In a previous post, I had shared how to quickly decide which pool to stake to by looking at the pool’s Return variables (e.g. return on ADA invested) and by checking if it’s mission (if any) are in line with yours.
That was a very simplified method of delegating to get you started. As you get more familiar with delegating, it is good to know certain other variables like the pool’s saturation level.
So what is saturation and should you take this into consideration when delegating?
Actually, the saturation level is already factored into the computations for return variables (e.g. ROA). Nevertheless, there is more to saturation than just this. To better understand it’s effects, read on.
Saturation in Cardano is a level set by the network where rewards will be capped. This means as more delegators join the pool, the limited rewards are split among more parties. In the end, delegators take home less rewards. At the time of this writing, the saturation level is set at 64 million ADA. This level will eventually be halved to 32 million ADA at a future unannounced date.
Does this mean it’s okay to delegate to any pool with less than 64 million ADA? Not exactly. I personally prefer to delegate to pools with less than 10 million ADA for 2 reasons:
1. Less Monitoring – these pools are very far from saturation and I don’t need to check frequently to see if there is a sudden increase in delegation making them saturated.
2. Support Decentralization – these small pools need delegators to survive. If all ADA holders only delegate to large pools and exchanges, these small pools will close shop and we will be left with a more centralised network with only a a small number of very large pools running. A more centralised infrastructure exposes the network to multiple security and resiliency risks.
How do you check if your pool is saturated? There are two easy ways:
1. From your wallet – the delegation section of the Daedalus wallet will show you the % saturation of any pool once you mouse over the pool name.
2. From pool explorers – use explorers like Adapools.org or Pooltool.io to see the saturation level and active stake of the pool you are interested in.
Now that you understand saturation, feel free to check your current pool and see if it’s time to move to a smaller stake pool. Happy staking!
If you like this article, please consider delegating your ADA to WISH Pool. You will be earning interest rewards while indirectly helping the lives of disadvantaged children. This is because at WISH Pool, we pledge to give at least 10% of our own profit to educational charities so that successful students can help get their families out of poverty.