CIP-0050? | Pledge Leverage-Based Staking Rewards

Full Document: English, Español, 官话 Chinese
Improving decentralization is absolutely necessary for the long term health and growth of the Cardano ecosystem. The current reward formula has resulted in a stable but stagnant level of decentralization. With the benefit of hindsight over the last year the intent of (a0, k) has not resulted in the desired decentralization outcome. This CIP provides the justification, methods, metrics, and implementation for an improvement program to increase decentralization of the Cardano network.
The proposed reward equation retains the function of k for diminishing rewards based on stake and enforces diminishing rewards based on pledge leverage, L. The proposed equation enforces a set of principles to ensure stakeholders of dramatically different size can all achieve the same maximum yield. The yield ceiling feature prevents the formation of two classes of stakeholders and removes some of the benefits of centralization. The economic motivations of the largest stakeholders will be aligned with decentralization, reward diversification, fault tolerance, and ensuring the Sybil protection of the entire community.
Cardano Foundation CIP-Editors Discord : CIP-50 Topic Thread
Current Status:
2022 11 07 - The CIP-50 hivemind is leading the effort. It is up to us to create a comprehensive simulation suite, test a half dozen equations, and publish an independent RSS-revision-2 research paper.
Additional Resources:
Cardano Live #54 | Cardano Network Parameters with Dr. Michael Liesenfelt
Spicy Dumpling Show | May 6 2022 | CIP 50: Pledge factor and pool rewards

I feel reducing k is counter-productive to the end goal of this CIP, while reducing barely-functional a0 over period of 10-30 epochs is akin to very slowly peeling off a painful bandaid (and again, not sure what problem it solves or tries to prevent).

I feel reducing k is counter-productive to the end goal of this CIP

Reducing k would not be necessary. It would be nice to establish k based on k-effective though.

while reducing barely-functional a0 over period of 10-30 epochs is akin to very slowly peeling off a painful bandaid.

I agree. My implementation plan may be too slow.

I don't believe there is much justification present in this CIP for how it will benefit decentralization, even though that is a stated benefit in a few places referenced below:
"This CIP provides the justification, methods, metrics, and implementation schedule for an improvement program to increase decentralization of the Cardano network."
"The yield ceiling feature prevents the formation of two classes of stakeholders and removes the economic benefits of centralization."
"The only economic motivation remaining for groups with large stake including founder(s), founding organizations, exchanges, investment capital, trusts, and venture capital would be to secure diversification and enhance the value of the entire network by dividing delegation."
After the second statement, it may be useful to expand on why the yield ceiling "removes the economic benefits of centralization." As for the 3rd statement, I don't agree that the only economic motivation for groups with large ada holdings is to delegate it elsewhere, in fact there is another motivation that is specifically addressed by the linear pledge benefit up to pool saturation that you are proposing to remove.
The greater economic motivation is for whales to run their own pools, in this way they can avoid paying fees on delegating their ada as well as take a free shot at massive returns by becoming a stake pool mogul. Let's consider a whale with 100m ada and look at the hypothetical scenario in the "Recast of a0" section with a0=100 and k = 500 which would make a 680k pledge able to support a fully saturated pool of 68m. In this case the whale could run two max pledged pools and split the remaining ada between the two of them as delegation at around 49m each, this is already a +EV scenario over delegating this ada to other pools because now the whale doesn't have to pay fees on it. The real benefit however is now the whale can attract delegators by choosing fees significantly lower than the broader market since any additional delegators are a free roll. Delegators now have financial incentive to choose these lower fee whale run pools, and as these pools fill up the whale can simply rebalance the 100m ada to create additional max pledge pool with low fees. This process can continue for as long as the whale has the ada to open additional max pledge pools and the economies of scale from shared infrastructure means they can offer lower and lower fees.
In this CIP there exists no counter incentive to a whale becoming a pool mogul who runs as many low fee pools as possible. In the current system on mainnet the counter incentive comes from being able to earn higher and higher rewards as pledge increases all the way up to pool saturation, this linear benefit of pledge up to saturation means whales must face a trade off if they want to leave room open in the pool to attract delegators, they must forgo additional rewards they could have received by further increasing their pledge. Without this counter incentive there is increased centralization pressure for large pool groups run by whales.
I don't feel that this CIP currently demonstrates that it will lead to increased decentralization, the focus seems to be creating a more egalitarian reward distribution. I'm not convinced it achieves this since individuals who run stake pools and have large amounts of ada will have the potential for outsized returns compared to delegators in both the current system and in this CIP. This isn't so strange since delegating ada is a risk free investment, while pledging ada carries additional risk (sometimes significantly more depending on how you go about it). It's unclear to me that this CIP will fundamentally change this reward distribution paradigm but I do think it could significantly reduce decentralization due to the changing incentives for very large ada holders.

I don't believe there is much justification present in this CIP for how it will benefit decentralization,

I will do a better job clearly describing expected decentralization outcomes for each aspect of the change.

it may be useful to expand on why the yield ceiling "removes the economic benefits of centralization."

I will clarify and explain.

I don't agree that the only economic motivation for groups with large ada holdings is to delegate it elsewhere, in fact there is another motivation that is specifically addressed by the linear pledge benefit up to pool saturation that you are proposing to remove.

You state 'in fact [...] addressed by the [current] linear pledge benefit' as if the current pledge incentive is effective and successful.
Currently 14.3B in stake has group leverage ratios exceeding 100 and seem to be demonstrating some level of highly leveraged Sybil behavior totally ignoring the current linear pledge benefit incentive. Community rewards are purposefully decreased by 23% to compensate a few large stakeholders (~1.25B) by 30% more (5.5% vs 4.25% yields).  Currently Sybil behavior has no cost, no consequence, and is easily achievable. Skin in the game pledge is the proper mechanism for limiting Sybil behavior.

In this CIP there exists no counter incentive to a whale becoming a pool mogul who runs as many low fee pools as possible.

Currently the largest 'pool moguls' are Binance, Bison Trails / Coinbase, ADALITE, and 1PCT charging 6%, 5%, 3%, and 1% margin respectively on 5,765M stake with a total of 2M pledge.
Any extra incentive for one group with a decrease/penalty for another group will be discovered and exploited. My first principle is to treat everybody fairly from tiny starfish delegators (1-2k₳) to massive blue whales (>100M₳) and exchanges.

You need a chart. Maybe this CIP needs a new section and chart.
The current reward equation creates an unbounded return opportunity for anybody who can grow delegation and collect fees without pledge. The proposed a0 leverage parameter enforcement provides the tunable parameter which limits the maximum ROIC of Sybil actors by limiting maximum delegation size.

As a0 is decreased maximum delegation size decreases resulting in less fee revenue and a lower ROIC.

After reviewing the CIP the following comments came to my mind:
Calculation of effective K:
Looking at it logically a calculated effective K of 40 does not sound realistic in a world where >20% of stake is assigned to single pools. I'm wondering if the calculation should be based on Fraction*K-Per-Pool instead of Faction/K-Per-Pool.
Also, the K-Per-Pool of >10000 for small pools does not reflect a realistic number as it includes a huge list of pools that are not minting blocks at all and thus should not impact K at all.
K in general:
Anyways I think K, in general, seems not to be relevant at all in the end. It does not avoid centralization. It does hurt pools that want to stay single pools if K is increased. In my opinion, we could just set it to a lower number which reflects our minimum understanding of good decentralization. Maybe in the 100 range. Small enough to avoid the artificial introduction of pools in MPO scenario and by that avoid unnecessary overhead.
A0:
I think it's not a good idea to call the new parameter A0 again. Would feel more logical to give it a different name and get rid of A0, instead it can get very confusing.
Ad "The pledge yield boosting parameter"
Maybe worth noting that small pools currently lose>50% of the rewards if one block is minted. You can find Average Calculations based on pool sizes in my calculation sheet: https://docs.google.com/spreadsheets/d/1ztm6Jov85Vk7AGtZ22BVE3I-BhzIlubnLSTUEomdq4U/edit?usp=sharing
Please note that this calculation is not considering the risk of losing blocks to battles.
Ad "A small pool advantage"
Don't underestimate this effect. With the current propagation times, we are seeing the risk for a fully saturated pool is up to 10%. This shall drastically decrease as soon as pipelining is in place. Anyways a bigger pool (>68M) would suffer even more from this effect.

Find my calculations here: https://docs.google.com/spreadsheets/d/1HuW1S3hLKe43mJ8kCuVUgp9lJwvlcIh9ZOH8mejQRr0/edit?usp=sharing
Forum Thread: https://forum.cardano.org/t/understand-the-risk-of-slot-battles-and-ghosted-blocks/97580

Ad "Path to Active"

It would be good to explain per step what is the expected result of the change
If we first remove the pledge factor. We are in a situation where sybill protection is not incentivized at all (incentivization is minimal today as well, but still this could be seen as critical)

Final thoughts:
I think the proposal will:

make pool splitting pointless -> thus reducing/avoiding multi-pools
allow small pools to be competitive, but only to a limited degree (just as much as they can afford)
could turn into a scenario where many small pools exist but are unable to grow without borrowing money
could tend to make Cardano even more capitalistic. Pool Owners with more pledge will be able to earn more. There is no way to bring stake to your pool by adding any other value, it's purely about the money you have. In the worst case, this will lead to more centralization on the long term (just like in the traditional financial system)

If I was a greedy whale with 6.5M I could comfortably spool up 6 nodes and 3 relays on a single 128GB ram 1U dual/multi IP server, pledge 1M to each of the 6 pools, set a 3% margin, and if I could manage to grow delegation to 300M the return on invested capital (6.5M) would be 10%. Obviously I wouldn't care at all about using the 'pledge incentive' to earn 4.4% yield compared to 4.2% yield. Then, I would add 128GB of ram to the server, fire up another 6 nodes, split pledge to 500k per node, and try to grow delegation to 650M for a 16% ROIC.

One day a nation-state may be a greedy whale so I currently prefer pledge enforcement to pledge incentive.

If I was a greedy whale with 6.5M I could comfortably spool up 6 nodes and 3 relays on a single 128GB ram 1U dual/multi IP server, pledge 1M to each of the 6 pools, set a 3% margin, and if I could manage to grow delegation to 300M the return on invested capital (6.5M) would be 10%. Obviously I wouldn't care at all about using the 'pledge incentive' to earn 4.4% yield compared to 4.2% yield. Then, I would add 128GB of ram to the server, fire up another 6 nodes, split pledge to 500k per node, and try to grow delegation to 650M for a 16% ROIC.

Of course the multi pool operator does not care about the pledge incentive they are losing, from their perspective if they can fully saturate an additional pool it will be worth the trade off financially. The more important perspective is that of the delegators, these are the people that shape what the system looks like. A 4.4% yield is around 5% more than a 4.2% yield, that difference is greater than the 3% margin the operator is charging in your example, so I would say it is significant from the delegator point of view. I feel the need to point out again that even if it were not viewed as significant by the average delegator, it can be adjusted to be more significant via system parameters.
If a pool operator wants to expand to more pools and increase her leverage, she must make her existing pool(s) less desirable by splitting her pledge, and she must sell this to her current delegators or risk them leaving. By continuing to split pledge she must reduce fees or her delegators face financial pressure to leave for competitors that provide better rewards. In your system this financial pressure does not exist, super whales will run pools that charge the lowest fees because there is no opportunity cost scenario where they pledge to saturation, their best strategy is to delegate to their own pools and open more as delegators come in for the low fees. This means a system that incentivizes centralization into the hands of a few super whales.

So essentially your formula gives each pool a different ‘saturation point’ based on its pledge (still capped by saturation based on k). So pledge only determines how big your pool could grow, it doesn’t give you more rewards (for a certain stake) like with the current formula (those extra rewards are for most occurring pledges very low, but they do exist).
You’ve chosen 100 as a start value of your a0 (based on current k of 500). This means that any pledge above 680k is meaningless. There’re however dozens of public pools with already a higher pledge. So those actors still have an advantage to split pools, so the value should probably set lower…
So take e.g. a0 set to 50 which leaves only about two dozen public pools with higher pledge (did a quick search on adapools.org). Most pool operators want to earn something with their pool and be profitable instead of just covering costs. For that to happen (especially when min fixed fee drops considerably), you’ll need to have a chance of becoming one of the pools with high enough saturation (based on k). Let’s say 20M+ stake should be a reachable goal… But with a0 set to 50, that means that you’ll need at least 400k pledge for being able to reach that goal… Not a lot of pools will be able to reach this and a lot of SPOs will be very unhappy.

I've been thinking about this and I don't disagree.

Prometheus-Pool : Also the concept of 'pool moguls' that I laid out in my previous post is far more dangerous in your proposed system, where there is no parameter that can be tuned to make it increasingly costly for a large ada holders to control the stake pool market by offering fees that cannot be beat by non-whales.

Introducing a slight correction factor may not treat large pool operators the same/equal to small pool operators. It could be seen as 'fair' to balance the ecosystem. What do you think about these curves in log scale and linear scale?

It would require one more factor though. a0 could be used as a linear diminishing reward coefficient combined with a separate pledge leverage factor, L. This example shows the following formula where a0 = 0.1 and L = 100.0 :
r( sigma , lambda ) = R * min{ sigma * ( 1 - a0 * sigma * k ) , L * lambda , 1/k }
What do you think team?

Prometheus-pool : My initial take is this feels a bit unstable.

Agreed!
I can make equations for any possible reward curve shape we can draw, but people will know exactly where the bias exists and attempt to exploit it. Currently the pledge incentive is a bias with consequences shared in the proposal from 1.5 years of 20/20 hindsight.  A simple flat egalitarian yield ceiling with pledge leverage enforcement for Sybil defense has a profound psychological effect: Stakeholders know there is no way to game the system for yield, either individually or collectively with governance, and pledge is absolutely mandatory for PoS. Everybody won't try to become like Wave Financial, Binance/Coinbase, 1PCT, or 'New Person unknown whale'.
Bitcoin/Nakamoto wanted everybody to be able to generate block lottery tickets equally anchored to an energy cost, however they had a blind spot to the capabilities and economics of ASIC semiconductor manufacturing and global energy market differences. Bitcoin has earned a terrible Nakamoto coefficient of 4. Without any engineered bias Cardano decentralization would converge to the diversity of the underlying community, services, and stakeholder distribution. If this proposal is eventually adopted changes in community diversity, not changes in a formula or parameters, would change decentralization.

If this proposal is eventually adopted changes in community diversity, not changes in a formula or parameters, would change decentralization.

The unstableness I'm thinking of is relative to the k parameter. A desirable property of the current system is that it is designed to converge to k stake pools, but this system doesn't seem to have that property. As the price of ada rises relative to the cost of hardware, there will be pressure for stake pool operators to split their pledge into smaller and smaller pools to maximize rewards, this could be undesirable since there may be technical reasons why you don't want to have too many block producing stake pools.
This system seems sensitive to the current price of ada, any significant price change seems like it could cause the system to re-organize in seeking the new optimal way to split pledge. It also doesn't seem like a good thing to encourage an individual to split pledge to seek higher rewards, since a single individual running multiple nodes doesn't increase decentralization, incentivizing this behavior will only needlessly raise the cost to run the system.

ResponsibleStaking:

"A small pool advantage"

Don't underestimate this effect. With the current propagation times, we are seeing the risk for a fully saturated pool is up to 10%. This shall drastically decrease as soon as pipelining is in place. Anyways a bigger pool (>68M) would suffer even more from this effect.

Ghosted blocks due to propagation delays will cease to be a problem with the implementation of "Input Endorsers".  (Assuming I am correctly understanding how this will be implemented.)

prometheus-pool:
Whales becoming "pool moguls" is a great argument against the proposal.
michael-liesenfelt:
Pointing out return on invested capital with your graphs is a great counter argument.
One thing I am left thinking about is how these arguments will change over time.  Currently the utility of Ada is still quite limited but it is going to increase massively.  There is definitely an opportunity cost to locking up Ada as pledge.
How do you both see things changing when your Ada capital can earn more return by providing backing for a stable coin, or by using it as collateral in one of the newly invented financial instruments?  I believe the opportunity cost of pledge is going to increase.
How do you both see this changing your arguments?

Ghosted blocks due to propagation delays will cease to be a problem with the implementation of "Input Endorsers". (Assuming I am correctly understanding how this will be implemented.)

Not 100% sure if this also will apply to regular blocks. For Input Blocks this shall be the case.

How do you both see things changing when your Ada capital can earn more return by providing backing for a stable coin, or by using it as collateral in one of the newly invented financial instruments? I believe the opportunity cost of pledge is going to increase.

It's true that the opportunity cost of locking up your ada as pledge when you could be earning yield elsewhere will rise. Exactly how that will effect the ecosystem I think is hard to say, I'm sure there are things coming that will effect staking/stakepools that I completely don't expect, like how ISPO's hit last year. I suspect as more attractive options become available the first pledge flight we'd see is from private pools and less successful stake pools since successful stake pools are pretty lucrative assuming they aren't 0 margin. There should still be incentive for significant pledge to be valued for successful stake pools because most/all of these new financial instruments are going to stake their locked up ada, more pledge means more rewards on top of the yield from the financial instrument itself. If pledge is not being valued enough at the current level of k then a0 can always be adjusted.

@prometheus-pool: Whales becoming "pool moguls" is a great argument against the proposal.

I'm not denying it, but a pledge leverage enforcement will prevent "pool moguls" from becoming "pool tzars" or a "pool emperor". Visualize Star Wars Palpatine memes here.
Because k doesn't prevent pool splitting I'm still thinking about and sleeping on the the role/impact/use of k. What happens if a logarithmic decreasing pledge leverage factor which kicks-in at a given k as stake increases? I'm still thinking about and sleeping on these thoughts. Large stakeholders may not feel like this is fair though, but currently large stakeholders don't feel that being forced to continue splitting pools with sub-optimal rewards is fair either.
r( stake, pledge ) = R * min{ stake , a0 * pledge * Log_Scale_Diminishing_Function( stake, k ) ~, 1/k~  }

@74d4: How do you both see things changing when your Ada capital can earn more return by providing backing for a stable coin.

Staking will become the de-facto 'risk free return' just like US Treasuries currently. Other securities with higher risk and higher yield are/will be available.

@74d4: One thing I am left thinking about is how these arguments will change over time.

Private multipool operators and corporate exchanges will be joined by nation-state central banks when we succeed. This would represent a healthy transition of fiat systems to the Cardano ecosystem. Nations and central banks will join exchanges and eventually eclipse them. If a single small individual doesn't get treated equally soon, I fear it may never happen under stake-weighted governance.

Regarding pledge saturating pools for extra yield: And, I get the argument that under this proposal whales could become "pool moguls".  However, I don't think the current design can tweak things properly.
In particular, I don't agree with this in the current system:

@prometheus-pool : If pledge is not being valued enough at the current level of k then a0 can always be adjusted.

If you look at @michael-liesenfelt graphs for the system as it is running currently, you will see that any increase in a0 (to make pledge more valued) will result in magnifying the whale benefit in 100% pledge saturated pools, but will have almost no effect at lower pledge proportions.
With the current design parameters, I don't think it is possible to increase the value of pledge without just massively handing extra yield to the whales for very little comparative gain for "non whale" pool operators.  The design in this regard seems to be skewed disproportionally at the wrong end.  The increased pledge advantage needs to be more even across the curve somehow.

FYI:

Pool Splitting Behaviour and Equilibrium Properties in Cardano’s Rewards Scheme
by Christina Ovezik & Aggelos Kiayias
Posted 19 April, 2022

I'm glad that the Blockchain Technology Lab is now considering single entities operating multiple pools.

@74d4 The increased pledge advantage needs to be more even across the curve somehow.

Could the pledge advantage be changed so that it is relative to the pledge of other pools? Pools would be ordered from highest to lowest pledge. Pools near the top get more benefit than pools near the bottom but there wouldn't be a gap as there is today. The would have the effect of pulling up the smaller pledge pools into the yield boosting zone.
This might discourage pool splitting as the impact on rewards wouldn't necessarily be linear. It could increase the leverage of saturated private pools that are already at full pledge but it would probably be worth it if it decreases the leverage of smaller pools. I don't know the nitty gritty details of what the formula would need to look like and it needs more input from other people.

@Zaytion : This would have the effect of pulling up the smaller pledge pools into the yield boosting zone.

Could you draw/show on the Stake vs Leverage chart where you would like the gradient of this zone? Could you draw on a yield vs stake saturation chart the curve shape or gradient you envision?

This is an excellent proposal.
It is well written and explains the principles, goals, and methods clearly including helpful visual aids to understanding.
The relationships between the various relevant parameters and their effects on outcomes for different scenarios in comparison between the proposed and current system can be difficult to conceptualize.
For this reason, it will be very useful to run simulations comparing the proposal with the current system under different parameter sets.
The proposed improvement to simulation testing to include creation of multiple pools is necessary to be more realistic.
It would be helpful if IOG shared more details of their simulations.
Modeling the diverse capabilities and attributes of actors in the system as seen in the real world would provide more meaningful comparisons.
I appreciate the inclusion of the effect of the minimum pool fees in the proposal.
It is critical to reduce, eliminate or prepay the minimum fixed fee.
I think there are reasons to keep a small minimum fixed fee and possibly to add a small minimum variable fee to prevent someone with deep pockets from starving out valuable stake pool operators by running zero fee pools.
In any case, this should not affect this proposal from moving towards adoption.
I agree with ResponsibleStaking that the leverage parameter should not be called a0 (poolPledgeInfluence) as it is confusing.
I would suggest calling it maxLeverage.
I think the initial value of maxLeverage should be set higher than 100 since it is currently effectively infiinite.
I also agree that the value of k (stakePoolTargetNum) should not be a prescribed multiple of k-effective but rather k-effective should be advisory to changes in the value of k.
I am still undecided about the potential impact on whale behavior and appreciate the ongoing discussion on that topic.
One nitpick: The range for the new a0 (maxLeverage) is listed as 10,000.0 to 1 in one place and 1,000.0 to 1 in another.
I don't think a maximum on the range needs to be defined.
My "gut feeling" suggestion for starting parameters would be:
k (stakePoolTargetNum): 250
maxLeverage: 250
(prepaid) minPoolCost: 30000000
minPoolRate: .01
Obviously, these would need to be modeled and adjusted on a regular basis.
Overall, I find this proposal to be very compelling and support it being seriously evaluated by IOG researchers and game theorists with evaluation methods and results being transparent to the community.
Thanks michael-liesenfelt for investing the time to create and support this proposal!

I like and support the CIP.  Very much like the simple yet elegant reward scheme, with rewards relative to the a0 pledge. My minor comments below (let me know if there's a better way to do this).
Garant Notes and Comments
Minor Comments

In Motivation Section, third paragraph, I found this sentence slightly confusing, had to reread a few times. Is the Nakamoto Coefficient really just k-effective, because it more clearly represents the real group that can 51% attack? This sentences suggests the NC is half the k-effective?
IS NOW:

"The Nakamoto Coefficient is approximately half of k-effective rounded up to the nearest integer. K-effective provides a higher resolution quantification of network decentralization compared to the Nakamoto Coefficient."

RECOMMEND: (If I understand it right?)

"The Nakamoto Coefficient is k-effective rounded up to the nearest integer. K-effective provides a more realistic Nakamoto Coefficient because it represents the real 51% of grouped entities that can commander the network."

In The Proposed Reward Formula Section:
2.1 Recommend a table below quantifying a0 range and resultant pledge %. Took a few times to read, and curious about the range a0 from 10,000 to 100, and 1.0 to 0.

"Instead of a0 ranging from 0.0 to infinity the a0 parameter is intended to range from 10,000.0 down to 1.0. An a0 value of 100.0 would require pools to pledge 1.0% of stake and an a0 of 1.0 would require all pools to be 100.0% pledged."

2.2 In the rewards "r" formula, should alpha be a0 instead?  Also, had to look into what is lambda is again.  Might help the reader to redefine variables.

Suggestions

In Motivation, third paragraph, perhaps provide a good reference or background definition on the Nakamoto Coefficient.  To be perfectly honest, I have heard the term alot but did not know what it meant - I had to google it.  This looks like a good reference to consider adding perhaps: https://cardano.stackexchange.com/questions/4699/what-is-the-nakamoto-coefficient-of-cardano

Maybe add section numbers to each...section for easier referencing (Austin Powers joke unintentional :)

In The Current Reward Formula Section:
5.1. Might be worth defining all variables, equations, and some context for the casual reader audience. E.g. R equation, tau, rho, sigma, alpha, 	lambda left undefined. I had to go back and refresh.  Good reference also might be: https://hydra.iohk.io/job/Cardano/cardano-ledger-	specs/delegationDesignSpec/latest/download-by-type/doc-pdf/delegation_design_spec from
Shelley ledger design spec https://github.com/input-output-hk/cardano-ledger
5.2. In markdown you could render equations directly if you wanted. E.g. try (see raw text)

$$ y=m*x+b $$

(Note: well, looks like this doesn't work in github markdown, only jupyter notebooks...)

In The Proposed Reward Formula:
6.1. First sentence, recommend "relative to" in lieu of "based on" to help convey the concept of relative stake limit based on a0, up until saturation.
IS NOW:

"The proposed reward retains the function of k for limiting rewards based on stake but repurposes the a0 parameter for enforcing reward limits based on pledge leverage."

RECOMMEND:

"The proposed reward retains the function of k for limiting rewards based on stake but repurposes the a0 parameter for enforcing reward limits relative to pledge leverage."

6.2. Might be a good idea to quantify and expand how much more computationally efficient the equation, might be an underrated huge additional benefit to emphasize? At least on a super high level.

"The new equation is computationally simple and purposefully does not use logarithms, exponents, or geometric curves"

In Recast of a0, second sentence, recommend "relative to" in lieu of "based on".
IS NOW:

"Pledge leverage establishes a different ‘saturation point’ for each pool based on its pledge."

RECOMMEND:

"Pledge leverage establishes a different ‘saturation point’ for each pool relative to its pledge."

Thoughts

I like the CIP.

I support it, with understanding of thorough testing and further reflection. At face value, it just makes plain sense it's better.
love the fair reward scheme and elegant simplicity.
I haven't thought thru the game theory new attack vectors, seems like it would be better with higher more purposful a0 pledge against Sybil.
I haven't thought thru the social and ecosystem wide impacts of a hardfork, however it's probably best to do this sooner than later to get it right up front, and have governance dictate the a0 and k parameters down the line.
I haven't thought thru the private vs public a0 pledge impacts, however I seem to agree it may incentivise decentralization with a multi-delegation approach, than self run private pools (outsource the work, same high rewards)...

Definitely agree a0 has negligible effect currently

good statement: "The pledge incentive is currently a statistically unnoticed benefit used only by large private stakeholders." agree.
love the line a0: The pledge yield booster - great concept.

Definitely agree k saturation limit in reality is a non-factor, just open up more pools, must assume bad actors.
Change must come from economic incentive, not altruism, which it does incentivize better rewards across the board.
Side thought: Open source decentralization ranking score tracker?

delegation guide
single pools best, what size?
multi small biz pools okay
multi big company pools bad
include multi private big business pools (binance, coinbase)
company score (sundaeswap, genius yield, liqwid, newm)...
open source audit of pool groups / investigation like journalism

"these pools might be run by one entity" fyi

Love the inclusion of the principles section, and very much agree, great guiding compass.
Love the simple yet elegant reward equation.

Simple is better.
I'm pretty fluent in math, and the current reward formula is not the most straight forward for sure. F=ma and E=mc^2 is the way.
Also efficiency may be a hidden huge incentive too? Also better sybil attack protection?

Really like the statement: "Stakeholders know there is no way to game the system for yield, either individually or collectively with governance, and pledge is absolutely mandatory".

Sometimes I think that future cardano is at risk from stake holder voting to change the rewards scheme to benefit themselves in the future by a cartel or collusion like the banks in 1913 to form the Federal Reserve.  I guess a hardfork would be easier now without peer-to-peer checking nodes.  Best to get it right now, and make it very hard to change later, like the US Constitution Bill of Rights.  The best aspect of bitcoin is the immutable and predictable monetary policy.  It would behoove Cardano to have a basically permanent monetary reward policy going forward to ensure investor confidence, and immutable decentralization insurance.  This is my main concern in Cardano being an invested stakeholder.
(Is this the correct understanding of concensus: In the future, full nodes peer-to-peer checking can reject blocks if SPO nodes are not updated to the "new reward" software update (hardfork). Or is it stakepools running nodes software version before the peer-to-peer full node checking.  Right now, with no p2p full nodes, I believe it is the stake pool node software version that agree and reach concensus.  In the future, will they be like bitcoin miners, where the nodes have the power to reject mined blocks, if the miner is not on the right software version (still learning).
Either way, the earlier the better to make this change, and hopefully be permanent or very hard to change, for investor protection.

Garant Comments, Suggestions, and Thoughts

Hi Michael,
First of all thank you for putting all this effort into improving the current reward sharing mechanism.
One, in my opinion very important but often overlooked topic is the wallet ranking, it can significantly decrease the time until the system reaches its Nash equilibrium. I just wanted to share some links which can help to dig into this topic

Pool Ranking Formula explained: https://cardano-community.github.io/concepts/#/Rankings/Main
Video By Damjan: https://forum.cardano.org/t/daedalus-rankings-desirability-hit-rate-estimates-explained/41755

Currently only Daedalus ranks the Pools according to the Pool ranking formula, and pushes the system towards Nash equilibrium
One additional thing to mention:
After registering my Pool (FORTE) it appeared in Daedalus and got a Hit rate estimate of 60% assigned. Even with 100% performance it stayed at 60% for around 20 Epochs (80 days). And after that it jumped to 90%, what i wanted to point out is, when we look at changes in the system we really have to take very long time frames into considerations, month and years not just Epochs.
Br Sebastian

I'm not a pool operator nor a developer, but what i think that maybe the principle right now its all wrong. Meaning that the current Staking Pool way incentivizes the gathering of large amounts of ADA into one pool, 64 mil. while also putting pressure on the "wanna be" pool operators to become marketing experts to be able to attract enough amount of ADA to be able to mint blocks.
What if it was the other way around, what if we incentivize those who run smaller pools, the smaller the more yield you can gain or the more blocks you can mint?
This way you would increase decentralization, incentivizing the little pools and the creation of much more smaller pools (run by individuals and not by companies of whales, it would also be counterproductive for whales to create their own pools as they would have smaller return if the pools are too large and it would cost them too much to run hundreds of pools, so they would just delegate to existing pools instead of creating large pools of their own). I know that the maximum delegation is reduced to half every few years, but i think its too slow. Smaller pools would still have to be good enough marketeers but would be able to sustain financially the pool from day 1. This would open up a staking market as seen on PoW with the miners probably.

itchains,
What if it was the other way around, what if we incentivize those who run smaller pools, the smaller the more yield you can gain or the more blocks you can mint?

Earlier in this thread (April 13th) I showed an example of a bias against large pools added to the egalitarian equation. Is that the type of yield vs pool size relationship you recommend? If not, could you draw a yield vs size chart and pool size vs leverage charts which show what you imagine?

IMHO there is no need to reduce k parameter, and k should not be something that's calculated after-the-fact based on some active stake reshuffling by the big fish or ISPOs within the ecosystem, but instead something that's driven more by an approximation of a number of fully functional running stake pools (either in general or one per entity) at a given point in time. If some or all of the suggestions within this CIP are implemented the barrier to entry for new/smaller SPOs is improved and as we onboard more stake pool operators it'd make sense to gradually lower the saturation ceiling of a pool.
Yes, I have heard some concerns voiced about 'how many is too many nodes on the network' - that's something we need to get feedback from Cardano networking team gurus - just quietly, I doubt Charles and Co would have launched a network that grinds to a halt when 10,000 nodes are added to the network topology - presumably again that's something networking team could test with their AWS relay infrastructure worldwide on a smaller less demanding non-mainnet network? We currently have around 1105 block producers creating at least one block per epoch, and around 4475 online relays according to pooltool.io data... over the course of past couple of months, ~1000 single pool operators and 180 multi-pool operators produced at least one block (thanks to Dmitry of adastat.net for statistics).
From that it seems fairly safe to deduce that increase of k to 750 or 1000 is not likely to stretch the network to unreasonable size, and what's more the k increase tends to act as a wake-up call/reminder/call to action for delegators that pay attention to the network health/updates and their investment choices. It also obviously acts as a decision point for a portion of SPOs about whether to spin up extra pools (a calculation that would now need to take into account the ideally-dropped-to-zero minimum fixed fee, as well as continually increasing hard disk/memory requirements for a properly maintained node) or redirect excess delegators to their fellow SPOs/pools supporting worthy causes, etc.
Also, while on the subject of k increase - it's worth noting that both Nakamoto coefficient and k-effective have both improved from the moment k-from-150-to-500 was announced, and it's my understanding that the biggest drops in Michael's k effective chart were due to Binance injecting large amounts of new stake into their pools at those points in time. Worth noting that this probably would have happened regardless of k parameter value at the time, and that its effect on the k effective chart somewhat distracts from the fact that active stake from non-behemoths did spread out somewhat (despite the multi-pool splitting behaviour by some of the SPOs). And while it's obviously important to include stake delegated to the likes of Binance in analysis (and important to try and get a dialog happening with the exchanges to see if we can decentralize network more - kudos to Michael for pushing that envelope), it can muddy up the analysis a little bit with regards to effectiveness of k-based saturation-reducing nudges.
If the goal is improve decentralization, I feel that trying to do everything possible to allow reshuffling of single entity's stake from x to y buckets doesn't need to be a priority - as that reshuffling has zero effect on Nakamoto coefficient and k effective, unless I'm mistaken... that's why I'm personally opposed to any k parameter reduction at this point in time and prefer to move in the opposite direction... if we're striving to even out the playing field (so that smaller pools can generate comparable ROSes to the likes of Wave Financial pools), seems like a perfect time to alert all delegators about the need to make some important (for the health of the network) decisions, and for those that don't follow twitter/telegram announcements, a big red warning in a wallet about an upcoming changes and possible saturation of pools bigger than x million worked reasonably well last time around, I think.
As far as pledge consolidation goes (from the effects of this CIP implementation), for me the main question is what will happen to the current 650k+ pledge entities (especially those that are operating multiple pools already, e.g. the BLOOMs, EDENs and WAVE financials of this world). I guess the answer will depend on whether there is adequate financial incentive for spinning up new with-max-pledge-for-optimal-saturated-pool-rewards (e.g. ~680k pledge for current k parameter and pledge factor of 100) pools, and while I need to do some more careful studying of Michael's charts pertaining to rewards, it feels like even without relying on / guarantee of any new delegators coming to such a pool, 680k owner pledge pool might end up being profitable/self-sustaining (say, 1 block every 15 days = currently ~650 Ada = ~320 USD = enough to fund a block producer node, since you can probably piggy back on your existing relays, etc - and obviously if some delegators do come along, lured by a lower than average fee e.g. 0 fixed, 1% variable then its a cherry on top). Obviously mileage will vary, and some SPOs / operator teams will stick to their current number of pools (e.g. if theyare firm believers in decentralization ethos) and also per-block reward will slowly continue reducing over time, but nevertheless this aspect of the CIP effects is the one that needs some more exploring IMHO to see whether there's anything that could be improved in a world where protocol has no concept of multi-pool entity (and we should be grateful to have some wallets that make an effort to alert/inform the delegators about such things and/or penalize such practices in rankings).
It'd obviously be nice if instead of spinning up extra pools such entities either delegated excess pledge (obviously that yields fewer rewards than, say, locking your Ada in Eternl wallet vault for x months) or maybe organize some symbiotic partnerships with single pool SPOs that might be in need of some pledge assistance/boost, but that's probably beyond the scope of my musings / feedback on this CIP. And yes, while achieving fault tolerance (by delegating to many pools) seems like a worthy cause some bigger Ada holders should probably be thinking about - spreading Ada across many pools also means more account/wallet management - then again, so does coordinating some pledge agreement with a new party (I guess we have smart contracts now, probably a matter of time before something that doesn't require a lot of trust will be invented to facilitate these sorts of setups behind the scenes).
So in summary, I support Michael's proposal minus the k reductions - ditching non-zero fixed fee floor is long overdue (let the SPOs set their levers to the settings most appropriate to their situation/goals/sacrifices they might be willing to make/marketing campaign... especially given current price volatility of Ada, magic hard coded numbers seem a bit of out place), while having essentially pledge-driven saturation ceiling of a pool seems to make good sense (hopefully some good new relationships are formed as a result of this not just at the upper/higher echelons of the active stake). As stated earlier, the main question mark is around expected behaviour of bigger pledge entities and what ideas people might have on how to encourage these larger holders to improve the overall network decentralization picture (without needing to make sacrifices).

Some updates from my side.

I've been reviewing the proposal and all the comments in this thread, which for I'd like to give a little summary of the "key points" I've noted (though a lot of the discussion is going a big in a ping-pong mode between two statements sometimes). But overall:

The discussion seems at the moment quite divided around the notion of whether or not this proposal would effectively benefit decentralization. At this stage, the proposal lacks for strong evidence that it would improve the situation w.r.t to concentration of stake around a small number of entities. Getting strong evidence is however not easy because it highly depends on how we model the different actors of the system for which there seems to be disagreement at this moment of the discussion.

The k-effective metric, its calculation and interpretation sparks off multiple debates. It is also suggested that k-effective can be somewhat interpreted in terms of the Nakamoto coefficient (or at least, that there's a relation between both). So perhaps it'd be worth not introduce k-effective at all and only consider the nakamoto coefficient to reason about the effectiveness of k?

The proposal may be touching on a bit too many topics at the same time (changing the reward formula, adjusting the costs of running pools, adjusting the value of k ...). Perhaps a way to organize the debate with more fluidity could be to discuss these items separately (even though, they have an interdependent effects on one-another). For example, if the k-effective metric is something that you think has value in itself to reason about the effectiveness of a reward & incentive mechanism, I would suggest making it a separate discussion/CIP to centralize the debate about this one.

There has been a few mentions as well of other external factors that perhaps need to be taken into consideration when reasoning about the behavior of the players (ghosted blocks, future L1 improvements, risk / financial uncertainty of running a pool vs delegating ...).

It's been highlighted that keeping a a0 parameter while changing its semantic is quite confusing. Since the proposal is suggesting a new formula, it may as well suggests new parameters should their semantic be different. maxLeverage was suggested in its stead.

The 'Path-to-active' is oddly specific in terms of the next step to take. Rather, the path to active should describe observable KPIs that proves the CIP is used and, well, active. Of course, getting it implemented in the ledger is a convincing-enough proof, but rather than describing a serie of parameter adjustments and a quite specific time-frame, I would suggest to describe higher-level steps and observable results that are actionable. For instance, getting a model comparing the effectiveness current approach with this new one on various dimension (k-effectiveness, yields, stake leverage etc..) would be a nice first step.

On a different note, I've been able to get in touch with Aggelos on the topic who pointed out that this kind of designs had been considered in the past and is very similar to how Tezos currently works at the moment. He pointed out this nice summary he wrote a while back on the matter:
https://iohk.io/en/blog/posts/2020/11/30/blockchain-reward-sharing-a-comparative-systematization-from-first-principles/
This approach could be described as a "Delegative Bimodal With Capped Rewards and Enforced Pledging" (perhaps a name suggestion for this proposal?). He also pointed out that the research team is now working on a new simulation engine (as you've also linked above @michael-liesenfelt). The engine isn't yet available publicly but should be soon enough to enable a wider array of experiments to be conducted on different models to search the space for an optimal solution.

There is one issue with this proposal that I haven't seen discussed yet. It opens up an attack vector that was previously expensive under the current system but has occured before. The attack doesn't have any official name that I know of, so I will call it an Oversaturation Attack (OA).
Since the start of Shelley there have been instances where a pool becomes massively oversaturated. There are definetly instances of this which seem to be mistakes, we aren't talking about those. Instances where a whale or whales purposly oversaturate a pool are the concern and would fit the definition of an OA.
When a pool get hit by an OA, it means some whale or whales came and delegated a large sum of ADA to the pool. Under both the current and the proposed system this would lower the yield of that pool. A pool with sustained lower yields should lose delegates. After some period of time the whale can leave, having destroyed some portion of the pools delegates all of which may not return. Currently a whale or whales may do this because they don't like a particular pools operators / owners.
The current system makes an OA expensive because the saturation limit for all pools is ~68M ADA. Only pools close to saturation can be attacked in this way cheaply.  Pools with a lower saturation require more ADA to attack. The new proposal would give each pool its own personal saturation limit based on their pledge. These would mean any pools under the 'max pledge' would be easier to attack than they are now.

@michael-liesenfelt  Stakeholders know there is no way to game the system for yield, either individually or collectively with governance, and pledge is absolutely mandatory for PoS. Everybody won't try to become like Wave Financial, Binance/Coinbase, 1PCT, or 'New Person unknown whale'.

Large entities that currently enjoy investment, because they are offering the best yields, will not want to give that up if they can do something about it. The current pledge incentive gives large entities the startegy to just pledge. If you take that away, the next best opportunity is to create many pools and become a 'pool mogul'. Offering lower fees would be one way they can compete, but they can also attack the yield of their competitors using OAs. The largest entities could all push on the smaller entities and create two classes of stake pools. The pool moguls keep making new pools that don't get attacked and the smaller entities keep getting squeezed as their yields fall relative to the moguls and delegates leave. This should drive delegation to the pool moguls over time and continue to make the large entities the best bet for the highest yield in the system.
Small and tiny pools would be the easiest and cheapest to attack. Their ability to resist such an attack would be minimal. Also aside from the financial incentives, small and tiny pools would be very exposed to OA from those that don't like them and those that just want to cause trouble by attacking the smaller pools.
These level of attacking will cost some yield for the large entities. However, as with most competative capitalist environments, the players at the top stand to gain the more over time by spending now to push out the competition. Only pools that survive get rewards.

First,
I really want to thank @hodlonaut , Homer J (AAA), for all of his wisdom, advice, experience, and input to this CIP. He has been an amazing contributor since the beginning of the forum thread before this CIP was drafted. He is currently working on the most accurate way to compute k-effective. Previously I've computed k-effective using the distribution of delegated stake from Cardano Blockchain Insights and adapools.org. @hodlonaut is working to compute k-effective directly from the blockchain by accurately grouping the ~21,600 blocks per epoch. I look forward to his upgraded method.
For the Spanish translation,
I want to give thanks and credit to Juan / DOT5 stakepool. Thank You!
Team,
I also want to thank each and every one of you who are participating in this CIP process.

On k-parameter and k-effective,
I agree that k-parameter doesn't have to change. Reshuffling from x to y buckets has zero effect on Nakamoto coefficient and k-effective. I purposefully included 3 different values of k-parameter (150,500,1000) on the chart of group stake versus leverage in the CIP. I'm in favor of reducing k-parameter and using k-effective in an advisory way, others would like to keep k the same, and others would like to increase the k parameter.

@ktorz : "[...] k-effective can be somewhat interpreted in terms of the Nakamoto coefficient (or at least, that there's a relation between both)."

Yes. k-effective is a real number representing the average decentralization of the entire network whereas the Nakamoto Coefficient is an integer subset of 51% the network.

@ktorz : "[...] For example, if the k-effective metric is something that you think has value in itself to reason about the effectiveness of a reward & incentive mechanism, I would suggest making it a separate discussion/CIP to centralize the debate about this one.

K-effective is just background information for the "Motivation" section. It's not the CIP and not a CIP by itself.

@ktorz : "[...] So perhaps it'd be worth not introducing k-effective at all and only consider the Nakamoto Coefficient to reason about the effectiveness of k?"

No. K-effective is proof that the current reward sharing scheme is flawed. The historical trend of k-effective provides a higher resolution metric compared to the Nakamoto Coefficient.

On topics,
@ktorz,
Could you draw/show on the Stake vs Leverage chart where you would like the gradient of an incentive/enforcement zone? Could you draw on a yield vs stake saturation chart the curve shape or gradient you envision?

@Zaytion : "It opens up an attack vector that was previously expensive under the current system but has occured before. The attack doesn't have any official name that I know of, so I will call it an Oversaturation Attack (OA)." "[Large Stakeholders] can also attack the yield of their competitors using OAs."

I agree that this is a significant issue. Rick of DIGI can share the experience of a 20M ADA whale attacking. Mitiging this with the reward equation would erode the strong sybil protection of pledge leverage enforcement. Charles mentioned this in an AMA long ago... The appropriate solution would be a separate CIP to propose 2-way at-will delegator acceptance staking. Delegators could select a stakepool and stakepools could choose to reject a delegator in the next epoch.

@Zaytion : "If you take that away, the next best opportunity is to create many pools and become a 'pool mogul'.

That is very true as @prometheus-pool mentioned. I'm planning on adding a section in the CIP on the motivations and ROIC of large stakeholders with and without pledge leverage enforcements based on the previous posts in this conversation thread. Remember, as @74d4 confirmed, "With the current design parameters, I don't think it is possible to increase the value of pledge without just massively handing extra yield to the whales for very little comparative gain for non whale pool operators." The current system has no tunable parameter to prevent a pool mogul from trying to become a pool emperor whereas pledge leverage enforces a real limit.

Everybody,

@ktorz : "On a different note, I've been able to get in touch with Aggelos [...]"

Satoshi Nakamoto centralized the decision making of selecting SHA as the PoW method. Unfortunately, Satoshi overlooked the centralization and economics of ASIC semiconductor manufacturing. As a result Bitcoin currentlly has a terrible Nakamoto coefficient of 4.
IOG centralized the the RSS reward equation. Unfortunately, pool splitting and multipool actors were not simulated or considered in the original RSS paper. Multipool actor omission became a peer reviewed mistake. Multipool and sybil actors have resuted in Cardano earning a Nakamoto Coefficient of approximately 22 with nearly 50% of stake controlled by non-regulated sybil/multipool actors.
This CIP scope is trying to correct this Shelley era problem in the Voltaire era using Voltaire era collective principles. I insist on a Voltaire-style inclusive diverse collective hivemind of stakeholders and peer reviews to prevent another centralized mistake. Ideally IOG researchers would participate here, not in private, not afterwards, so that we could all collaboratively develop CIP-50 and (I hope!) draft a new 2023-RSS-revised paper together.
Our hivemind has to prepare a simulation engine ready to run tens of thousands of trials of dozen(s) of actor types against a dozen(s) of reward equations/variations.

To-Do:

@ktorz : "It's been highlighted that keeping a a0 parameter while changing its semantic is quite confusing. Since the proposal is suggesting a new formula, it may as well suggests new parameters should their semantic be different. maxLeverage was suggested in its stead.

Agreed! It seems the hivemind agrees on this and I will change a0 to a leverage parameter L in the next revision.

@ktorz : The 'Path-to-active' is oddly specific in terms of the next step to take. [...] I would suggest to describe higher-level steps and observable results that are actionable. For instance, getting a model comparing the effectiveness current approach with this new one on various dimension (k-effectiveness, yields, stake leverage etc..) would be a nice first step.

Agreed. I will re-write that section to include a hivemind effort to model many equations and many parameters, potentially collectively authoring a new updated RSS paper, and then using it on testnet before mainnet.
@michael-liesenfelt:
In the rationale section include many candidate alternate equations as recommended by CIP-1.
@michael-liesenfelt:
Add 'pool mogul' / 'pool emperor' large stakeholder motivations section and chart:

Correct the ROIC charts, fix the errors first.
Discuss the ability for large groups to promote decentralization without yield loss.

Hivemind:
Create a pool ranking recommendation based on the new equation.
@michael-liesenfelt:
Include discussion of OA attack and a recommended mitigation as recommended by @zaytion.

We are an SPO and have been following the discussion on CIP50 very closely.
Basically, we are already of the opinion that the change of the parameters can be a progress also for SPO, but would not necessarily want to lower the k parameter.
To justify why we are skeptical in the end that the adjustment will bring a significant change, I would like to elaborate a bit:
k-effective is a very useful differentiation because it includes whether a multi-pool operator is at work, or an SPO. However, I think that an MPO is still in line with the system, because the delegators are still doing liquid-staking and the wallet owners have power of disposal over their stake incl. voting-rights at any time.
However, there are also MPOs that do not conform to the system because they circumvent or, to a certain extent, encapsulate the rules of the game. Let's call it encapsulation or encapsulating MPO.
Example:
Someone holds their ADA on Binance. Binance has its own form of staking, which is based on its own rules. In exchange, Binance requires the ADA owner to lock his ADA for a certain period of time, whereupon Binance reduces the ADA owner's ADA balance according to the locking period. This means nothing else than that Binance has the power of disposal over the ADA and the actual ADA buyer no longer does. I think I can even go so far as to say that some exchanges may not be buying ADA at all but selling something like subscription rights or synthetic ADA certificates, at least with Etoro that could be since it is not possible to transfer one's ADA to a wallet from Etoro.
Encapsulating and non-encapsulating MPOs can be distinguished simply by the fact that non-encapsulating MPOs do not bypass the delegation structure and delegation systematics of the Cardano network, but encapsulating ones do.
Encapsulating MPOs therefore always have a delegation structure where 99% or more of the Stake is contained in a position, or even in the Pledge for non-exchanges.  Sometimes the Stake is also distributed over 2 positions with 50% each.
Examples:
BINANCE 1 position with > 99% stake leverage: >1M encapsulating
AVENGERS 2 positions with 50% stake leverage: >1M encapsulating
ADALITE >500 delegators Leverage: 2000 non-encapsulating
1PCT >500 delegators Leverage: 464 non-encapsulating
WAVE
-SKY >500 delegators Leverage: 15 - 1000 non-encapsulating
-W. Financial 1 position with >99% L: 680,000 encapsulating
NEW GIRL 1 position with >99% L: 1 encapsulating
NEW GIRL is very mysterious: nobody knows who is behind it.
At the very least, it's not very decentralizing, that's for sure. And if it's organized crime, which can't be ruled out, it's also a threat.
Some other pool groups downright flirt with anonymity and secrecy by calling themselves WHO KNOWS, for example.
What I am concerned about is that a lot of energy is put into the correct methodical parameterization of the system, also in order to set the right control impulses by means of incentives, but large parts of the stakeholders are not reached at all by this. On the one hand, this is due to very powerful participants, such as the aforementioned encapsulating MPOs (Exchanges, Funds, Investment-Vehicles, Private Investors or Investor-Cluster). On the other hand, it is also due to a large number of participants who are indifferent to the goals and motives of the Cardano network, to the point that some have simply forgotten about their stake or at least do not care if it is lying around somewhere where it does not generate any rewards. (https://forum.cardano.org/t/how-many-zombies-are-among-us/101922)
A lot of attention is put into technically avoiding a 51% attack, but no one sees the elephant in the room, because if some of the encapsulating MPO get together, that can be the case very quickly. They could also make an attack in the form of overpromising returns to investors to lure them in to achieve more than 51%, that doesn't seem far-fetched to me.
All in all, I think there is a need for action there.
I don't think CIP 50 will do much to change the dominance of these encapsulating MPOs, because a fixed fee without a minimum level doesn't hurt them, and it remains to be seen whether the increased competitiveness of SPOs will lead to strong delegation migration. In particular, it does not reach ADA holders committed to exchanges. On the other hand, it is easy to increase the pledge for the encapsulating MPOs up to a leverage level of 1 -2. Also easy for exchanges by splitting into a pledge position and a stake position to secure their liquidity.
What other solutions are there?
Significantly, said MPOs are characterized by very few, very high stake positions.
Since I have a past not only in IT, but also in ecological research, I took a look at bio-diversity indices, like the Simpson index or the Shannon-Wiener index. These measure biodiversity, which is composed of the number of species (stakes) and the dominance of individual species (stake positions). One could work with this, but it can be circumvented on the one hand by artificial stake positions, and on the other hand small pools may then come off badly if they do not yet have many delegators. But maybe it would be an approach to measure only from a certain stake level.
In the end, again, I think it can probably always be worked around.
What remains?
Maybe it's regulatory after all?
I think the introduction of a KYC principle would already help. And it would also help with other problems, see https://forum.cardano.org/t/how-many-zombies-are-among-us/101922
Or let's think about money laundering
I think there will probably be a wave of opposition on this demand, but I submit that the financial regulator has already demanded this, not to allow anonymous wallets. And if we don't do it, it would be an advantage for the exchanges, they have already implemented it. And if regulation intervenes, it could be an additional boost for exchanges and good night for decentralization...
At the end I would say, the problem with encapsulating MPO should be solved. I don't want them, because they're circumventing the rules. Do you?

From the blog post linked in the above https://github.com/cardano-foundation/CIPs/pull/242#issuecomment-1136099989 by @KtorZ:

Delegative bimodal with pledge-based capped rewards. What typifies this particular delegative approach is that the resource pool’s rewards have a bound that is determined by the amount of pledge that is committed to the pool by its operator. In this way, the total leverage of an operator can be controlled and fixed to a constant. Unfortunately, this leverage control feature has the negative side effect of implicitly imposing the same bound to all, small and large resource holders. So, on the one hand, in a population of small resource holders, engagement will be constrained by the little pledge that operators are able to commit. On the other hand, a few large whale resource holders may end up influencing the consensus protocol in a very significant manner, possibly even beyond its security threshold bound. In terms of leverage control, it should be clear that one size does not fit all! From existing systems, this is the approach that is (in essence) followed by Tezos.

Adding some relevant info. Quoting from the Trail of Bits report https://blog.trailofbits.com/2022/06/21/are-blockchains-decentralized/ :

A recent impossibility result for the decentralization of permissionless blockchains like Bitcoin and Ethereum was discovered by Kwon et al. It indicates that for a blockchain to be optimally distributed, there must be a so-called Sybil cost. That is, the cost of a single participant operating multiple nodes must be greater than the cost of operating one node. Unfortunately, Kwon et al. conclude that there is currently no known way to implement Sybil costs in a permissionless blockchain like Bitcoin or Ethereum without employing a centralized trusted third party (TTP). Until a mechanism for enforcing Sybil costs without a TTP is discovered, it will be almost impossible for permissionless blockchains to achieve satisfactory decentralization.

The source, Kwon et al.: https://arxiv.org/pdf/1905.05158.pdf

@csoroz :
On the other hand, a few large whale resource holders may end up influencing the consensus protocol in a very significant manner, possibly even beyond its security threshold bound.

A large stakeholder could choose to be 'bad' using all of their stake to attract delegation to earn fees or influence consensus. Pledge leverage limits the maximum size of their influence to the leverage limit of their pledge, $L\lambda$. Currently no limit exists and the largest invested stakeholders (Binance, Coinbase, Wave Financial, [...]) are choosing to be benevolent while other non-invested high leverage multipool operators will try to grow. At some point a large stakeholder becomes invested enough in Cardano to willingly choose decentralization. Cardano Foundation is choosing community delegation, even with a reward penalty. CIP-50 intends to create a system where large stakeholders could choose to be 'good' and divide their delegation without penalty (The Yeld Ceiling) to dozens of pools dramatically benefiting decentralization.

@morganthomas :
[...] Kwon et al. It indicates that for a blockchain to be optimally distributed, there must be a so-called Sybil cost. That is, the cost of a single participant operating multiple nodes must be greater than the cost of operating one node. Unfortunately, Kwon et al. conclude that there is currently no known way to implement Sybil costs in a permissionless blockchain like Bitcoin or Ethereum without employing a centralized trusted third party (TTP).

IMHO the author is correct that a Sybil cost is necessary, however does not account for Cardano having two different 'classes' of stake: delegated stake and pledge. Operating a node will likely never be an effective Sybil cost because Cardano is too power and compute efficient. Also, it may be possible to create a custom version of cardano-node which could create blocks for many keys/pools, not just one, within a single memory footprint.
Pledge leverage does introduce an effective Sybil cost: Loss of rewards for operators and delegators for over-leveraged groups.
If group stake is less than the pledge leverage limit $\sigma < L\lambda$ the loss of rewards Sybil cost $C(\sigma , \lambda)$ would be $0$.
If group stake exceeds the pledge leverage limit $\sigma > L\lambda$ the loss of rewards Sybil cost would be: $C(\sigma , \lambda) = R(\sigma - L\lambda)$.
Currently on Cardano with $k$,
If pool stake exceeds the pool size limit $\sigma > 1/k$ the loss of rewards is $R(\sigma - 1/k)$.

@mangelsjover The source, Kwon et al.: https://arxiv.org/pdf/1905.05158.pdf

Last revision of RSS already discusses that source (ref. [26]):

Finally, after the first version of the present paper was made public (on the arXiv repository, cf. [5]),
another work, [26], studied a parameterized notion of decentralization, where, in an ideal system, all
participants should exert the same power in running the system, independently of their stake. This is
a significantly more demanding notion of decentralization than the one considered here, where in an
ideal system, participants exert power proportional to their stake. It is argued in [26] that in order for a
system to achieve full decentralization, there must exist a strictly positive Sybil cost, that is, the cost
of running two or more nodes should be higher when the nodes belong to the same entity than to
multiple entities. Clearly in systems with anonymous users, Sybil costs cannot be positive and such
concept of decentralization is impossible.

There has been a long discussion thread happening over several days on the Discord server. This is slightly unfortunate as we didn't intend to use discord as a means to discuss CIP but only as a means to organize meetings. So, here's both a (best-effort) summary and a full transcript of the Discord's discussion.
Discussion Channel
The discussion, unfortunately, happened on a Discord in a not-so-structured manner, and on the #general channel. There have now been multiple requests to set up a proper discussion channel which could be used to discuss the issue in a bit more synchronous manner than the Github comments.
CIP editors to create a room to facilitate the discussion.
There was also a mention of the 'focus group' idea which was abandoned after IOG's research declined the invitation to discuss the proposal, pointing out that such an approach had already been discussed and rejected (cf the blog post pointed out earlier).
Whales Incentive / Pools Moguls
This seems to be the most debated topic regarding CIP-0050. The opposition (to re-use Michael's terminology) suggests that CIP-0050 would introduce an actual optimal strategy w.r.t to pledge management by enforcing a cap.  However, in the current situation, the rewards/pledge relationship is linear and influenced by other factors (e.g. margins).  There's therefore no pre-established optimal strategy regarding the pledge. Larger pledges would yield larger rewards.  However, with CIP-0050, pools with a large stake would be incentivized to create many more pools and set the pledge for each to the optimal value.
This point hasn't been addressed fully by the proposal (since it kept being discussed and dismissed).
Decentralization of Cardano
Part of the discussion was articulated around whether or not Cardano is sufficiently decentralized. Some facts mentioned in the discussion:

3000+ stake pools registered, about which ~1100 produce blocks on each epoch.
Binance -> controls 11.1% of the active stake
Coinbase/BisonTrails -> controls 6.6% of the active stake
Minimum Attack Vector / Nakamoto Coefficient ~23

On the one hand, it was pointed out that the current system seems to visibly encourage decentralization with as evidence the number of stake pools and the current Nakamoto coefficient which is amongst the best ones in the industry. On the other hand, the MAV is only 23 (vs 3000+ pools) which indicates that while effective, the system isn't near its optimal equilibrium.
It was also pointed out that large actors such as exchanges colluding are highly unlikely due to the legal consequences that this would entail.
Choice of protocol parameters
There are still many discussions around changes in protocol parameters. Mainly regarding k, a0 or the minimum fixed fee for pools. While CIP-0050 mentions that a0 and k have been judged ineffective, there's a lack of data/discussions around whether changing those parameters could also improve the current situation.
The minimum fixed fee is still perceived (and was argued by Colin H. on the Cardano forum) as a major crippling factor for small pools. It reduces rewards and thus the attractiveness of small actors.
This gap in the discussion seems also due to the lack of updates from the IOG research team who mentioned on multiple occasions in the past some 'findings' that justify the choice of parameters. Such findings are still to be published.
Methodology & discussion
It has been outlined by a few people that the way the discussion around that CIP is done isn't efficient and even problematic at times. Mainly, it is said that counter-proposals aren't properly being discussed. Ideally, we would have the proposal address the raised concerns with clear, quantifiable, justifications (and it should be up to the author to champion this, not to the opposition).
Also, the methodology itself for evaluating the solution is being debated. It isn't clear to some that the proposal is indeed improving the situation since there's no agreed-upon methodology in place to compare the two solutions. In particular w.r.t to social behaviours and interactions. This is equally true of the current system although the current system has the advantage of being observable under real market conditions.

Full Transcript
06/17/2022 ---------------------------------------
Michael Liesenfelt
Opinions are split, However the metrics and facts are not split. The RSS paper does have a peer reviewed mistake which has proven to limit decentralization. Game theory versus historical game reality has been numerically proven at this point beyond any 'opinions'. I had to write the "Motivations" section to teach what was not previously taught or included in the RSS paper. I wrote a section to guide how the next 'RSS' paper should be investigated and authored.
I have only been into Cardano for a handful of months and I'm a newbie. It was blatantly obvious that IOG had a decentralization problem, IOG didn't have a solution path for the last year and a half, and IOG needed help. I understand the fear, you don't want to accidentally compound the previous peer reviewed mistake and tank the MAV from 20 to 10 or worse... I understand that fear. CIP-50 exists as a hivemind to help buidl Cardano. I want it to be a hivemind because nobody is perfect or all-knowing, not me, obviously not Aggelos. A hivemind of voluntarily thought leaders is the only way to avoid intellectual centralization.
06/18/2022 ---------------------------------------
Nkt
Where's the centralisation happening? There's 3000+ nodes on main net. No-one can capture anything close to even 5% of the stake, let alone the 33+% required  to do anything naughty.
We are probably the most decentralised system. We are certainly the most decentralised open system where you can see who is running what.
Michael Liesenfelt
What is your real name and what is your role at IOG?
Michael Liesenfelt
Two groups already have more than 5% stake on the network. Binance at 11.1% and Coinbase/BisonTrails at 6.6%. The Cardano Nakamoto Coefficient MAV is not 3000/2=1500, currently the Cardano MAV is 23. You are not even close to factually correct. This is contained in the CIP-50 document. You really really should read CIP-50 and sleep on it, because it seems that you have not read it.
Korlat
I would love to see this "numerical proof" you have, I didn't find it anywhere in CIP-50. Simply looking at the current state of the system and laying the blame solely on the rewards equation ignores the fact that blockchains are social systems and social/cultural norms can dampen/overwhelm financial incentives.
Michael Liesenfelt
The k-effective over time relative to the desired K-parameter is about as clear as it gets. The Cardano MAV is 23, not 230.
Korlat
if that's your proof then I think your use of that word is at best misleading
Michael Liesenfelt
I want the MAV of Cardano to be >50, not 20. CIP-50 for MAV >50. Where do you stand on decentralization?
Korlat
CIP-50's main concern seems to be lowering the rewards for max pledged pools. the financial incentives seem to lead to a staking ecosystem run by massive whales
Michael Liesenfelt
What section and what paragraph are you reading? The Motivation section is the current reward equation.
Korlat
Those "biased rewards for max pledged pools" are what help prevent a staking ecosystem controlled by massive whales. We don't want all the public stake pools to be run by massive whales. As for multi pools, every time they split their pledge to open more pools they lower the rewards of their delegates, this is financial incentive for delegators to seek other pools
Michael Liesenfelt
You are confused. The network does not have Sybil protection right now. High leverage reigns. Only a handful (4) whales and institutions use the pledge incentive.
Image
How were you misled? How can we do better with community education so this factually incorrect paradigm gets rooted out?
Korlat
there are ~100 pools that have 1m-10m pledge at the moment, even at current value k and a0 this provides a significant discount on the pool margin delegators pay to pools and as k increases lower pledge amounts become increasingly significant. This is more than a handful
Michael Liesenfelt
There are only 4 groups making >5.25% yield right now.
Literally everybody else is at ~4.25%.
Sybil is high leverage. Low leverage is skin in the game.
Read CIP-50 again. Sleep on it. Think about Sybil behavior, skin in the game pledge, and leverage.
Korlat
There are significant differences in the rewards of the pools clustered around 4.25%, and these differences are based on the pools pledge, margin, and total stake. This is the financial incentive to avoid pledge splitters.
Korlat
I have read CIP-50 plenty, when there is an update that addresses the issue with it being susceptible to control by a few massive whales I will be sure to read it
Michael Liesenfelt
I don't understand why you think there is a CIP-50 leverage issue that doesn't currently exist right now. The 'issue' you mention exists right now, but we have benevolent whales. I'm really confused by you and your thought pattern.
havealoha
I don't think this channel is meant for debate about existing parameters. If you have proposed a cip that intends to change parameters then maybe. Why don't you  take this somewhere else.
Korlat
It seems like this discussion is about CIP-50 but I guess I will just close with a brief explanation of my thoughts.
I'm not sure what benevolent whales you're referring to but it would be very difficult for a few whales to control the entirety of the current staking ecosystem. There currently exists no sweet spot for pledge when running a public pool, a property of pledge having a linear benefit all the way to saturation of a pool. The more you pledge the more rewards you get, but the less room you have to accommodate delegation.
 A few massive whales could conceivably run every public pool of the ecosystem by pledging the maximum on many pools, and in fact they can attempt to do so without any opportunity cost since there is no linear pledge benefit all the way to saturation.
George [APEX]
the stake pools not minting blocks don't really matter when we are talking about decentralization. the number is closer to 1100, I did not check recently how many pools are minting blocks in an epoch.
in epoch 344 we had 21338 blocks minted by 1114 stake pools.
184 stake pools minted 1 block each.
585 stake pools minted at least 10 blocks.
141 stake pools minted at least 50 blocks.
the problem is that most of the pools minting many blocks per epoch are part of multi-pools, so the number of entities minting many blocks is very low. this is what really matters when we are talking about decentralization, not the fact that there are more than 3000 stake pools.
Nkt
Seriously? It would literally be illegal for Binance and Coinbase to join forces to get a ~18% share, and even those two giants would still need another 50%+ expansion before they could unduly influence things. Do you have any idea how unlikely and illegal that collusion would be?
Nkt
This is true. And it is something we are looking at, of course. The issue with "front running" and the like, and there's a theory that a large group could perhaps influence block production in their favour by attacking the network by producing zero sized blocks faster, but that's not proven - it didn't seem to happen when there was a glitch on one node.
Nkt
What? No-one said it was 3000/2. It isn't even "over 2".
Michael Liesenfelt
@Nkt @Korlat What are your names/ affiliations? I will happily add you to the "Opposition" list publicly.
There is nothing wrong with being in opposition to CIP-50. I will also happily include a detailed statement of opposition.
George [APEX]
allow me to doubt that anyone at IOG really cares about making small stake pools more attractive to the delegators (except Professor Aggelos Kiayias), fact that would help decentralization. if that was true, the minimum stake pool fixed fee would have been reduced long time ago.
Nkt

the problem is that most of the pools minting many blocks per epoch are part of multi-pools, so the number of entities minting many blocks is very low. this is what really matters when we are talking about decentralization, not the fact that there are more than 3000 stake pools.

That's a good point. Something to be mindful of.
Nkt
You can Google me in a few seconds, but I'm not yet educated enough on the details of this proposal imo to stake a position on it.
Nkt
We have day jobs doing things on the Cardano network, we don't have the time or bandwidth to sit around and read everything from the 3000+ pools, the millions of users, the thousands of bug reports/improvement requests, the trillions of Catalyst proposals. No-one can. This isn't directly part of my job at IOHK/IOG.
However, just by being here and seeing what is being said, I feel fairly sure that I'll be asked, eventually, to write a document for somewhere higher up.
Nkt
I currently don't see how that would help though. Imagine we dropped it to half the current requirement. How would that stop a whale from doing a multi-pool system for less "money"? How would that stop multi-pools that simply acted incognito, hiding the fact they are working together? Would it not simply lead to that sort of behaviour if we incentivised it?
Yes, more small pools would be good, but surely we want them to grow a bit and stop being small pools?
George [APEX]
no, not all employees have this time. but some should. Charles said once (at least) that the one most important thing for him is the decentralization.
HomerJ (AAA)
I see... so assessing health of the network is not part of someone's job description somewhere at the company? I mean there were some findings from research team that were promised to be published over a year ago about why pledge effect needs changing and k needs to increase but those vanished in the haze so this 'i don't have time to read thoughts from 3000 pools' sounds like a bit of a 'leave us alone, we are doing the best we can but we still can't tell you why a year later nothing changed with regards to parameters we said we'd tweak and monitor'. I'm not pointing fingers at you personally but if you want to be an IOG representative in this discussion please read up CIP one more time and hopefully you'll understand than 3000 pools doesn't mean anything decentralization wise (although I think Michael already pointed it out - see https://adapools.org/groups).
George [APEX]
dropping the minimum fixed fee would give the small stake pool the option to make the stake pools attractive for delegators by being able to provide a better ROA. a small stake pool minting 1 block in an epoch is taking about 55% of the rewards from the delegators because of the minimum fixed fee.
how else could they grow and stop being small stake pools if they are not being given the chance? not every stake pools is being run by millionaires.
HomerJ (AAA)
Again, it sounds like you haven't read the CIP diligently. Colin Edwards (quant from IOG) himself admitted over a year ago that min fixed fee in it's current form is crippling competitiveness of smaller pools, it's simple mathematics. Also spinning up extra pools requires extra infrastructure (that might become progressively more expensive as blockchain grows), so that's at least one deterrent... Anywho I should probably reread what was said earlier too, in case I'm repeating some points. And yeah apologies for CIP editors for the wall of text too.
That's also kinda where Michael tries to make it more expensive for any new pools of multipoolers to be attractive, compared to an existing single pool - the need to have at least x amount of pledge to optimize rewards for delegators. Also nothing is stopping me from creating 100 pools with different ticker symbols today at 500 ada a pop (it's a deposit, I can get it back), it's whether I can fill those pools with enough stake so they pay for themselves that matters...
Nkt
I already said no to that. I'm here to learn for myself.
HomerJ (AAA)
Also it's probably easier to discuss one parameter at a time than all of them plus some new ones (like pledge-fraction-variable from CIP 50). So minFixed fee of 340 basically mean a new pool created by a new Cardano enthusiast - unless it starts operating with several millions of ada delegated to it, will provide inferior ROI for any delegator looking for a new pool compared to pools with 10m+ stake, just by virtue of 340 ada being a big chunk of reward pot that a pool making 1 block per epoch (or per x epochs) earns using current epoch reward pot. We're talking 2% vs 4% sort of differences, and most existing wallets will reflect this reality in there UI / rankings etc.
k parameter controls saturation point and vaguely is a number of optimal pools the network should converge to in hypothetic future... there were close to 1000 pools registered a month into mainnet (and we had over 1000 pools on Haskell testnet prior to Shelley launch) yet IOG went with 150... later increased to 500 (and their subsequent blogpost with analysis suggested that this bump up did decentralize things somewhat) and stated they were going to increase it further - after smart contract rollouts perhaps, but here we are. Imho setting it to 1000 is perfectly fine, given there are something like 1100 pools making at least one block per epoch (so actual number of up and running and functional pools is probably 1.5-2 times that, I have some stats on that I shared with Michael in our private chat). The only negative side of k increase is delegators that don't pay attention or are unable to act in a timely fashion might get reduced rewards for some period of time - and any big entities need to decide whether they need to create more pools or stake elsewhere.
Nkt
One thing that I've noticed in the "retirement" messages from closing pools is that they've often not minted blocks in a very long time. This has caused issues with the rewards available.
HomerJ (AAA)
Dang. Wish discord inserted some space between my two blurbs.
Nkt
There you go
HomerJ (AAA)
Time between blocks on average for a properly configured pool is just proportional to the amount of active stake a pool has. Yes there are some crazy variances with the leadership slot lottery sometimes (you can have pools with 45% luck for five epochs in a row, or 150% luck for five epochs in a row) and it's particularly not fun if you just started a brand new pool I can imagine but that maths is pretty fair to everyone.
(as a small aside, in their relatively recent blogpost professor Aggelos mentioned that their original simulations didn't take into account multi pool entities properly. Also that their simulations somehow led them to believe pledge effect setting is working as expected as far as deterring multipool splitting practices etc - but we can see that's not really the case today -  in part why Michael decided to write his CIP). I think pledge effect parameter (third one from my brief brain dump/summary) is probably best described in CIP itself so I won't say much about it... (apart from that pledge of zero vs pledge of 50,000 ada doesn't make much visible difference in delegator rewards today)
Did they end up creating some channel on IOG discord for CIP related discussions btw? I mentioned the idea to them a while back and I thought they agreed it might be worthwhile
Nkt
I don't see a CIP discussion area. Who were you talking to? (Please don't say me!)
Korlat
I'd much rather see the critique addressed or listed as a trade off. every protocol will have it's trade offs, this is why fully pledged pools generate more rewards, not because we want to give the wealthiest additional revenue, but because it adds the necessary incentives to the system for decentralization
Michael Liesenfelt
Your critique about the consequences of the current incentive system is addressed in the introductory "Motivations" section. There are Sybil MPO's with more stake than IOG earning more than IOG on fees and margin. CIP-50 replaces incentives with enforcement. "Necessary incentive for decentralization" has failed to deliver.over the last 1.5 years so now CIP-50 exists.
havealoha
If @CardanoFoundation  doesn't add channels for technical conversation and debate, we will lose channel members due to the general channel being to loud and chaotic.
Korlat
and in replacing incentives with enforcement you open the system to being run by a few massive whales, but you seem incapable of addressing this criticism directly, instead making vague/broad statements as a politician would. I thought the point of CIP-50 was to hive mind a better solution, how does pretending like a problem doesn't exist help get you there?
Michael Liesenfelt
Sigh. True. Ok, I'm trying to wrap my head around: What is this 'new' attack that doesn't currently exist right now. I cannot figure that out.
If the goal is 10B in stake under the current system you need 150 pools registered with 10k pledge in each to 'look' nonzero That is 150( 0.0105M )= 1.51M
If the goal is 10B in stake under the current system you need 150 pools registered with 100k pledge in each to 'look' good. That is 150( 0.1005M )= 15.1M
If the goal is 10B in stake under CIP-50 leverage enforcement with L=100, 10000M / 100 = 100M required.
L=50 would require an attacker to pledge 200M.
Is this specific enough? Am I missing something? Why is it harder to accumulate 10B in stake with charisma and branding now than it would be under CIP-50 leverage?
morgan.thomas
I think maybe the push back on CIP-50 here is coming from a perception not that it's a step backwards necessarily but that it doesn't solve the problem. Showing it doesn't make the problem worse isn't a high enough bar for acceptance. It needs to solve the problem. Maybe that's where people are coming from. I'm not a blockchain protocol engineer and I haven't read the CIP, so this is just my take from following this thread, @Michael Liesenfelt .
Korlat
Leverage isn't enough on it's own, a single entity could pledge 200M and run every stake pool in your system and satisfy the leverage requirement, would that make it decentralized? In contrast, there is no optimal public pledge in the current system, a single whale could not simply take 200M and spread that pledge among k pools and be at worst equal to every other pool in the system.
Michael Liesenfelt
True. I should also point out many MPO's make lots of ADA from the current system and may not have enough skin in the game pledge under a CIP-50 system. Sybil actors will be financially incentivised to FUD CIP-50.
Michael Liesenfelt
My prior example with numbers holds. CIP-50 has a yield ceiling, everybody can get to the same yield, just not the same delegation size.
Korlat
the more delegation you can accommodate, the lower the relative effect of your hardware costs, the lower you can set your fees, the more attractive your pool is, this is why max pledge pools will be the best in your system. I'm not sure what you mean by "holds" here, to me decentralization isn't something to be traded off to make everyone's yield more equitable, especially when in the long term this is possible through lowering a0
Michael Liesenfelt
Yes! CIP-50 lowers a0 all the way, zeros the incentive, then adds back in Sybil pledge enforcement. You are getting warmer, that is it!
a0 raising and lowering is included in the "Motivation" section.
Korlat
Based on your response I see further discussion will likely not be constructive. I hope you become open to seeing the shortcomings in your current proposal since without being able to do so it will stop improving. As mentioned by Aggelos in the blog KtorZ linked on your proposal, a system like yours was considered, but "a few large whale resource holders may end up influencing the consensus protocol in a very significant manner, possibly even beyond its security threshold bound." Perhaps you and others will be able to work through this issue after you admit it exists
06/19/2022 ---------------------------------------
Michael Liesenfelt
I will add you to the opposition list. What is your pool name?
Who are you?
morgan.thomas
@Michael Liesenfelt , I see here an opposition not to the idea or to you, but to how you are going about this problem solving process. To say that it needs improvement is different from being opposed. It's important to keep such distinctions in mind so as not to erode people's good will. Nobody is being forced to work on Cardano or participate in this conversation. The people who work on Cardano are free to ignore people's suggestions. Asking for people's names and wanting to put us on a list of opponents and messaging us on a weekend in a channel that is not meant for this purpose is all coming across as a tad too aggressive to me. I don't even work at IOG and that's how I feel.
Korlat
appreciate the thought morgan, I should probably be careful about messaging people on the weekend as well. As for the list, I have no desire to be part of one, I simply want to participate in the discussion, the topic is important to me
Nkt
This is also what I see. The proposal doesn't improve anything at all, and so why should it be done? All it is is a risk to the existing order, which is currently working. Why I am here is to try to find out HOW it improves things, and in what way it would actually improve the network, day to day, or if, perhaps, there's an edge case where it will help greatly. But currently, I don't see it helping, I see it making things worse.
Michael Liesenfelt
Sigh. I am being a bit heavy.
I agree that side-channels are necessary here.
We are trying to be a Linux-style open source project here after all.
Recording opposition is important for open source transparency. I'm not trying to ignore korlat, hide, isolate opposing viewpoints. The best thing to do is post on the GitHub pull request conversation thread for all to see. Discussion here isn't optimal, it should be debated in a CIP-50 channel here.
For all I know @Korlat could represent a Sybil MPO with a vested financial interest against CIP-50. Not all intentions are selfless.
Nkt
Recording who is on which side would make no difference - no-one shilling for an MPO-in-disguise is going to just put that in their public profile. "Oh no! We would have brought down Cardano, if it were not for me posting that I was an MPO with 45 squillion ADA staked!"
Michael Liesenfelt
So @Nkt , you "work for IOG". Who are you?
Sigh. I'm also under a ton of stress and responsibility. I don't have the time to one-on-one teach CIP-50 when they haven't read it and slept on all the pull request comments for a few days.
Sigh. I don't want to rehash large stakeholder ROIC charts with @Korlat . It is on the pull request conversation thread. Prometheus Pool beat you to that critique, and it has already been discussed.
rphair [COSD]

The best thing to do is post on the GitHub pull request conversation thread for all to see.

For other CIPs discussed on the Cardano Forum, an approach that's worked out well has been: after the discussion seems to have hit all major points for & against, for the CIP author to digest those out-of-band discussions & post them back on the PR discussion thread...

Discussion here isn't optimal, it should be debated in a CIP-50 channel here.

... but this has only worked because those Forum discussions had their own channel.  For this reason I will second Michael's motion to @CardanoFoundation that the moderators of this Discord be allowed to create CIP-specific topic channels, and start with CIP-50 which will be a great test of this method. 🧐
HomerJ (AAA)
Oh geez, proposal doesn't improve anything at all, can you support your sentence with some evidence?
It's a risk to existing order - eh, what? Again, evidence to support your claim?
I spent a chunk of my time explaining a few things based on my experience/understanding of things, least you can do is provide some shred of detail..
HomerJ (AAA)
Can you please describe in a few sentences what you think these few large whales will do exactly if CIP 50 were to come into effect vs what is the best they can achieve with today's parameters?
Nkt
If it didn't affect the existing order, what's the point then? What will it improve if it doesn't change it?
The onus is on the person wanting the change to explain what is wrong currently, and their solution, as well as considering the risks to an already working system.
HomerJ (AAA)
I have no idea what you just said... I asked you for evidence how it's a risk, you answered with 'what is the point of this CIP if it doesn't have any effect' (which it does). lol
I'm desperately searching for some arguments to respond to. It still sounds like you haven't read the CIP or if you have maybe you're happy with current decentralization state of Cardano so anything that's suggesting tweaking some parameters scares you by default.
HomerJ (AAA)
https://iohk.io/en/blog/posts/2021/03/04/not-long-till-d-0-day/ please familiarize yourself with this blogpost from IOG from March 2021.
IOHK
Not long till 'd' (=0) day - IOHK Blog
We are fast approaching full decentralization of block production on Cardano. It's a good time to reflect on the network’s evolution
Not long till 'd' (=0) day - IOHK Blog
HomerJ (AAA)
I tried to break down the sequence of steps mentioned in the CIP into smaller actions (e.g. lowering of min fixed fee, adjustment of k, and finally the pledge effect change proposal that Michael came up with) so that you could voice your concerns about some particular step (or maybe say 'i don't understand what this step achieves exactly / how it makes things better').
Nkt
I understand you don't understand. It is simple.

Oh geez, proposal doesn't improve anything at all, can you support your sentence with some evidence?

No, that's your job, it is your proposal.

It's a risk to existing order - eh, what? Again, evidence to support your claim?

If you're proposing a change, you need to lay it out clearly, and explain what effect it has on the already live working system. If you say it has no effect on the 3000+ SPOs already in the system, then what effect does it have? If it has no effect, what is the point of your proposal? If it has an effect, lay it out.
Currently, this feels like I'm arguing with a denier of evolution, who is demanding I disprove his claim "god did it".
HomerJ (AAA)
You're causing me a lot of mental pain right now 😂 I still don't know if you read the CIP, and if you did - what you have trouble understanding in it exactly... do you have any questions? Concerns? Things needing clarifying? But it's 2.20am and I'm going to sleep on it.
Nkt
I shall go and Re-read the whole of CIP-50 in the morning.
Alexander [NASEC]
I'd be thrilled if you can explain your concerns. Much like Homer I don't understand from everything you have said exactly what problems you see with the proposal?
Nkt
The issue I don't understand is how it will actually help anything. A fake small pool will get the same gains as a true small pool. So what stops a bad actor doing many smaller pools to win? In the same way we cannot know who is a multipool now, we still won't know in future, if the limits are smaller, or the entry requirements lower, or the parameters changed.
George [APEX]
he will not win anything by creating many small stake pools, because the delegation limit will be the same, based on the pledge amount.
Korlat
In today's system large whales can just just fully pledged private pools to receive an increased yield. They could potentially try to run public pools for even greater yield but there is no optimal strategy for doing so (no optimal pledge amount), they have to constantly adapt to the market and there is an opportunity cost to trying the public pool strategy (missing the increased yield from fully pledging private pools).
In CIP-50, large whales have no option to run private pools for increased yield, they can either pay a fee to delegate to someone else's pools, or they can run their own pools to avoid a fee and benefit from economies of scale on hardware cost. In the case they choose to run their own pools they max pledge/delegate to as many pools as they can fill, leaving one left over where it is not fully delegated. The marginal cost of running this additional unfilled pool is smaller than the cost of a non-whale operator who only runs a single max pledged pool due to economies of scale, so the large whales can afford to charge lower fees to delegators. As delegators fill the low fee pool the large whale can reorganize the massively liquid ada in her pools (since the vast majority of it is not pledged) to open another pool. The marginal cost of this next pool will be even smaller than the previous one, allowing for even lower fees to be charged to delegators. This is in contrast to the current system where opening additional pools often means lowering pledge of existing pools in order to pledge the new one, lowering the rewards delegators receive.
This leads to a constant financial pressure on the system for delegators to delegate to pools run by large  whales who can charge the lowest fees due to economies of scale. This is a problem with having an ideal pledge for public pools, once you've achieved the ideal pledge the only financial differentiator is fees, which economies of scale will allow you to lower. The current system avoids this by having a linear pledge benefit all the way to pool saturation, there will never be an ideal pledge that results in economies of scale/fees being the only financial differentiator.
Nkt
Exactly!
CIP-50 doesn't help at all, and can only result in harm, as I see it. The whales can just spool another pool and fill it to the optimum level for maximum benefit to them. Reducing the size of a pool maximum doesn't affect that at all, they just make more pools, and tune them all to the optimum. Nothing is gained for the network, and it is an overall nothing, at best. At worst, it simply increases the take of those who can run the higher number of optimally tuned pools.
06/20/2022 ---------------------------------------
Michael Liesenfelt
You two @Nkt , @Korlat  should work together, get GitHub accounts, and pick up where Prometheus Pool left off discussing 'pool moguls'. Incorporate his previous words, your words and ideas here now, then upgrade from qualitative descriptions/arguments to numbers and charts. Determine which chart and figure of merit best burns your point into all reviewers. Criticise my prior large stakeholder ROIC discussion and charts.
One thing I caution you to pay attention to is the perfect yield number an average delegator would expect AND the 1 standard deviation normal uncertainty of yields on Cardano. Once you start doing math and making charts you are about to discover that the basis points of pledge incentive or the basis points of fees is totally overwhelmed by the uncertainty in basis points for the average community delegator. CIP-50 exists because the RSS pledge incentive is statistically unnoticeable to average delegators thus MPO's proliferate.
Then, look at the stake vs leverage chart of the Cardano community and the yield vs Saturation chart. Draw what you think the ideal stakeholder region and yield curves should be to avoid all the problems you see.
Korlat
If you want to ignore what I've pointed out because it doesn't come with a chart then feel free to do so, I have no interest in creating charts for your proposal, nor do I think they would provide any additional insight to this issue.
 For many Cardano is a long term investment, many people have been staking for almost 2 years already and plan to stake for many more. Even at current k there are plenty of pools where delegators could move to in order to earn statistically significant benefits from pledge/margin, and the magnitude of the financial incentive will increase as k does assuming pledge remains static (as it will for non-pledge splitters).
The real problem currently is people continuing to propagate the misguided notion the pledge is only significant for nearly max pledged pools. Sure, if you decide just look over the course of a few epochs, randomness will overwhelm anything but nearly maxed pledge. If on the other hand you're planning to stake for years (like a significant portion of the ecosystem is) then there are plenty of opportunities, even at current k, to earn significantly more rewards by selecting pools based on pledge/margin.
We need better tools for the average delegator to rank/compare the expected rewards they would get from stake pools, and we need to stop propagating the falsehood that pledge is meaningless unless it's nearly maxed, ultimately propagating that has become a self fulfilling prophecy.
Michael Liesenfelt
I'm trying to encourage you to upgrade from qualitative descriptions and opinions to numbers, quantities, and facts.
Why? Because Sybil actors will have a strong conflict of interest financial motivation to FUD CIP-50, including IOG. Are you the first of many Sybils?
CIP-50 is trying to create a situation where IOG and all large stakeholders won't be punished or yield disadvantaged for dividing delegation across many pools to directly benefit decentralization. Also, at the same time securing the market competitiveness of the smallest pools.
CIP-50 is based on the paradigm that the RSS paper by the IOG research team contains a peer reviewed flaw (Ignoring MPO operators) hindering Cardano decentralization. 'Aggelos said' is not good enough here. Are you on the IOG research team trying to uphold the ego and honor of the RSS paper paradigm?
06/21/2022 ---------------------------------------
Korlat
As I've already said, feel free to ignore what I've pointed out, we all have limited time and I don't intend to spend mine making charts for your proposal. I also don't intend to spend it trying to have a discussion with someone who is only interested in finding reasons not to engage with the points I'm making, I was only trying to explain my thought process to Homer. So whether it's because there isn't a chart, or I could secretly be an MPO, or because I quoted Aggelos to show I'm not the only person that believes your proposal is susceptible to control by whales, or because I'm secretly protecting the ego of the research team, feel free to pretend like I haven't said anything at all.
Michael Liesenfelt
I think you repeated many times what Prometheus Pool already said many times. Give credit to and cite Prometheus Pool before building original criticism.
https://github.com/cardano-foundation/CIPs/pull/242#issuecomment-1094533748
GitHub
CIP-0050? | Shelleys Voltaire decentralization update by michael-li...
Full Document: English, Español, 官话 Chinese
Improving decentralization is absolutely necessary for the long term health and growth of the Cardano ecosystem. The current reward formula has resulted ...
CIP-0050? | Shelleys Voltaire decentralization update by michael-li...
Also, this post contains a potential solution to your criticisms. I haven't had time to really dive into this one yet, but it may provide fairness and Sybil defense all in one:
https://github.com/cardano-foundation/CIPs/pull/242#issuecomment-1100884321
GitHub
CIP-0050? | Shelleys Voltaire decentralization update by michael-li...
Full Document: English, Español, 官话 Chinese
Improving decentralization is absolutely necessary for the long term health and growth of the Cardano ecosystem. The current reward formula has resulted ...
CIP-0050? | Shelleys Voltaire decentralization update by michael-li...
Nkt
Wait. You "haven't had time to really dive into" that one? You didn't write that then? It's got your name on it!
Michael Liesenfelt
Since I posted that comment in April my mind changed. It would be nice to have a leverage based pledge enforcement for Sybil defense that got more restrictive as pool size grew, however as an attacker I realized (with some difficulty) I may be able to create a custom version of cardano-node which could create blocks for many keys/pools not just one. Let that thought bend your mind for a second ;-) N numbers of pools within nearly a single memory footprint.
So, linear pledge enforcement isn't terrible and would be solid/simple. Cardano network diversity would reflect stakeholder diversity.
Then I also realized I had made a biased form of the fair egalitarian equation. Large pools could be linearly disadvantaged by a nominal small fee percentage so even large stakeholder wouldn't gain any yield by operating their own pools. However there are a few large exchanges like Binance who are not pledging and losing far more than a fee percentage currently! So making Binance's yields fair but 3% less than a 10M stake pool wouldn't be terrible for them. It wouldn't be perfectly fair and it wouldn't pass a Voltaire-style stake weighted vote though, so a 'benevolent dictator' (IOG/CF/Emerging) would have to impose that large pool bias before Voltaire voting.
CIP-50 currently added Sybil defense for the first time and provided for bias limitation to between 0% (biased) and 5% (egalitarian) across a range of 0 to 68M (k-based saturation).
Nkt
So please explain how this enhances anything? The smaller pools ramp down their profitability as they get bigger? That's the plan? They already can't make enough to keep going with the prices low.
The optimum pool currently has 68m ADA, beyond that rewards drop rapidly. What does the optimum pool size look like under CIP-50?
06/22/2022 ---------------------------------------
Michael Liesenfelt
optimum: 1/21600 < sigma < {1/k and L*lambda}
06/24/2022 ---------------------------------------
Nkt
Would CIP-50 affect the "Block Drought" that smaller pools complain about, where they fail to mint blocks for a long time, and so lose stake? e.g. https://twitter.com/earncoinpool/status/1539960390909665280 ?
Las
@zygomeb
zygomeb
Self-election mechanism works the same way under CIP 50 so they can still have periods of no blocks
also I'm on vacation don't @ me 😩
Nkt
I think with more pools, and the same block structure, that drought would get worse.
Michael Liesenfelt
CIP-50 does not alter block production probability at all. Stake/Total_Stake * 21600 is the probabilistic block production per epoch for all pools. It is independent of total pool count and totally dependent on your stake per your pool.
Nkt
So it wouldn't have any effect. Interesting.
06/27/2022 ---------------------------------------
KtorZ
I'll go through the thread above and try to make a summary to post on the PR, if that's okay for everyone involved.
Also, Reza (new blockchain researcher working at the CF since May) has got a look at the proposal and had a few constructive remarks to make. I'll see if he has any time to share that tomorrow or this week.

Also, please find here some additional feedback from Gholamreza Ramezan, PhD_, Blockchain researcher at the Cardano Foundation who I poked about this topic :)

Some aspects of the system are not very clear. For example, when a pool operator divides its pool into two pools in different geographical locations, in fact, it somehow has contributed to the architectural decentralization aspects of the system.
Should we create a Sybil cost for it? No.
As another example, if a new pool owner deploys a new pool in the same data centre just beside the other pools owned by others, it has contributed to the political decentralization, not architectural decentralization.
Should we give the pool owner full credit for decentralization? No.
Regarding the new formulation, we need to reach an agreement about quantifying the blockchain decentralization level. Then, we need to introduce a decentralization metric which shows how to measure whether a given pool is contributing to the decentralization. Then, we make the leverage parameter L proportional to (Nakamoto Coefficient * Pool Distance), where the pool distance shows how much a given pool contributes to the decentralization based on the decentralization metric.
However, I believe the bigger problem here is our approach to finding a solution. Our discussion is looking for a solution for different challenges. We cannot achieve the best solution for different challenges at the same time. Improving the blockchain decentralization (politically, administratively, …), bringing fairness in the reward from pool owners’ perspective, or being fair from delegators’ perspective are different challenges. We can find the best solution separately. But, considering all challenges, we can find only optimal solutions that partially satisfy the challenges.
The next problem is the robustness of the proposed solutions against future unseen scenarios. The pool owners' and delegators’ behaviour are mainly a function of ADA price (except for non-rational ADA holder). The price of ADA is freely determined by the market which is affected by political factors. Therefore, the reward mechanism should be able to adjust the reward according to external factors while true decentralization is still guaranteed.
In the discussion on April 14, when people on this post dealt with a challenge, they quickly added a new parameter to the model. We cannot add a parameter to our formula whenever we deal with an unknown issue. More importantly, our suggestions for the formula are mostly linear or a second-degree equation. We have to avoid this manual modelling process. I believe we need a different computing model to find the optimal solution and be able to respond to the changes in the environment dynamically while following our principles. I mean something by another computing model such as reinforcement learning. This is an example of a possible approach to finding a solution:

We should determine the principles, e.g.:

Different pools have different limits.
Favour any activity that contributes to decentralization.
Decentralization from our perspective is …..

We have to determine our required parameters such as the minimum and maximum pledge and the minimum and maximum delegation for each pool.

We let our computing model find the optimal solutions by considering all different aspects of the system while guaranteeing our principles.

@KtorZ
Discussion Channel
There was also a mention of the 'focus group' idea which was abandoned after IOG's research declined the invitation to discuss the proposal, pointing out that such an approach had already been discussed and rejected (cf the blog post pointed out earlier).

I'm sorry. We have entered a new open-source reality for Cardano. There will be an inclusive stakeholder focus group. The CIP-Editors team currently has the option to exercise leadership and facilitate CIP specific discussions & meetings (Discord?). Otherwise, a few weeks after Vasil goes live on Mainnet, a focus group will be created independently with Cardano community leaders.

Some facts mentioned in the discussion:

46% of Cardano is non-regulated Sybil/multipool 'pool mogul' operators.

Whales Incentive / Pools Moguls

High leverage sybil pool moguls already exist and compose ~46% of mainnet currently. Low leverage pool moguls and exchanges currently exist, but don't have the option to become single pool operators without significant financial penalty. Many are attempting to become pool moguls right now obviously. Under CIP-50 the cost to become a pool mogul is significantly higher and there is an opportunity for large stakeholder decentralization without penalty. The optimal CIP-50 strategy is to pledge enough to maintain a saturated pool, then pledge more (lower the leverage fraction) to be more attractive in pool rankings. Under CIP-50 nobody gets a better yield than anybody else preventing centralizing bias and allowing for community diversity, competitiveness, and flexibility.
It has been, is, and will still be covered by CIP-50.
Prometheus Pool is Korlat (See Cardano Technical Community Discord). Prometheus Pool / PROM / Korlat continues repeating the same qualitative criticism over and over and over and over. Each repeat does not improve the validity. PROM/Korlat has the option to stong-man a devils advocate attack situation because I don't see an attack. I see the opposite, a reduction of the attack surface. I believe PROM/Korlat has ventured into the realm of non-math FUD.
@KtorZ, be careful not to give legitimacy or resonate the FUD components.

There's a lack of data/discussions around whether changing those parameters could also improve the current situation.

IOG will open source their prior simulation tools used for the RSS paper and further analysis. If this does not occur, the CIP-50 hivemind will create our own. It is likely we will have to create our own anyways but it would be nice to begin with a collaboration.

"and it should be up to the author to champion this, not to the opposition".

CIP-50 is a process of creating a community hivemind without a single champion/leader/dictator/monarch. All authors have a self-criticsm bias, including me. The opposition should justify opposing scenarios.

Also, the methodology itself for evaluating the solution is being debated. It isn't clear to some that the proposal is indeed improving the situation since there's no agreed-upon methodology in place to compare the two solutions. In particular w.r.t to social behaviours and interactions. This is equally true of the current system although the current system has the advantage of being observable under real market conditions.

CIP-50 has provisions for a competition of many equations and many parameters with many actors quantified by solid figures of merit (k-effective, MAV, Sybil-coefficient) to reach a solid conclusion.

Gholamreza Ramezan: Some aspects of the system are not very clear. For example, when a pool operator divides its pool into two pools in different geographical locations, in fact, it somehow has contributed to the architectural decentralization aspects of the system.

It is necessary to consider the stake of entire groups pledged or delegated into one or more pools. It becomes more clear once you've abandoned the RSS-paper legacy paradigm of 1 entity 1 pool.

"in the same data centre just beside the other pools owned by others, it has contributed to the political decentralization, not architectural decentralization."

There is:

decentralization of stake and block production.
decentralization across autonomous systems (AS's) and ISP's.
decentralization across countries and national alliances/unions.

Cardano is a Proof-of-Stake consensus blockchain so decentralization is based on stake. Adding autonomous systems (AS's), national boundaries, or national alliances to the L1 ledger is beyond the scope of CIP-50. I encourage you to draft a new CIP to justify adding this type of information to the L1 to enhance consensus similar to the Minotaur PoS-PoW hybrid work.

"we need to reach an agreement about quantifying the blockchain decentralization level. Then, we need to introduce a decentralization metric which shows how to measure whether a given pool is contributing to the decentralization."

As stated in CIP-50 the combination of: k-effective, k-effective vs k-parameter, Nakamoto Coefficient / MAV, and Sybil fraction would be adequate. These figures of merit were not included in the original RSS research paper.

However, I believe the bigger problem here is our approach to finding a solution.

That's right! CIP-50 is a process, not just a proposal. Cardano Foundation, IOG, and all stakeholders should ideally participate equally to avoid another centralized peer reviewed mistake. I will be personally disappointed and sad if IOG/Blockchain Technology Lab chooses not to participate.

The next problem is the robustness of the proposed solutions against future unseen scenarios.

The current equation has proven to fail against future/current unforseen scenarios (46% sybil multipools, ISPO's, exchanges, nationstates?, benevolent large stakeholders, malicious large stakeholders ). CIP-50 was intentionally designed to be very simple, unlike the current RSS equation. Most of my 'motivation' section was dedicated to including content which was not in the RSS publication.

"I believe we need a different computing model to find the optimal solution and be able to respond to the changes in the environment dynamically while following our principles."

Yes. CIP-50 includes a couple sections on how many future equations should be evaluated and bench marked. The path to active includes an open source equation competition.
I hope, I hope, I hope IOG will open source it's prior computational analysis methods and participate in a new community research paper, or I will personally lead the effort to craft an adequate simulation suite to consider all equation forms to compose an independent research paper for journal review. This is not my first choice because it would be embarrassing and divisive.

I believe PROM/Korlat has ventured into the realm of non-math FUD.

Do you disagree that your proposal has an optimal pledge value for running a public pool while the current system does not?
Do you disagree that economies of scale will enable people running more pools to pay cheaper per pool hardware costs, enabling them to charge lower fees?
Do you disagree that since whales can have cheaper per pool costs due to economies of scale there is financial incentive for them to run their own pools instead of paying a higher cost in fees to people who run less pools? This is in addition to the further financial incentive from potential fees collected on delegation
Do you disagree that being able to charge lower fees puts financial pressure on delegators to seek out entities that run many pools and benefit from economies of scale?
Do you disagree that this financial pressure is not present in the current system because there is no optimal pledge for a public pool? If you try to find some "optimal" pledge in the current system, someone else can pledge more and offer a better return, a competition that results in pledge consolidation. Whales trying to compete in such a market also must pay the opportunity cost of the rewards they could have gained from running max pledged pools.
Do you disagree that having financial pressure for delegation to converge to whoever can pay the lowest fees via economies of scale is an existential risk to have in a system whose goal is decentralization?
You say I keep repeating myself, but when have you engaged with any of these points and told me what you disagree with or don't understand, instead telling me I need a chart, or apparently now just classifying these points as FUD.
I would encourage you to keep in mind that your argument that the state of the current system "proves" it doesn't work is not exactly a robust way to analyze a social system with parameterized incentives. Incentives are critical in the long run, that's why the incentives in your system are concerning. You also seem to conflate leverage with decentralization, it should go without saying but, a system with leverage of 50 run by a few whales is not decentralized.

I believe PROM/Korlat has ventured into the realm of non-math FUD.

Do you disagree that your proposal has an optimal pledge value for running a public pool while the current system does not?
Do you disagree that economies of scale will enable people running more pools to pay cheaper per pool hardware costs, enabling them to charge lower fees?
Do you disagree that since whales can have cheaper per pool costs due to economies of scale there is financial incentive for them to run their own pools instead of paying a higher cost in fees to people who run less pools? This is in addition to the further financial incentive from potential fees collected on delegation

Do you disagree that being able to charge lower fees puts financial pressure on delegators to seek out entities that run many pools and benefit from economies of scale?