IOHK Sets Parameters For Cardano’s Shelley Upgrade And Rewards

IOHK sets parameters for Cardano’s Shelley upgrade code on June 30 as the testnet remains on schedule, defining them which will determine the rewards for ADA holders and the operators of the stake pools as we are reading more in our Cardano ADA news.

Based on the current ADA price and the further assumptions, IOHK expects another big return of investments on 6% or 6.5% for stake pool operators. As per the product manager of IOHK Aparna Jue, the release of the Cardano Shelley code in the public testnet on June 30 remains on schedule. The Hard Fork Combinator was released in the public testnet this week and numerous tests in the networks which were successful so that another release candidate was selected. Jue reported that they were defining solid parameters for the Shelley network and that the behavior is controlled by about 20 parameters for which IOHK sets values before even the mainnet is launched.

As Brunjes outlined in a new blog post, most of the parameters are technical in nature and that they don’t have a huge impact on their users’ experience. Some parameters have a huge influence as they determine the degree of centralization of the entire ecosystem as well as the profitability of the delegation of the stake pool. Their optimal settings is crucial for the success of the Shelley mainnet:

“Cardano incentives have been designed to encourage an equilibrium with k fully saturated pools, which means that rewards will be optimal for everybody when all stake is delegated uniformly to the k most attractive pools. The higher k chosen, the more decentralized the system becomes. But a higher k also leads to a less efficient system (higher costs, more energy consumption) and lower rewards for both delegators and stake pool owners.”

In order to create a balance between decentralization and the rewards for operators of stake pools as IOHK will initially set the value at k-150 and then increase the value. This will ensure that the system is efficient and stable because it can grow gradually over time to get even more decentralized:

“The number of 150 stake pools of roughly equal size makes Cardano an order of magnitude more decentralized than any other blockchain. And this is only the beginning. There is no reason why there could not be thousands of stake pools in the future.”