake pool in an attempt to protect the stake they have gathered.

Many of these stake pool owners have a large amount of pledge stored in their current stake pool. They are starting to split this pledge between these multiple stake pools. In their rush to protect the stake they “forget” one important thing, keep patient. After changing the pool metadata and generating a new stake pool certificate and re-register it on the chain they should wait till the end of the epoch before transferring the pledge from the existing to the new stake pool.

Resulting in severe consequences since the stake pool will not fulfill the required pledge as known by the chain. As a result the stake pool will not receive any rewards and delegators will jump of the pool in panic once they don’t receive rewards. Ouch that’s painful for delegators!

What happens with these rewards? The rewards will not be payed out when the pledge does not match up with what is know on the chain and as such these rewards end up in the IOG treasure, thank you, Ka-Ching !

This teaches us one thing, not always stake pool owners with the largest amount of stake have “the knowledge” to avoid such mistakes. Personally I am convinced that many more stake pool operators will make this mistake. Looking at I was able to identify several stake pools that made this mistake. Behind their pledge a cross is shown meaning their pledge does not match what is known on the chain.

Above scenario is similar in case of de-registering a stake pool. During the registration process of the stake pool on the chain the stake pool owner pays a 500 ADA fee. Once a stake pool owner de-registers a pool he/she should not de-register the rewards wallet before the epoch is ended otherwise the 500 ADA will not be returned to the stake pool owner and they are lost to the IOG treasure.

Let this be a lesson for every delegator, a stake pool owner with large amounts of stake does not automatically guarantee that he/she is more knowledgeable than a owner of a small stake pool. Many of these stake pools owners gathered their stake on basis of very low fees at the start of the Cardano main net and not on basis of any marketing activities or contributions to the ecosystem. Many of these stake pool operators will defend themselves that their low fee was part of their marketing strategy and will not agree with me, but I have another opinion.

Above mistake could have been easily avoided by these stake pool operators, if they would have paid attention or tested a similar scenario during the HTN.

Cheers, Ron