The founder of the Cardano (ADA) crypto responds to concerns about contingent staking

Charles Hoskinson, the founder of the Cardano (ADA) crypto project, recently responded to concerns about the concept of “contingent staking.”

Contingent staking is a new feature introduced on Cardano’s network that allows stake pool operators to specify certain conditions under which staked funds will be released and made available for withdrawal.

While this feature has been praised by some members of the Cardano community as a way to incentivize stake pool operators to act in the best interest of the network, others have raised concerns about the potential risks of contingent staking.

In this article we will take a closer look at what contingent staking is, the concerns that have been raised about it, and Charles Hoskinson’s response to those concerns.

What is contingent staking embedded in the Cardano (ADA) crypto project?

Before delving into the concerns surrounding contingent staking, it is important to first understand what it is.

Contingent staking is a new feature introduced into the Cardano network as part of the Alonzo hard fork.

This feature allows stake pool operators to specify certain conditions under which staked funds will be released and made available for withdrawal.

Stake pool operators can set two types of conditions: time-based and activity-based. Time-based conditions simply specify a specific date and time when funds will be released and made available for withdrawal.

Activity-based conditions, on the other hand, are based on certain network activities. For example, a stake pool operator might set a condition that its funds will be released and made available for withdrawal only if the network has processed a certain number of transactions or if a certain percentage of other stake pool operators have signed a particular commitment.

The idea behind contingent staking is to incentivize stake pool operators to act in the best interest of the network. By giving them the opportunity to set conditions for the release of their funds, stake pool operators are motivated to act in a way that benefits the network as a whole.

For example, a stake pool operator could set a condition that its funds will be released only if it has produced a certain number of blocks in a given period of time. This would incentivize operators to produce blocks quickly and efficiently, which would benefit the overall performance of the network.

Community concerns and Charles Hoskinson’s response

While contingent staking has been praised by some members of the crypto Cardano (ADA)community as a way to incentivize stake pool operators to act in the best interest of the network, others have raised concerns about the potential risks of contingent staking.

One concern is that contingent staking could lead to centralization. If a large number of stake pool operators set similar conditions for the release of their funds, this could lead to a situation where a significant portion of the network’s funds are released at the same time. This could lead to rampant selling pressure, which in turn could cause the price of Cardano (ADA) to collapse.

Another concern is that contingent staking could lead to a situation where stake pool operators act in a way that is not in the best interests of the network. For example, a stake pool operator might set a condition that its funds will only be released if it receives a certain amount of ADA from other stake pool operators.

This could incentivize them to engage in anticompetitive behavior, such as refusing to delegate to other stake pool operators or setting high fees for their services.

In response to these concerns, Charles Hoskinson sought to reassure the Cardano community that the risks of contingent staking are minimal.

In a recent video update, he explained that the risks of centralization are mitigated by the fact that only a small percentage of stake pool operators are likely to use contingent staking. He also pointed out that activity-based conditions are unlikely to be used extensively.

In addition, Hoskinson pointed out that Cardano’s proxy model is designed to prevent anticompetitive behavior. Unlike other blockchain networks, where miners or validators are chosen based on their computing power, Cardano’s stake pool operators are chosen based on their reputation and the amount of ADA that is delegated to them.

This means that stake pool operators have an incentive to act in the best interest of the network, as any behavior that is not in the best interest of the network could lead to loss of delegation.

The founder of Cardano also addressed concerns about the potential risks of sales pressure arising from a large number of stake pool operators unlocking their funds at the same time.

He explained that this risk is minimal, as most stake pool operators are unlikely to use contingent staking, and those that do are likely to have a wide range of conditions for releasing funds.

This means that any selling pressure resulting from contingent staking is likely to be spread over a long period of time and is unlikely to have a significant impact on Cardano’s price.