As the cryptocurrency industry grapples with increased regulatory oversight regarding staking activities, Charles Hoskinson, the founder of Cardano, has proposed a model that could comply with regulatory requirements.
During one of its webcasts, Charles Hoskinson stated that operators in the cryptocurrency space might want to consider implementing the contingent staking model. This model focuses on the implementation of know-your-customer (KYC) practices.
The Contingent Staking Model
According to Hoskinson, the transaction certificate in the contingent staking model would have a dual signature requirement. This means that the staking pool operator and the delegate would need to endorse the transaction to be processed.
Notably, in the existing staking model, an individual who wishes to delegate their stake to a mining pool must initiate the transaction and send it to the pool without third-party interference. Contrary to the current staking model, the process in the contingent staking model is distinct.
In this model, the transaction would remain pending until the pool operator, and the delegate approves it. Under this arrangement, pool operators can accept or reject a transfer.
He said, “it raises an intriguing question about the possibility of altering staking models to align with regulatory requirements. The idea of contingent staking is a two-sided approach. It transforms a one-sided, non-consensual relationship into a mutually agreed upon bilateral relationship.”
Additionally, Hoskinson said implementing contingent staking would provide pool operators with more options and leverage. They can choose who they delegate assets, thereby assisting them in meeting regulatory compliance requirements.
Criticism Against Hoskinson’s Staking Model
Meanwhile, a few industry players have expressed their support for this model. However, many criticized this staking model, citing censorship issues.
Nevertheless, Hoskinson hit back at the critics, saying those critics have no basis. Speaking at a recent Twitter spaces event, the Cardano founder further said a staking pool could censor blocks with or without contingent staking.
He also argued that there is no transaction censorship or regulatory issue with the contingency staking model.
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