Cardano governance may cut minimum pool fee to 75 ADA

A Cardano governance proposal submitted on Sept. 11 would change the protocol parameter minPoolCost and reduce the minimum stake-pool fixed fee from 170 ADA to 75 ADA. The change is classified as an economic parameter that requires approval by decentralized representatives (DReps) and the Constitutional Committee and does not trigger a stake-pool operator ballot when altered on its own.

Voting runs through epoch 661, which ends on Oct. 11. A cached DRepTalk tally checked Sept. 23 showed yes votes representing 11.7% of counted DRep stake, below the 67% threshold. Two of seven Constitutional Committee members had voted yes, 28.6%, below the 66.7% threshold. Those figures can change before the deadline.

An earlier combined proposal that paired the same fee cut with higher Plutus memory limits expired on Sept. 1. That bundled action cleared DRep and committee thresholds-DRep yes votes reached 68.6% and five of seven committee members voted yes-but it required an SPO ballot because it included a technical change. Stake pool operator support reached 34.5% of counted stake, short of the 51% required for passage.

Cardano’s reward distribution deducts a pool’s fixed cost from its gross reward each epoch before applying the operator margin; the remainder is shared among delegators by stake. The current mainnet minimum fixed fee is 170 ADA. If the proposal passes, operators could declare 75 ADA, continue declaring 170 ADA, or set a higher fee. Delegators would receive a lower fee only if the pools they use choose to reduce their declared fixed charge.

A typical small pool example used by analysts shows a single-block gross reward of about 300 ADA. At a 170 ADA fixed cost, roughly 57% of that reward is taken as the fixed charge before margin and distribution. At 75 ADA the fixed charge would be about 25%. If an operator reduced the declared cost from 170 to 75 ADA in an epoch with similar rewards, roughly 95 ADA more would remain for margin and allocation across delegators. Individual gains would vary by each delegator’s stake share, the pool margin and the pool’s actual rewards.

When Cardano lowered the minimum from 340 ADA to 170 ADA in October 2023, a follow-up analysis found 340 ADA remained the most commonly declared fixed cost and 170 ADA became a secondary tier used mainly by smaller pools. That outcome showed operators did not move network-wide to the new minimum after the prior cut.

An analysis that used a 36-epoch window and benchmarks of 3 million ADA of stake and 5,500 ADA of cumulative rewards identified 627 active pools below both benchmarks, 246 viable small pools, and 741 pools at or above 3 million ADA. The analysis noted that a single person or organization can control more than one pool.

A separate review of funding found transaction fees covered less than 1% of staking rewards over a 73-epoch period. Changing minPoolCost would not alter the total reward pool but would change how rewards are divided among pools that lower their declared fixed fee.

The immediate governance question is whether DReps and the Constitutional Committee will meet their thresholds by Oct. 11. If they do, the next question is how many operators will lower their declared fixed fees and how often those pools will earn rewards sufficient to support operation and distribution to delegators.