If you are delegating your Cardano (ADA) to a stake pool, it's important to understand how the pool's performance can affect your returns. In this article, we'll explain three key terms that can help you understand your stake pool's performance: assigned blocks, estimated blocks, and pool luck.
Assigned Blocks
A block that has been assigned to a stake pool by the Cardano blockchain protocol to be included in the epoch. An epoch is a fixed length of time in the Cardano protocol, during which a set number of blocks are produced.
Estimated Blocks
An estimate of the number of blocks that a stake pool should have during the current epoch. This estimate is based on the amount of stake that is delegated to the pool and the overall stake distribution within the Cardano network.
Pool's Luck
The percentage of blocks that a stake pool was/will be able to successfully produce and include in the blockchain compared to the number of blocks that it was estimated to produce. This percentage is calculated by dividing the number of blocks that the stake pool actually produced by the number of blocks that it was estimated to produce. A higher percentage indicates that the pool had good luck and was able to produce more blocks than estimated, while a lower percentage indicates that the pool had less luck and was unable to produce as many blocks as estimated.
Orphaned Blocks
Another thing that should be considered and affect the block produced by the pool is called orphaned blocks which caused by "slot battle" and "height battle". In Cardano blockchain, slot battles happen when more than one pool is chosen to add a block to the Cardano blockchain at the same time. It's like a foot race where multiple runners are trying to cross the finish line at the same time but only one can win and be recorded as the official finisher.
Only one block will be accepted by the chain, and the other block(s) will be discarded. We called this discarded block the "Orphaned Block". The pool that successfully adds the block will receive rewards, while the other pool(s) will miss out on those rewards. Keep in mind that this is out of the control of the pool operator, it's like a game of chance and luck, like flipping a coin. The chance of winning the slot battle is 50:50.
Impact on Returns
The pool's luck can have an impact on the return that delegators receive each epoch. When a stake pool has good luck and is able to produce more blocks than expected, this can result in higher returns for delegators. On the other hand, when a stake pool has bad luck and is unable to produce as many blocks as expected, this can result in lower returns for delegators.
It's important to note that the luck of a stake pool is largely random and is not within the control of the pool's operator. While a pool's operator can take steps to optimize the performance and reliability of the pool's infrastructure, ultimately the pool's luck will depend on various factors such as network conditions and the overall distribution of stake within the Cardano network.
It's also worth noting that the luck of a stake pool can vary from epoch to epoch, so the returns that delegators receive can also vary from epoch to epoch. Delegators should be aware of this risk and understand that their returns may fluctuate as a result of the pool's luck.
Factors Affecting Block Assignment and Returns
The number of blocks that a stake pool is assigned and the corresponding returns for delegators can vary from epoch to epoch based on various factors, including the overall distribution of stake within the network, the performance of the pool's infrastructure, and network conditions.
The distribution of stake within the Cardano network can change over time as more people delegate their stake to different pools or as the amount of stake delegated to a particular pool increases or decreases. As a result, the number of blocks that a stake pool is assigned may also change.
By understanding the concepts of assigned blocks, estimated blocks, and pool luck, you can get a better sense of how your stake pool is performing and how this might impact your returns as a delegator.
It's important to note that, while the luck of a stake pool can affect returns in the short term, in the long run the overall distribution of stake within the Cardano network tends to remain relatively stable. As a result, the returns for delegators may also tend to be similar among different stake pools. Ultimately, the choice of which stake pool to delegate to may come down to other factors such as the pool's fees, infrastructure, and reputation.