Main navigation

Cardano CEO Says Ethereum Staking Is Problematic, Here's Why

Thu, 02/09/2023 - 08:29
article image
Godfrey Benjamin
Cardano CEO says centralizing staking is bad for entire industry
Cardano CEO Says Ethereum Staking Is Problematic, Here's Why
Cover image via

Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of U.Today. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.

Read U.TODAY on
Google News

With the growing rumor that the United States Securities and Exchange Commission (SEC) is planning to ban crypto staking services, expert, including Cardano founder Charles Hoskinson, have shared their stance on the matter. Hoskinson believes one of the prominent protocols in the industry, Ethereum, offers what he named problematic staking.

The rumor was first broken by Coinbase CEO Brian Armstrong on the premise that users' staking rewards when they lock their cryptocurrencies looks a lot more like dividends paid out to security token holders.

For Hoskinson, the absolute inaccessibility of Ethereum tokens locked in staking smart contracts makes them look like regulated products.

“Ethereum staking is problematic. Temporarily giving up your assets to someone else to have them get a return looks a lot like regulated products. Slashing and bonds not so good. Non-custodial liquid staking on the other hand is like the mining pools we've used for 13 years,” he said in a tweet responding to Armstrong’s first post.

According to the Cardano boss, his team approached the subject of staking on the protocol to a model one that is mostly controlled by the community instead of a few users.

Cardano (ADA), Tezos (XTZ) Staking Enabled by Digital Bank Revolut: Details

Bad twist for industry

While the news is still tagged as a rumor, industry participants are notably gearing up for an actual ban by the market regulator. According to Hoskinson, the "fundamental misunderstanding about the actual facts of operation and design" will make the SEC categorize all staking products as one and the same irrespective of their differences.

He believes designing a centralized system instead of a decentralized one, as most staking protocols have done, is billed to hurt the industry. With the SEC empowered to regulate crypto pending a regulatory change in the U.S., the commission has brought a lot of enforcement actions against several companies, including Ripple Labs Inc and LBRY.

article image
About the author

Godfrey Benjamin is an experienced crypto journalist whose main goal is to educate everyone around him about the prospects of Web 3.0. His love for crypto was birthed when, as a former banker, he discovered the obvious advantages of decentralized money over traditional payments. With his vast experience covering various aspects of Web3, Godfrey's articles has been featured on, Cryptonews and Coingape, among others.