Most crypto projects that are based on Ethereum (ETH) use the Proof-of-Stake (PoS) consensus mechanism to secure their blockchains and incentivize network participants. However, each blockchain has its own set of rules for its participation program, which includes the percentage return for participants.
As blockchains strive to secure their networks through staking, some rules, such as downsizing, have been seen as harsh on unsuspecting participants.
Slashing is a PoS functionality that implies the loss of staked cryptos for nodes that do not fulfill their obligation to maintain the proper functioning of the network. The cryptos lost from the drawdown can be distributed to other participants or sent to a recording address.
It has been reported that the United States Securities and Exchange Commission is developing a policy to ban cryptocurrency staking for retail investors. Brian Armstrong, co-founder and CEO of Coinbase Global Inc. has raised concerns about the rumours.
“We are hearing rumors that the SEC would like to eliminate crypto gambling in the US for retail clients. I hope that is not the case, as I think it would be a disastrous path for the United States if that happened,” Armstrong said.
Ethereum vs Cardano Staking
In response to Armstrong’s comments, the Cardano chief indicated that there are issues with Ethereum’s staking program. Notably, more than 16 million ETH staked cannot be withdrawn until the Shanghai update.
This has caused some analysts to express concerns about the tendency of ETH developers to make ETH secure. According to Hoskinson, the Ethereum network forcibly locks up the assets of its clients, leading to centralization.
Ethereum staking is problematic. Temporarily handing over your assets to someone else for a return is a lot like regulated products. Slashing and not so good bonuses. On the other hand, non-custodial liquid staking is like the mining pools we have used for 13 years.
—Charles Hoskinson (@IOHK_Charles) February 9, 2023
The only difference between Cardano and ETH staking is that the latter does not allow users to withdraw locked assets. As such, CTO Larsson warned Hoskinson to avoid dumping gasoline on the neighbors’ fire.
It may not be wise to pour gasoline on a neighbor’s house fire. It could also spread to your home.
If PoS is banned, well…
— CTO Larsson (@ctoLarsson) February 9, 2023
This post Ethereum staking is problematic, says Cardano founder C.Hoskinson
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