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Cardano: IOHK will increase parameter k and improve decentralisation

  • IOHK will change the parameter k and will thus influence the staking rewards for Cardano users from December 6, 2020, and in March 2021. 
  • The parameter k will be increased to strengthen the decentralization and to force users to switch to smaller stake pools.

IOHK Marketing and Communications Director Tim Harrison has presented a roadmap of key points in Cardano‘s decentralization. Since the deployment of Shelley, the Cardano ecosystem is moving toward two major milestones in its development: the introduction of decentralized finance and the transition to a fully decentralized network.

This last milestone is part of the last era of Cardano, Voltaire. The introduction of the Catalyst project and the sustained reduction of the d parameter are two factors that move the network towards that goal. However, Harrison has presented a change in another factor that is intended to reward the long-term holders of ADA.

IOHK will increase the parameter k for Cardano

IOHK will increase the parameter k of the reward system. When Shelley was deployed on the mainnet, IOHK started with k=150, effectively limiting pool size at around 210 MM Ada. After monitoring the activity on the network in recent months and observing how the IOHK staking pools operate, the decision was made to adjust the parameter.

However, Harrison also pointed out that k is not equal to other parameters in the Cardano network. Modification of k requires active user participation. Therefore, the users who are staking have to become active and choose new pools to stake their ADA, as Harrison added:

(…) we plan to implement the k change in a staged manner. First, we shall move to k=500 at Epoch 234 (21:44 UTC Sunday 6th December 2020). The move to k=500 will give small- to mid-range pools that are currently struggling, an improved opportunity to attract delegation. It will also have the effect of limiting pool size to 64MM ada, which means over 100 of the largest pools will become saturated. You can redelegate at any point between now and the change.

Based on the above, IOHK recommends that ADA delegates choose new pools to stake, especially if their group has exceeded 64 MM ADA. The recommended period is before or during epoch 233, before 9:44 p.m. UTC on December 6. The users can check the level of saturation of their pool with the Daedalus wallet.

With the change, IOHK plans to ensure that small and medium-sized staking pools will also be able to contribute to the network alongside large operators. Harrison believes that the rewards at Cardano will be distributed “more fairly than other blockchain systems” such as Bitcoin and Ethereum. Ultimately, users will benefit from choosing a new pool by getting higher rewards. IOHK’s Director of Marketing and Communications added:

This mechanism limits the delegation that can be rationally made to any pool and spreads delegated stake more evenly across a larger number of pools.

Furthermore, the k-parameter will be changed again in March 2021 when it is increased to 1000. However, IOHK will maintain an open dialogue with the Cardano community to make decisions regarding this increase. In this sense, Harrison made the following clarification:

And to be clear, no one delegating to an over-saturated pool will lose any of their stake. It is simply that the return on their stake/ROI will be reduced if they remain delegated. We always encourage the community to keep an eye on their delegation choices, and this will be especially important around this time.

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