Daedalus Can't Make Heads Or Tails Of Cardano Pool Ranking.
Updated: Sep 4, 2020
We are several epochs well into the Shelley with decentralisation parameter at around one quarter. As epoch numbers progress, the education seems to be progressing at a much slower pace. It surely doesn't help that existing software isn't doing the best job available either. Or as intended anyways. Surely, fuelling a lot of misconception all along.
One of the key parameters how to determine the most desirable pools is the default Cardano pool ranking system. Depending on which platform you use - you may be surprised to find out how these rankings can vary. Below, we will examine 5 most common places that people can and do use today.
First two are official (Daedalus and Yoroi/Adapools) and the other three unofficial sources (pooltool.io, cardanoscan.io, and Pegasus App).
The most obvious one is using Daedalus ranking. Below you can see a screenshot from earlier today. I'll let you browse through it real quickly and let's see if you find any issues with it at the first sight.
All right. Before we get into the ranking. Let's establish some mechanics of how Daedalus ranking works. The whole idea is about ranking pools based on desirability. This means, most desirable pools based on your stake amount should show up in front. The least on the very end. So the greener the better, right? In theory - but how the practice has been?
Number one pool, according to Daedalus ranking is IOG1. That's nice but do you also know that it currently has 237,000,000 ADA in active stake which makes it oversaturated already. And you are surprised people keep adding more onto it as day goes by? Live stake as of today is at staggering 283 million ADA. Saturation point today hovers around 211 million ADA.
Could you argue that someone prefers to be staking with IOG pool regardless of saturation? And pay price for lower rewards in exchange for the safety of the operator? Perhaps, but that's not the point. There are many safe pools in existence - including other IOG pools. So that's clearly NOT what is happening here. So why is Daedalus showing this pool as the most desirable one presently? Most definitely an issue with how code ranking works.
The most senior and official staking mechanism just fails entirely to actually make good on rankings prognosis as originally intended. You can learn about it in Design Specification For Delegation and Incentives in Cardano white paper. Section 5.6.1. that talks about Pool Desirability and Ranking specifically.
It describes the desirability of a pool based on pledged owner stake, costs, and margin. But if the pool is saturated, rewards start diminishing when distributed proportionally to every ADA. So as they say '"to determine a pool's rank, we order pools by decreasing desirability. The most desirable pool gets rank 1, the second most desirable pool gets rank 2 and so on." Clearly, there is either some time delay or other issue as the top pool cannot be saturated so heavily and yet be number one desirable pool in the world.
There is an ongoing discussion which I just found earlier today and is worth following not to re-write much of what goes under Daedalus hood. I invite you to have a sneak peak here: LINK HERE
Let's not forget how the ranking was completely out of it for the first few weeks all together. If someone didn't tell you that these are random - you would go with the suggestions as presented. Can't blame you there. System was really randomly freaking out. And that is why you saw one pool at number 1 on Monday and number 886 on Tuesday, and back to 230 on Wednesday. You get the idea.
Not to mention hundreds of pools missing during first days of registration when delegators were checking out all the pools.
So my question is - why is it so difficult to get this right? And if we can't, why we can't have a simple pop up or a bar (disclaimer) saying that these rankings are meaningless until further notice? Bottom line - ranking for Daedalus hasn't worked as originally designed or intended. Definitely not at current network parameters and lifetime into the Shelley.
Bravo. So we can't rely on Daedalus just yet. So what are the next sources to look at?
Yoroi + Adapools Ranking
Until recently, Yoroi had no overview of what ranking looks like. The general assumption was that it would follow Daedalus. As both are official wallets and work similarly in terms of key mechanics of delegation. However, with the recent partnership announcement - Yoroi introduced third party Adapools functionality within its interface. Hence both official wallets work at odds with each other now.
For the starters - at least the first pool isn't the saturated one on. Yoroi. The visual nicely shows that none of the pools ranked atop by Yoroi are saturated. That's a plus. Visual on Adapools.org and Yoroi interface is slightly different as website provides for a lot more information currently.
Two official Cardano wallets - yet two drastically different ranking results. When chatting with Newman from Adapools - crucial inputs were provided to make sense of these. Current Yoroi ranking takes into consideration size of the pledge, saturation level, pool size and to some degree also a composition of delegation (number of delegators and their average stake in the pool). There also is one parameter called a community strike which is usually warranted in a special cases only. It's been used with the likes of fake IOHK ticker pool.
All these parameters are then streamlined 1-2x per week. Pledge itself has a very low value of impact and over time it will be overtaken by ROA in each individual epoch boundary. They are also working on an option to create a score calculator that can show you parameters based on your selected pool directly.
Word of caution - if you have visited Adapools web in the past - you will need to clear your cookies and reboot browser. You may be stuck on showing incorrect data. This includes both - web version and Yoroi interface. You may also want to check if any of the filtering tabs aren't enabled, such as small pools or saturated pools. Otherwise, you will not be seeing full list. This is not the case inside Yoroi integration though.
More effort in educating people how the ranking works is still required. When you click on question mark on the tab it just gives you a simple answer "based on our scoring". Similarly, there is no explanation of any sorts inside Yoroi either. This is same as Daedalus - so at least there is consistency. Thus, it is up to you to ask and get answers like above.
In this regard, having two official wallets with two different ranking outputs and no human explanation for an everyday user is a miss. Hopefully, this gets better in time.
have firm understanding of how official wallets should or should not rank pools
include simple explanation of what default settings are for an everyday user to understand - even if it says RANDOM atop - e.h. Daedalus.
Otherwise, we are feeding misinformation into the system itself. Crypto is an already challenging environment for an average person to navigate alone. These missing steps don't help.
What other options you have when looking at pools?
The basics of pool tool philosophy is to give users data and let you filter/sort on your own. As PapaCarp, its creator, puts it: "Pooltool wants to remain focused on data and let our users interpret the data." The basic assumption is for them drawing data set from the official Daedalus wallet source (cardano-wallet) and hence their default 'ranking' is derived from there. Thus, not surprisingly - you get similar issue as we have discussed with Daedalus above. Hence, I find it as a missed opportunity to push beyond Daedalus narrative more effectively. However, general approach seems encouraging from their words.
To Pooltool's credit - you can also see clearly in orange colour which pool is getting close to the saturation. Or already is saturated based on the live stake in a red colour. What I also particularly like - pools don't necessarily have any visible ranking (1., 2., 3., etc.) as in Daedalus or Yoroi/Adapools. Unfortunately, default view is sorted based off Daedalus. So we are back to square one.
Given all of that information - in order to make it past initial pools list - it will be challenging to ever look for pools further down the list. But that's true for every list. Naturally, all columns can be filtered as you see fit.
And lastly screen shot from cardanoscan.io. This is another great example where the website doesn't impose ranking mechanism onto the user by default. There is no 1. or 100. rank, just a plain list.
When chatting with Stitch, platform operator, he says that "we are choosing to sort the pools based on the committed pledge at this time. We think that ranking pools by any algorithm is discriminatory for many pools. As we can never rank a pool with any parameters we have right now without doing a discrimination to new or smaller pools, everyone should be given equal opportunity to be found by fair search system."
It is quite refreshing to hear such an outlook. Because it really is a hard time to make any meaningful distinction so early into Shelley. However, I would just add to it that pledge may also be a relative term and slippery slope to rely on entirely. If we are to be a global ecosystem - a pledge of 1,000 ADA in a developing country could be equal to someone with 100,000 ADA in a developed. Hence, always consider these parameters in line with the mix of all.
Perhaps Pegasus Mobile App
Honourable mention - there is Pegasus mobile app. Great on the go companion. However, when looking at their ranking - the default one loading on the screen is based on live stake. So most saturated pool - IOG1 is ranked as number one - again. So that's no use to us either. Again, to their credit - there are small signs that are showing next to near or already saturated pools. At least there is that.
EDIT - 3.9.2020: Pegasus now has a new update and drawing the sorting data from cardano-wallet, just like Daedalus does instead of live stake amount. Hence, similar concern as previous cases.
So what is the conclusion from this all?
Daedalus ranking, or cardano-wallet behind it more specifically, has failed both, Stake Pool Operators and Delegators alike so far. To this date it shows unreliable data and presenting it as a guiding principle. What more, as one of the most senior data points within the ecosystem - other data solutions rely on its performance and reliability. Thus, by proxy, further spreading misinformation amongst the Cardano community and those at large as well. This has to be fixed sooner rather than later.
Listing/sorting pools has proven a big challenge across all platforms. It is evident that any and every group within ecosystem has its own vision and preferences. This also comes in line with their interests in that space. Hence, the official guiding principles should be neutral, agreed upon and stick to. Otherwise, it just breeds more confusion.
If we are to sort or rank any pools, we owe sensible explanation to Cardano users.
Otherwise this is a pretty hefty security risk for the network at large, as well. Imagine if all stake were to fill in top 10 pools with all the stake - the governance of such network sounds - problematic at best. If code can't fix it for now - we need ADA holder to pick up the slack until it does.
If we can't provide for explanation, perhaps, the top listed pools should be rotated as a random assortment to give chance to all stake pool operators. With every passing epoch it will be gradually more and more difficult to push through the noise if someone is just starting up. Maybe you think - why should we care - it is too early. Things are just settling down. Well - we need to look ahead and point at things which don't seem quite right now. Otherwise, system grows complacent very quickly. And you never reach your intended destinations per distractions and special interest.
Meanwhile, what can you do as an individual?
don't believe everything you see by default - do a closer dive into any respective pool to understand semantics
visit multiple sources to compare what you find - you can't rely on one
make your own opinion
question mechanics and reasoning behind why are you being shown what you are seeing
whether it is via wallets or third party apps.
including any potential conflicts of interests
educate yourself and those around you in order to make good decisions
that's to not base your outcomes on luck only.
Spread the knowledge, not the fud. 💙
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Have you found some value here today? Consider partial delegation to FAY pool to keep us going. Or any other smaller pool you've seen out there creating value, there are many of us.
Pool Ticker: FAY
Pool ID: 9ac6f4118dccc20d978e7239d73d47e939cc594c350effa8711f5ac4