Why do very small pools seem so unattractive at first glance?
The main reason is that they do not have a proven track record. Yes, you can try to delegate your precious ADA for a number of days to see what it can do, but there is a risk the pool actually is not capable of producing the blocks it gets assigned, or worse, the pool is not even online. By the time you find out it is not generating any rewards for you, you easily may have lost 3~5 days of rewards…
However, if you are one of the first delegators to a pool which actually successfully spits out all blocks requested from it, you’re in for a great ride!
Pools that have the potential to grow over a longer period of time, generally will deliver higher rewards, compared to large or medium-sized pools which are approaching pool saturation levels.
The reason is as follows: You, as one of the early delegators, can look forward to a higher portion of the pool’s total rewards as it starts to produce its first blocks. But things actually get even better as soon as other delegators start to join in:
For example, unique delegator 1 has delegated a stake of 1M ADA in epoch 10, which entitles the pool to produce 1 block in epoch 11. The rewards go exclusively (minus pool fee) to delegator 1. During epoch 11, a new delegator joins with another 1M ADA, bringing the total block producing rights for epoch 12 to 2 blocks. However, the rewards of block 12 are still exclusively for delegator 1, since delegator 2 will only start to receive rewards from epoch 13 and onwards!
Conclusion: if you can find a very small, but reliable pool, from example from a pool operator with a proven track record, chances are you as a delegator have found the golden path to maximum ROI over a longer periode of time!
Solution: with the launch of [4ADA2], such a pool is now OPEN FOR DELEGATION! 🙂
Our next blog post will have a closer look at pool fees, and what they mean for you as a potential delegator.