Following Cardano's recent protocol parameter adjustments implemented through the "Reward Sharing Enhancement" proposal, stake pool operators (SPOs) across the network are reporting approximately 20% increases in rewards distribution. The update, which modified the reward calculation formula and adjusted several key parameters, aims to improve the sustainability of smaller and medium-sized pools while maintaining the network's high level of decentralization.
Parameter Adjustments
The protocol changes, which took effect at epoch boundary 394, included several key modifications:
- Reduction of the minimum fixed fee from 340 ADA to 170 ADA per epoch
- Adjustment to the pledge influence factor (a0) from 0.3 to 0.45
- Increase in overall reward rate from the reserve by approximately 5%
- Modified saturation threshold calculation to favor pools with higher pledge
These changes were proposed and approved through Cardano's on-chain governance system, with 76% of participating stake voting in favor of the parameter adjustments.
Impact on the Ecosystem
Data collected by pool monitoring services indicates that the average return on stake has increased from approximately 3.8% to 4.5% annualized, with the benefits distributed across the staking ecosystem:
- Small-to-medium pools (10M-30M ADA) have seen the largest percentage increase in rewards
- Highly pledged pools receive relatively higher rewards than before, incentivizing skin-in-the-game
- Delegators to all pools are seeing increased returns on their staked ADA
"The parameter adjustments have achieved exactly what was intended," said Mark Johnson, a stake pool operator who has been running "ADAOZ" pool since the Shelley era. "We're seeing more sustainable economics for operators while delegators enjoy better returns. It's a win-win for the ecosystem."
Network Health Indicators
The changes appear to be having a positive effect on network decentralization metrics as well:
- The Nakamoto Coefficient (minimum pools needed to control 51% of stake) has increased from 23 to 26
- The number of blocks produced by pools outside the top 10 has increased by 8%
- Over 30 new stake pools have registered since the parameter changes were announced
The Cardano Foundation has indicated it will continue monitoring the effects of these parameter changes over the next several epochs before considering any further adjustments.