The weakness of Proof of stake in Cardano

There is a valuable article published by the Ergo team:
One aspect that’s worth concerning is about the contradiction between the token’s velocity and security.

Example is when we stake ADA within the stake pool. We make the system more secure and get reward approximately 5.5% per year.
when there are more lending or yield farming Defi that gives more profit, user might move their token out of stake pool and lock into the Defi contract. this weaken the security of the network because it has been moved out of the stake pool.
From this example, we can see that there is a contradiction between token’s velocity which generates value within the eco system and the security of the system.
This is just one example, what about if there are other Defi that require user to move their token out of the stake pool? that the number of token moving out will even be much more and that might cause more serious security problem for the system.
Does Cardano team concern about this issue? and what is your plan to solve this issue? Could you please address it clearly?

Thanks for posting the interesting article from the Ergo team.

One thing to note about staking in Cardano is that smart contracts can be associated with a stake address, so that the ADA locked in the contract will generate stake rewards: this supports a variety of use cases for keeping ADA staked while it participates in contracts.


Interesting article indeed.

My thoughts on this:
The rate of return for staking is partly dependent on the fees and also the ratio of your pool’s stake in relation to the total stake.

The more transactions, the more fees, the higher the staking rewards will be. In this situation where for example yield farming is getting traction I would say that would also mean more transactions/fees. Especially when lots of stakers move to those “better” incentives, the transactions will grow even more.

Secondly, lower total stake (because stakers are moving out) will also increase the rewards since the chances of finding blocks has a relation between your stake and the total stake. So when total stake decreases your chances of finding blocks increases.

So I would say that these two factors would increase the staking rewards which in turn will also balance things out.
Curious if I am correct on this or not.

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