Cardano Founder Defends Contingent Staking Model Against Critics

Charles Hoskinson, the founder of Cardano (ADA), faces criticism for a proposed contingent staking model for crypto regulation. In response, Hoskinson took to Twitter to address the opposition and clarify why he believed the model would benefit the industry.

I’m still at a loss reading some of the comments on contingent staking. It’s incredible how polarized some people have become to the extent that they can not understand a basic concept and continue to misrepresent it. (1/10)

— Charles Hoskinson (@IOHK_Charles) February 16, 2023

Hoskinson criticized those who failed to understand the basic concept of his proposal and expressed disbelief at the polarized reactions. He stressed that the model does not replace normal staking or private pools. A marketplace of stake pool operators (SPOs) would still exist to allow people to delegate their preferences.

Hoskinson highlighted the dangers of initial stake pool offerings (ISPOs) without entry conditions and contracts prior to receiving customer funds. He also emphasized that SPOs, as optional service providers, should have a say in their business relationships. They are not public goods, contrary to the claims of some opponents of contingent staking.

Contingent staking does not implement a KYC regime on cardano. It does not replace normal staking. It does not remove private pools. A marketplace of SPOs would still exist and allow people to continue to delegate to their preferences, including normal stakepools. (2/10)

— Charles Hoskinson (@IOHK_Charles) February 16, 2023

In a call for reflection, Hoskinson urged the Cardano community to avoid mirroring the divisions in western democracies. In addition, the proposed contingent staking model focuses on the know-your-customer (KYC) practices.

It uses a two-sided transaction certificate signed by both the delegate and the SPO. This allows SPOs to consent to delegation before it occurs. Hoskinson introduced the model in response to the renewed regulatory scrutiny around staking activities in the crypto space.

The regulatory pressure has forced crypto trading platform Kraken to shut down its staking services for customers in the United States as part of a settlement with the U.S. Securities and Exchange Commission (SEC).

The Cardano founder’s proposed model is an attempt to align the cryptocurrency market with regulatory requirements and prevent similar closures in the future.

Contingent Staking: A Solution to Regulatory Scrutiny in Cryptocurrency

As regulatory scrutiny around staking activities increases, the cryptocurrency market is in need of solutions that can ensure compliance while maintaining decentralization.

The proposed contingent staking model by Cardano founder Charles Hoskinson could be one such solution. It would allow SPOs to consent to delegation, ensuring compliance with KYC practices and preventing the entry of bad actors.

It was clearly explained. There was never any discussion of mandatory KYC on layer 1. It was just a lie repeated for some bizarre and unknown reason

— Charles Hoskinson (@IOHK_Charles) February 16, 2023

Opponents of contingent staking argue that it undermines the decentralization of the market and removes agency from SPOs.

Related Reading | Blockchain Association: Crypto Regulations Impossible Without Congressional Act

However, Hoskinson stresses that it does not replace normal staking or private pools and that SPOs remain optional but valuable service providers.

As the market faces increasing regulatory pressure, it is important to explore innovative solutions that balance compliance with decentralization.

The Cardano founder’s proposed model has the potential to be one such solution, and it is essential to engage in constructive dialogue and reflection to ensure the continued growth and success of the cryptocurrency market.