The questions not asked. Can Contingent Staking (CS) even work as described? What are the trade offs? Who and how will be affected?

I’m unable to be there for The Great Twitter Debate :upside_down_face: so I’m just gonna leave this here for the curious.

Topics discussed here are CS functionality, scenarios where it won’t work, ideologically informed choices, other solutions on L1 and all that in a long Spank-fully explained format. :wink:

I find it concerning that so many days have passed since this drama has started yet so few people dare ask for more info. Majority seem to be scared of any disagreement and just lined up behind their favorite flag-barer joining in to yell Yea or Nay. And a few people that actually try to inform, make videos, blogs and present other options seem to be mostly ignored in favor of Twitter one liners and memes. Fear of FUD-ing ones own bags will quickly turn an open community into a bunch of maxis that fear any progress. So, lets ask questions of both sides and reveal if there is maybe even better option then either are proposing at the moment.

To frame this discussion: The question is not if we should have CS or not. Cardano is permission-less chain. Anyone can build contingent staking on L2. The real questions are:

Does CS even work as claimed?

What are the trade offs we have to make to have either of these (or both of these)?

How and who will be affected with this change?

Does multi-signature enabled delegation belong on L1?

If so, then should it be for all pools, just private pools, maybe new type of pools?

If not, then where and how do we provide that?

Let us see what kind of answers we can find.

Does CS even work as claimed?

One of the main features of CS seems to be an ability by SPOs and delegators to have mutually agreed terms (with conditions) accepted prior to engaging in act of delegation. Some of the examples used are businesses, non-profit organizations, regulated entities and so on.

However, looking a bit deeper it is not clear if just CS can fulfill any of those with out addition of elements.

For example:

You can’t have regulated entity use CS to confirm location, identity or age of a participant with out adding some form of ID that is acceptable by such regulating body. No such things exist at the moment on Cardano. Also, if Digital ID (DID) was to become available, there is no guaranty that we can use it directly from Cardano L1. It could be a case that some other chain has made a deal to issue DIDs and Cardano would have to use that trough building a bridge and/or a side-chain in other to use it. This can make using CS on L1 unusable.

There was a talk of helping SPOs to deal with attack on their pool by over-saturating their pools and loosing rewards for every one. CS doesn’t prevent this, since attacker can delegate with a wallet that holds a small amount. Once accepted as a delegator, the attacker can transfer as much as they want in order to continue this attack.

What about enabling future capabilities of preventing of: money laundering, financing restricted groups or entities, tainting political donations, and so on?

Even if we assume that some form of regulatory approved DIDs/ SSI are available, CS on it’s own doesn’t prevent abuses of this kind. Anyone can buy a Ledger Hardware Wallet (HW), use their DID to delegate to some restricted SP and then sell their HW to any of restricted entities. Since HWs can only be hacked if you physically hold them and their seed words are just HW seed words and not Cardano wallet seed words, then you just create a black market for pre-delegated Cardano HWs and one can easily bypass any of above security needs. It is not illegal anywhere to sell your own HW, nor does CS provide on-going compliance checks. Even if such ruse was found out SPOs have no way of removing such delegator, unless we are not told something about full CS capabilities. Don’t be afraid to ask these questions :wink:. (I’m not going to assume here that CS allows SPOs to UNDELEGATE wallets since I didn’t hear anyone say it.)

What are the trade offs we have to make to have either of these (or both of these)?

How and who will be affected with this change?

So, as proposed by Charles, CS will add an option to use a multi-signature (+ metadata) to L1 in other to allow Stake Pool Operators (SPOs) to control who may delegate to their Stake Pool (SP) and under what conditions (that’s the metadata part).

If this is applied to all SPs, then act of staking becomes permission-ed instead of permission-less. Even SPOs that chose to not use this would be considered to give permission to everyone.

So far many of the counter arguments were:

“Don’t touch it! Don’t mess with it! Don’t change it! …because [insert ideology]”

While ideological arguments may be valid when applied to a project that (let’s be honest here) started based on ideological arguments, they may not be convincing arguments against progress of a system.

However, ideological arguments can inform us about direction that such progress should take. As mentioned before CS can exist on L2 and in some forms it already does. No ideology stops this. However, changing a nature of delegating affects Cardano community instantly.

As of right now when you delegate your ADA to an SP it is not a business transaction. Act of delegating is a vote. What you are doing is delegating the voting power of your wallet, which is determined by amount of voting token (ADA) that you hold. You are not guaranteed any return and may never even have any financial benefit (if SP that you delegated never makes blocks). You are NOT investing your ADA and this is NOT a financial transaction.

I can prove to you right now that it is not ADA you are delegating. For proof:

  1. Open a new empty un-staked wallet
  2. Move ALL ADA from your currently delegated wallet to this new wallet
  3. Check what’s delegated

You will find that you wallet with ZERO balance is still delegated to the same pool, while your ADA is now un-delegated. Even after new epoch your empty wallet stays delegated while your ADA will stay un-delegated.

So what changes with CS?

If any SP makes any delegator digitally sign a contract this immediately becomes a businesses relationship.

For example:

Here in Canada you can be involved in some crypto, projects and NFTs and it’s considered a hobby. You can even run a small SP with no earnings or low earnings under a hobby clause. Unless it meets requirements of being a business. Even one business like transaction can have regulatory and tax implications. Here is a section from Canadian gov’t website explaining this. :point_down:

Since CS would change the nature of all SPs to permissioned, even SPs not using multi-sig would be considered as giving full permission, which government may use as proof of business.

This means that changing the nature of all SPs is NOT backwards compatible with some existing SPs and creates a state where implementation will actively exclude/ de-platform/ unbank some current Cardano members.

Are we willing to unbank and sacrifice a few for a good of a whole? Are we willing to sacrifices individuals’ freedoms and opportunities in other to satisfy needs of some social construct that’s not even a human?

I was under impression that we are all here to enable individuals greater freedom. Freedom from social constructs that seem to have forgotten that they are only relevant because they are made up of participating individuals. Freedom from social constructs that abuse the trust and reach granted to them by individuals. Freedom from being seen as acceptable casualty for no better reason then just extra 0.5% of profit margin.

…and do you think member attrition for convenience is going to bring more adaption?

I can’t answer any of :point_up_2:these :point_up: for you. This is one you must answer for yourself.

Does multi-signature enabled delegation belong on L1?

This question brings us to what a few have pointed out about another principle of Cardano being broken here. We are research based block chain yet everyone is arguing with zero research backing their claim. Lets us model a system that has CS in one region and see is it an advantage of having population that must delegate to only some SPs and not others. Will it centralize the system? Lets model multiple areas of restricted delegations and see if that leads to decentralization or not. Lets model a system where CS pools become more popular and form cartels and see the conditions of such network. Then all of us may have relevant information about this.

Research may find that it could work or that it can’t be on L1 or point to a completely new and better way of doing this.

If so, then should it be for all pools, just private pools, maybe new type of pools?

If CS is implemented on L1 why not have a different certificate then public pool. Lets call it institutional pool certificate, make them deposit 1000 ADA instead of 500 ADA and give them a minPool cost that goes to rewards of public pools. Hey, they want to be considered a business on a public network, then just like any business there will be costs. This way public pools stay 100% permission-less and institutional pools can do their own thing with out need to sacrifice anyone, while providing a benefit to overall community. Why not?

If not, then where and how do we provide that?

No CS on L1? That’s fine as well. Why can’t we make changes to wallets instead, so individuals can choose DID wallets and have button to request smart contract before delegating. SPOs can can put 100% margin and only send rewards to DID wallets with a contract.

I know some have complained about 100% margin fee strategy. Even Charles tweeted about it:

I just have to point out that it is true. That is madness. However, this has nothing to with Cardano. This is the cost of running a business in TradFi. Cardano has nothing to do with these fees. Plus, if you want SPOs to be considered as a business entity there is no avoiding dealing with business regulation in the region. You can’t have it both ways. You can’t have a voting/delegating relationship that is not a financial transaction and be a registered for profit business. Cardano is not an “off-shoring” business service, nor can it hide TradFi in murky digital waters.

For the end note (yes! it is finally the end of this post :grin:. Thank you if you are still reading :blue_heart:)

Don’t be afraid to ask questions of anyone. The whole point is that we as a community must be inquisitive and well informed. Do not just give up on decision making because you think ‘others’ got it, …and don’t forget:

Individuals freedom, incentives and information is what guides Cardano.

Cardano is each one of us. Cardano grows as we grow.

:cardano: We are Cardano. :cardano:


@Neo_Spank thank you for writing this. I’ve been attempting to articulate my own concerns, without much luck. May I request you cross post this to Contingent Staking is a beneficial extension for Cardano? Also, a copy to would spread this far as well.
Thank you again.

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@gjlite Thanks for taking your time to read posts on this subject and join the discussion. :+1:

I only cross post in this forum if it comes up organically in a discussion I’m involved in. Otherwise it feels like spam and could derail or consolidate OPs topic into just Yea or Nay debate, which is something I’m trying very hard to avoid for this discussion.

As for reddit, I stopped posting there years ago. I just use my reddit account as read only (mostly). :slightly_smiling_face:

No problem then. I understand what you’re saying.

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