News about Cardano and the cryptocurrency industry, and my new articles for the week of February 11–17.
My New Articles:
Decentralization Is Often An Overrated And Misunderstood Concept
Do you know the difference between a Decentralized and a Distributed network? I had doubts about the subtle difference, or not so subtle, since I later understood it.
The Debasement Of Bitcoin. A Lesson To Learn.
When superficial changes are implemented to address underlying problems, there are often poor results.
News Of The Week:
- Cardano Hard Fork: to make it easier for developers to build cross-chain applications, Input Output Global (IOG) has added new built-ins to Plutus to support ECDSA and Schnorr signatures. The mainnet update was on February 14, 2023 21:44:51 UTC., at the start of epoch 394. Tweet.
- Contingent Staking: although CS was explained by Charles Hoskinson in 2021, and on that occasion did not generate much debate, today, when he mentioned it again as a solution to the situation experienced by Kraken vs SEC, the debate started, loudly. News.
Weekly development report as of 2023–02–17
Contingent Staking by dcSpark
Want to build contingent staking on a L2 so Cardano itself stays agnostic? Good news: we have a dApp for that! Our new open source dapp allows making pool rewards managed by a smart contract — a perfect way to manage rewards without modifying the L1. Tweet.
Nigeria: The CBDC Experiment and Cash Restriction
Think this won’t happen in your country? The world is on its way to CBDCs. Tweet.
My article: CBDC: Government Centralized Money
Contingent Staking: Different Points of View in the Community
There has been an incredible amount of chatter within the Cardano community about pros and cons of contingent staking. This article attempts to go through every argument. All the different views on Contingent Staking
Last Words. My Opinion.
Contingent Staking provoked enormous debate in the community, centered on principles, as to whether or not it is correct to allow SPOs to refuse requested delegation, based on the identification of the delegator.
In this video, from minute 6:55 you can see that Charles Hoskinson talks about the subject.
In this other video, you can see Charles Hoskinson’s explanation on the blackboard in the year 2021.
I am very concerned with this kind of direction being given to the Cardano ecosystem.
This mechanism allows arbitrary selection of delegators by SPOs (Stakepool Operators) from identification.
It should be understood that the rewards that come from delegation are calculated and distributed by Ouroboros and not by the SPOs. SPOs do not hold the keys to the delegated ADAs, so delegators are not customers of SPOs, “Know Your Customer” does not apply.
Cardano’s PoS (Proof of Stake) consensus protocol is developed as public and permissionless, if they apply this mechanism, can we say that this design philosophy is preserved?
What could be the reasons for an SPO to reject a delegator?
There could be many, countless, one of them could be that the stakepool is close to saturation and to avoid that, and due to the lack of attention of that new delegator (or maybe it is an attacker), the SPO decides to reject the delegation, since it would imply a decrease in the rewards for all.
Perhaps, I think this would be the only good reason, but I understand that it should be taken care of by other mechanisms to alert the delegators about this kind of situations, for the common good.
However, decisions could be arbitrary, for other reasons, based on the amount of the delegation, the provenance of another stakepool, or other attributes that the SPO considers and that are contained in the staking KYC (Know Your Customer) certificate.
Then, it could happen, that to avoid arbitrary motives, IOG as developer (and as central authority) establishes which are the reasons for rejection and of course, if this “law” is not fulfilled, there would be controversy, and unnecessary disputes would be generated. Although I am going out on a limb with this hypothesis, I believe it is a possibility.
As I understand it, and even if this staking KYC certificate were implemented with the SSI (Self Sovereign Identity) concept under DId (Decentralized Identity) applications, what will deprive the authorities from requiring SPOs to disclose data of their delegators, and then, what will deprive the authorities from creating rules for SPOs to execute implemented refusal reasons, thus becoming police/bankers as in the current system?
Even if this KYC mechanism for staking is optional in L1, what will prevent the authorities in the various countries from making it mandatory for this service served on a platter in the protocol? And all that could come. We are opening a Pandora’s box.
It is said in the community, that Cardano has better staking than Ethereum, and it is called ‘Liquid Staking’, because the delegator can choose stakepool freely, withdraw their funds at any time, without blockades, and there are no penalties such as ‘slashing’, among other qualities, but with ‘Contingent Staking’, could we still call it Liquid Staking? because the freedom to choose pool for the delegators is conditioned to the SPOs’ discretion.
