Proposal Cardano reduced fees by 55% but in exchange came with an impact on small investors

A new resolution on the card network ( Cardano ) proposes to reduce minPoolCost from 170 ADA to 75 ADA , removing Plutus's credit limit change, an issue that prompted SPO operators to oppose previous resolutions.

This proposal eliminates the voting requirement, one of a series of obstacles that are currently awaiting approval and each state will continue to set its own announced fees.

Delegators in small pools may lose their prizes at an epoch that receives almost all of the fixed fees before ratios are calculated. Meanwhile, operators who rely on these fees as income and those with smaller ratios face already irregular block production

A lower floor would open up space for more price competition, leaving each operator to decide whether or not to use it.

There are still questions about the prize.

The previous proposal to capture the fee reduction coincided with an increase in Pluto's memory limit and expired on September 1 after approval ratings from DRep stood at 68.6%, higher than the 67% required, and the Constitutional Committee approved 5 out of 7 people.

However, only 34.5% of the stake holders voted in favour, which was below the 51% threshold. The inclusion of a limited liability issue meant that an SPO vote was required for this type of joint proposal.

A separate proposal filed on September 11 changes only the value of minPoolCost according to a database. The parameters of the card are listed as economic parameters that must be approved by DRep and the Legislative Committee, but do not have an SPO rating when changed just once.

That's the path forward for this kind of change. The DRep vote and committee remains a defining indicator as to whether it has passed, while executives still debate its economic impact.

I don't know what to do.

According to DRepTalk's vote count data recorded on September 23, the approval rating of the new proposal was 11.7% for a stake in DRep that voted against the 67% requirement. The committee approved 2 out of 7 people, or 28.6% versus 66.7%.

These numbers may change before the end of voting in period 661 on October 11th. The fixed standard value of each pool will be deducted from the initial prize in each period prior to March, with the remainder distributed according to a stake ratio.

If an offer is made, the operator may declare a fee of 75 ADA and then continue to charge 170 ADA , or maintain higher fees. The securities issuer will benefit only when the amount with which the prize is divided actually reduces the fee.

A clear example is a small pool that gets an initial prize of about 300 ADA from a single block where the fixed fee is 170 ADA . About 57% of the prize will be withdrawn before it's calculated, but if there are 75 ADA , the ratio will remain at 25%.

If the operator who calls 170 ADA chooses to use 75 ADA , at a time when there is enough prize, there will be money left over before the margin increases to 95 ADA .

Lessons from the previous fee reduction

An important point to note is the operator's reaction to this recent reduction in pay. A study by Input Output Research found that after a minimum credit card value was reduced from 340 to 170 ADA in October 2023, the cost of 340 ADA , still remains the most advertised level for all sizes of cards used

Charge 170 ADA becomes the second level used by small challengers, reducing before expanding price options but not causing a move to a new minimum charge across the network. Past charging behaviour makes response to ladder 75 ADA unpredictable and changing just one parameter won't touch declared charges

Reducing the risk of small incidents has a cost to operators.

The same study grouped pools with a 36-year window (548 58 583) and sustainability criteria associated to stakes of 3 million ADA and an accumulated prize pool of 5,500 ADA . It was found that there were 627 active pools in the lowest category, alongside 246 small pools which had sustainabilities and 741 pools whose stakes ranged from 3 million ADA upwards.

A single person or organization can control several pools, so the total number of pools alone cannot tell whether ownership is distributed more widely.

If the fixed fee is reduced, the remaining prize for distribution will be higher but operators have to sacrifice some predictable revenue. This exchange is most severe in pools that generate irregular blocks and operating revenues are already somewhat low.

Proponents of the proposal note that lower fees may help smaller pools attract stakes, and explain that as a temporary step towards broader fee reforms, future capital allocations and operator incomes will be an indicator of whether or not low fees can actually make these pools sustainable.

The issue of overall prize support for the cards was also outside this vote, as business fees covered less than 1 percent of stake prizes in the '73s. Reduced costs therefore changed only who got a share of the prizes at reduced rates.

The test of this edition is the question: Will DRep and the Board score their requirements by October 11? If passed, the next test will be the conduct of the operator.

The measured benefits to the issuer will depend on how often those funds are actually rewarded and whether the remaining income is sufficient for independent operations.

This article was translated and edited by CryptoSlate