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Unpacking the Future: Key Insights from Recent SPO Workshops

The recent Stake Pool Operator (SPO) workshops on March 26th and April 3rd, 2025, provided invaluable insights into the challenges and opportunities facing the Cardano network and its dedicated SPO community. Discussions spanned critical topics from operational sustainability and decentralization to future business models and protocol evolution. Here's a look at the key takeaways:

SPOs, particularly smaller or newer ones, continue to grapple with infrastructure costs. While experienced operators find installation easy, newcomers face a steeper learning curve. A significant concern is the high reliance on cloud services (over 90% of nodes), posing a considerable centralization risk to the network. Many SPOs prefer bare metal setups for their long-term cost-effectiveness and decentralization benefits, often employing hybrid models for failover.

A persistent issue is the presence of "dead pools" with inactive stake, which reduce network efficiency and distort staking incentives. The "stickiness" of delegation also makes it difficult for new or small pools to attract and retain delegators.

The Core of Sustainability: Incentives and Profitability​

SPO profitability is under threat, with staking rewards declining faster than new fee mechanisms can compensate. This creates a negative feedback loop: less staking participation leads to fewer rewards, further discouraging staking. To combat this, a proposal was made to emit full rewards each epoch without returning any portion to reserves, aiming to stabilize rewards and improve short-term viability.

There's broad support for transitioning towards a minimum margin model instead of the current minimum pool cost, which disproportionately penalizes smaller pools. Suggested adjustments include linking the minimum pool cost dynamically to the ADA price. Reducing taxes from 20% to 10% was also suggested to boost delegator rewards and attractiveness.

The pledge mechanism is viewed as capital inefficient, with ideas surfacing to de-emphasize its role. Furthermore, compound rewards on lost ADA are a long-term risk that might necessitate expiring delegation certificates to prevent distortion.

Building for Tomorrow: Business Opportunities & Network Expansion​

SPOs are actively exploring new revenue streams to ensure long-term sustainability. These include offering infrastructure for sidechains like Hydra heads, Midgard validators, and Midnight nodes, as well as engaging in partnerships with new projects and DeFi initiatives . Rollups with settlement on Layer 1 are preferred over standalone partnerchains for potential additional revenue. Transaction prioritization services and providing critical infrastructure beyond standard block production were also highlighted as potential opportunities.

While direct fiat on/off ramps and stablecoin swaps would be helpful for operational flexibility, they aren't seen as immediate blockers. Increased transaction volume, perhaps via a BTC bridge, is viewed as a sustainable way to boost rewards.

Enhancing the User Experience & Marketing Cardano​

Effective marketing for individual SPOs is challenging, with low ROI on paid campaigns. Personal branding and visibility are considered the most effective tactics. There's a strong call for a better on-chain experience, including improved wallet guidance for staking and a more intuitive pool discovery user experience. General Cardano marketing, emphasizing staking as a utility for new users, is seen as more beneficial than marketing individual pools.

Decentralization and Infrastructure Evolution​

The workshops reinforced the importance of decentralization. Beyond the cloud concentration risk, additional infrastructure for dApp processing is needed to avoid single points of failure. Future bandwidth demands from initiatives like Mithril and LAOs may further enhance the attractiveness of bare metal setups. Suggestions also included allowing optional node compilation to avoid bloated binaries and improve security.

Shaping the Future: Governance and Protocol Parameters​

There's a strong desire for more rapid iteration of key parameters like K, taxes, and reward models. Improving delegator rewards is a high priority. The current governance process (DRep voting) is seen as suboptimal for managing operator-specific parameters like fees.

These workshops underscore the vibrant and engaged nature of the Cardano SPO community, actively working to address current challenges and innovate for a more decentralized and sustainable future.