With a new adjustment, a minPoolCost parameter is lowered from 340 to 170 ADA. Largely, it will affect the economics of small ADA staking pool operators. This may attract new enthusiasts to the staking ecosystem of one of the second largest PoS L1s.
Cardano (ADA) minPoolCost drops to 170 ADA: What does this mean?
Cardano's (ADA) minPoolCost parameter, a metric that displays the value that can be deducted from pool rewards before distribution, underwent a 50% reduction today, Oct. 23, 2023. Effective today, this indicator is set at 170 ADA per epoch, or about $44 in current prices.
Per the official statement, this decision was taken following the SPO-Poll and a subsequent evaluation by the Parameters Committee of the Cardano Foundation, a Swiss-based nonprofit that observes the development of Cardano (ADA) blockchain.
minPoolCost was introduced with the mainnet activation of Shelley hard fork in August 2020. This parameter is designed to protect the network from Sybil attacks and guarantee pool operators a minimal reasonable budget for running ADA staking hardware.
Together with K-ration, minPoolCost is set to motivate users to cooperate with smaller ADA staking pools. As covered by U.Today previously, as the Cardano (ADA) blockchain migrated to full decentralization in 2021, some incentives were activated to prevent the network from ending whale domination.
Small pools to benefit from new upgrade, decentralization enhanced
Largely, as explained by The Cardano Foundation’s Response to the Parameter Committee Recommendation in PCP-001 document, this upgrade will reduce the "floor price" for small pools, making the barriers to entry to Cardano (ADA) staking lower than ever before.
As displayed by the Staking Rewards portal, the ADA staking ecosystem is undergoing a major activity spike in October 2023. Its staking market cap jumped above $6 billion. A 128.21% increase has been registered in the "Staking Tokens Trend" metric.
The current staking ratio of Cardano (ADA) is over 63%. This means that almost two out of three ADA tokens are delegated to staking pool operators (SPOs) and used to protect the network's PoS design.