Two elevenths developed contemplations on Cardano's K param in the Plomin Era
The beginnings of trying to understand this not-so-simple param now that the community can vote on changing it.
Just FYI I’m about a level 2 (maybe 3) noob on these topics to please check links for more complete info.
So! The basics!
Cardano is a blockchain and ecosystem of digital infrastructure / apps that are build on top of it.
ADA (the token of Cardano) is the 9th largest cryptocurrency by market cap at ~$34B as of this writing. Although market cap is a pretty terrible way to measure the size/impact of a blockchain and it’s ecosystem.
The Plomin Era is the period of time after the Plomin hard fork (essentially software update to the nodes in the Cardano blockchain).
Before this update a small number of non-profits and for-profits had the deciding power of what updates to make to the blockchain (the roadmap), what principles should those updates stem from (the constitution), and what to do with the big pile of money (the treasury), that can be used to hopefully improve the blockchain and ultimately all the valuable/useful applications people are/will build on top of it.
Now after the Plomin hard fork much of that power is in the hands of any person that holds the ADA token (which most people could buy on their phones right now). A important thing to note is that the more ADA you have the more voting power you have. So money = power? Although sounds like there are some ideas to change that.
A stake pool is a computer node in the network that produces or validates other’s blocks (so processes transactions and executes smart contracts (basically computer programs)). (source)
A key problem in blockchains is: how do you ensure that the nodes in network are legitimate and are not running some malicious code? Well you can have all or many of the other nodes in the network validate that the last block produced by a particular node was legit by checking its hash. That great but what if I was a bad guy and just span up 51% of the nodes in the system? Then I could pass off my bad code as legit. Well that is where proof of work (PoW) and proof of stake (PoS) come in.
The basic idea is that for every node you spin up, you have to spend a resource such that spinning up many many nodes to take up the 51% of the network would just not be profitable for the amount of money that you would get out of controlling the network. Solving math problems which requires lots of GPUs and power is that resource in PoW systems (like Bitcoin). (source)While many other chains including Cardano use PoS which is having the node operator put in some pledge amount of coins that will be burnt if they are malicious. Also by having other people delegate their coins to a stake pool to get a small amount of interest/reward on their money but if the node operator was malicious then the other peoples interest/reward would be a lot less. Hence folks will only delegate to trusted stake pools. It is important to note the delegator’s coins would still be completely safe inside their wallet and would not get burned. (source)
The K parameter in the Plomin Era
Ok so now we can get to the K parameter which is basically the ideal number of stake pools in the network and is used to determine the max size of a pool by dividing the total supply of ADA 45B - the reserves by K. Remember that a key principle of blockchains is to be resistant to a centralized entity, so setting a max size of a pool makes sense. Currently K is set to 500. So with about 36B ADA in the circulating supply the max pool size is around 72M ADA. (source)
Wait a sec… the ideal number of nodes in a global, supposedly “decentralized” blockchain is set to only 500?!?
That was my reaction at first and second and I’m getting around to third but I’m starting to understand this is a far, far, far, far, far, ... more complicated topic than just “bigger K means more decentralized”. It has also been debated about for many years.
However now that we are in the Plomin Era, any holder of ADA can propose and vote on changing this value. In that particular example it seemed like the proposal was too vague but you can bet that there will be more proposals like it.
Although as established stake pool operators are very influential in the ecosystem because they have a large pool and an audience they are likely to get a lot of voting power delegated to them. Then a key problem one can imagine is that the stake pool operators will want to keep K low so they can keep their larger pools. Sounds problematic. Although if K was lower they would just split their pools into smaller pools and also there is the valid point to be made that most content and open source code developed by them for the ecosystem is free and having the staking rewards is one major way these folks are able to contribute and still pay rent.
So yes, it’s complicated and guess what? There are close to 2 dozen other params in the protocol which need to be understood to make to a properly informed decision.
Extremely complicated systems which if tweaked wrongly fail and lose billions of dollars put up for a vote by anyone who has (well a lot of ) ADA. What could go wrong?
I do admire the noble principles though and there are proposals of making educational systems that would help folks get a more informed opinion about this.
TODO:
Try to understand all the arguments and motivations of players trying to maintain or change the K value.
Understand how all the other parameters in the protocol affect this.
Look into other blockchains and see how they do or don’t solve this issue.
Look into how this really affects what we mean by the ultimate goals of decentralization.
Conclude how this parameter in blockchains might affect the peoples of this planet as it suffers civilizational instability due to many factors including how the changing climate will affect its inhabitant’s food supply system.