Contingent staking, why the Cardano community is pushing back

The Cardano community is divided over contingent staking, with detractors calling it a compliance protocol to appease U.S. lawmakers.

Input Output CEO Charles Hoskinson said he finds such criticisms baffling, putting it down to a misconception of the idea.

“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.“

What is contingent staking?

Recent SEC enforcement action against Kraken over its Staking Program has spotlighted staking compliance.

In a recent live stream, the IO CEO spoke about contingent staking — which can be conceptualized as a protocol-level “right to refuse business.”

Stake Pool Operators (SPOs) are businesses, but under the existing Cardano staking model, SPOs cannot refuse delegators (or customers,) unlike a real business, Hoskinson said. For example, the operators of a fried chicken shop being able to refuse to serve a rowdy, unpleasant customer, he said.

However, as things stand, SPOs cannot refuse delegated tokens.

The SPO’s right to refuse delegated tokens “is not, at its core, a compliance protocol,” stressed the IO CEO. Furthermore, contingent staking is simply a multi-sig setup — requiring the delegator’s proposed delegation transaction to be approved by the SPO.

“It’s not, at its core, a protocol about giving the U.S. government control over things.

Hoskinson said this multi-sig approach can be used to “fire” bad customers, get rid of those who don’t conform to your values, and “yes, that pattern can be used for KYC.”

Cardano community divided

A comment in a Reddit post further highlighted the changing narrative — which has gone from decentralized blockchain being an equalizing force, to changes becoming needed for compliance. The poster asked, what other changes are coming down the line?

“The point being made is that if we change it at the base layer to please America now… what other changes will we make later?”

Hoskinson deemed such criticisms “low information, dramatic, knee-jerk reactions,” especially as contingent staking is only a concept for discussion.