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Small node operator challenges pt 2, after action report & 0% apr returns


Kevin Reese
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Good day all. 

Thought I'd do a follow up post to my earlier thread 

 

Unfortunately, despite my best efforts, it seems unlikely that my staking service will be able to survive and launch successfully. Which is a bummer for me of course, but thought it would be helpful to post my experiences and challenges. 

I started the smart contract for my pool, with my 1250 egld (which is a large portion of my total net worth), last Friday on launch day. I had some tech issues on the day around my delegation manager, worked about 16 hours on the Friday and Saturday working on my offering.  Around Saturday night, I had about 2300 of the 2500 egld needed to activate.  I raised the delegation cap at this point, and began lowering my fees to attract users to sign up with my offering. 

About a day later, Sunday night,  I had many more delegations and was happy to see the delegation over 5000 triggered 2 nodes to be registered and sent to be activation. 

Unfortunately by Sunday night, and the time my pool had enough egld to activate the nodes, the que already had about 1200 nodes in it.  

Since then I've been on the node wait list, and my position is moving up very slowly (maybe 5-10 spots a day).  My two nodes are now qued at spot 421 and 424. 

So currently steak4all's APR is 0%.  The prospect for me to become an active validator seems very slim.  I'm offering additional tokens to people in my pool, and doing everything I can to retain delegators,  but how can I compete with 0% against paying pools?  I don't see much chance of success. 

The core of phase 3 -- at least concerning the new delegation smart contract system -- was to enable more community nodes. But the present system, IMHO heavily favors established providers, and in fact, it is almost impossible for a single node service provider such as myself to launch successfully. 

By the time I reached 2500 egld for a single node the larger providers already had about a 1000 ready to go, filling the que. 

Looking back, I'm satisfied with my how I launched my service. Sure I could have done a bit better launching my offering sooner Friday, but that wasn't possible for me due to other job commitments. So it seems I did everything 'right': have put many, many hours in; my costs are around $3500 CAD so far for my cloud costs and websites etc; and I have invested most my networth into launching this service.  Yet after all my efforts, it is likely to fail. 

Going forward it will be even more difficult as well for new service providers to launch a service:  how can a new SP attract delegators with 0% apy? If no new nodes are to be added, then you are looking at very big operating cost for no rewards for an unknown amount of time, possibly it will never even happen (having a node activate). 

My current position is fairly bleak.  Users are no longer delegating to my pool as I have 0% apr, why would they?  Existing users in my pool are leaving, because I offer no rewards, of course they will.  There is always unlimited available delegation spot to stake with the top 20 largest providers who already were offering APY from the get-go, due to have dozens or more servers already staked and ready to go before I could even launch one. 

I'm currently operating at a loss monthly, so how long can I sustain this, especially if I can't even promise to my delegators that I will ever have an APY for them to enjoy. Besides the operating costs I'm also unable to keep my egld stake not generating any profit as it is most of personal networth tied into it. 

And I also feel that is a bad deal for all my 180+  (now 140 or so) delegators who signed up for my service. They are effectively staking at 0% rewards with me, where they were expecting to be earning as soon as this week. 

For all these reasons and more I would say that the odds are incredibly stacked against any small operator starting a new delegation pool, at present, the odds of success are incredibly small.  The current system heavily favors established providers, and I though the intent was to encourage more staking providers, not less, with Phase 3. 

In this present system, the odds of being able to launch a new service offering via a delegation contract if you only have 1250 to get started, are so poor as it almost seems hopeless from my perspective, which is discouraging, as I really want to succeed.  I hope this can change, as the economics should be encouraging to new SP's, as this leads to decentralization, which was the main goal of Phase 3. 

One possible solution would be to allow a node to get a spot in the wait list, with only the DM contract being activated (1250) and assigned to one node. For example my one node that looks like it will not activate, has been an observer node for months.  But those months operating as an observer did not give any benefit at all, and hundreds of new nodes could automatically be scaled out by a larger provider in the time it took me to activate a single node. 

With no incentive for node operators to de stake their nodes, it is conceivable then that there will be no new delegation pools able to launch, as the wait list doesn't really move, AFAIK and from what I've seen.  Hopefully this is addressed in Phase 4 as I imagine it will be.  But currently, it seems all but impossible for a single node DM operator like myself to successfully launch. 

Thanks for reading!   

 

 

 

 

 

 

 

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