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  • #036: 💡Why Cardano is Better Positioned than Ethereum in the Wake of SEC's Crackdown?

#036: 💡Why Cardano is Better Positioned than Ethereum in the Wake of SEC's Crackdown?

🧐While Cardano drags its feet, Algorand is making smart moves in India

Author

Laura & Sooraj
February 12, 2023

Welcome to This Week In Cardano

Read time: 5 minutes

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Hi Cardano Community,

Welcome to This Week In Cardano - your daily Newsletter covering the major updates in the Cardano Ecosystem!

This is what we have for you today:

  • 💡Why Cardano is Better Positioned than Ethereum in the Wake of SEC's Crackdown? on Staking Services?

  • 🧐 While Cardano drags its feet, Algorand is making smart moves in India

  • 📈 Cardano Ecosystem Tweet summary

  • 💎 Gem of the Week

This Week In Cardano

Your Wee Newsletter covering all major events happening in the Cardano Ecosystem

Why Cardano is Better Positioned than Ethereum in the Wake of SEC's Crackdown on Staking Services?

The recent settlement between the Securities and Exchange Commission (SEC) and crypto exchange Kraken over its staking-as-a-service program has raised questions about the future of crypto-staking services.

This edition of "This Week In Cardano" explores the implications of the SEC crackdown on custodial staking services and how Cardano is better positioned compared to Ethereum in this context.

What is Staking?

Staking is a process in which validators on a proof-of-stake network hold a certain amount of cryptocurrency as collateral to participate in the network's consensus mechanism and receive rewards for their participation.

SEC Crackdown on Kraken

Kraken agreed to pay a $30 million fine for not registering the offering and sale of its staking program with the SEC.

The SEC took issue with the fact that Kraken determined the returns for its customers as opposed to the variable rate of rewards determined by the protocol.

Impact on Centralized Staking Services

The SEC crackdown on Kraken has raised concerns for centralized exchanges offering staking-as-a-service programs. This has resulted in a drop in buying volume for Coinbase Wrapped Staked ETH (cbETH) compared to selling volume.

Why is this a big deal for Ethereum staking providers?

The Securities and Exchange Commission's (SEC) crackdown on custodial staking services is a big deal for Ethereum staking providers as it may impact their operations and lead to increased regulatory scrutiny.

The crackdown is aimed at third-party providers who offer "staking as a service", and take control of the assets for the purpose of providing a return to the customer. This is seen as a security by the SEC and falls under the purview of securities laws.

How did centralized staking providers become significant stakeholders in the Ethereum ecosystem?

Ethereum staking has several limitations and risks.

The stake is locked, withdrawals are not yet allowed, and there is a minimum requirement of 32 ETH (unless third-party assistance is used). Custody passes to the staking address or third party.

The staker must set up and run a validating node or pay a third party to do so, exposing them to the risk of slashing from inactivity or misconfiguration.

As it became increasingly difficult for retail ETH holders to stake, the centralized staking providers offered an easy and accessible way for retail investors to participate in staking and earn rewards without having to manage their own validator node.

This resulted in a situation where centralized staking providers like Coinbase and Kraken and permissioned staking providers like Lido became the biggest stakeholders in the Ethereum ecosystem

Why Cardano's staking is fundamentally different form Ethereum's staking?

Cardano's staking mechanism favors a non-custodial model, which means that the custody of the tokens remains with the staker, and the rewards are added directly to their staked tokens. This model eliminates the need for a third-party intermediary, making it a more secure and trustworthy option.

Rewards are based on a luck system and delegators do receive fair shares, with Cardano genuinely creating value for its stakeholders.

Cardano offers a range of advantages for staking over Ethereum, including

  • The ability to stake without locking.

  • The option to withdraw any amount at any time.

  • No minimum stake requirement

  • Rewards are added to the stake

  • The ability to select from thousands of stake pools  

  • Little technical expertise required to stake

  • Custody remains with the ADA holder

  • There is no slashing.

Result, Cardano has a far better validator distribution than Ethereum

Why Cardano is Better Positioned than Ethereum in the Wake of SEC's Crackdown

Cardano's non-custodial staking mechanism, combined with its user-friendly design and accessibility, makes it a better-positioned L1 alternative to Ethereum in the wake of the SEC's crackdown on custodial staking services.

With more and more individuals and projects looking for decentralized financial products which have no single point of failure and secure options for staking, Cardano is well-positioned to capture a significant share of the market.

While Cardano drags its feet, Algorand is making smart moves in India

Tapping into the Growing Market:

India is set to surpass China as the world's most populous country, presenting a huge opportunity for the growth of blockchain-based solutions. By partnering with T-Hub, Algorand is positioning itself at the forefront of the Indian market, providing support to startups and established companies building high-impact, scalable blockchain solutions.

Algorand Partners with T-Hub

Algorand has made a significant move in India by becoming the first layer-1 blockchain protocol to partner with T-Hub, India's premier innovation hub, which has over 600 corporate partners, including Intel, AWS, Microsoft, and Cisco. The partnership aims to support startups and established companies building high-impact, scalable blockchain-based solutions.

Faculty Development Programs and Student Developer Training

The Algorand Foundation is set to launch faculty development programs, student developer training, and a master class series for companies looking to transition critical business processes to Web3. These programs will be held in partnerships with Jawaharlal Nehru Technological University Hyderabad and the Indian School of Business.

Technology Partner for the Global Climate Resilience Fund

Algorand has been named as the technology partner for the new $50 million Global Climate Resilience Fund, which was launched by the Clinton Foundation and its Clinton Global Initiative, with SEWA as a founding partner.

The fund is aimed at helping women micro-entrepreneurs address climate change and will help local entrepreneurs connect with the carbon markets and monetize carbon credits.

Algorand's focus on India

Algorand's focus on India follows the recent appointment of Anil Kakani as India Country Head.

These partnerships show that Algorand is taking a proactive approach to establishing itself in the Indian market and contributing to the growth of the blockchain ecosystem in the country.

Why the lack of focus in India by the Cardano Foundation may prove to be costly in the future for several reasons:

Missed Market Opportunities: India is set to become the world's most populous country, presenting a huge opportunity for the growth of blockchain-based solutions. By not having a strong presence in the country, Cardano may be missing out on potential partnerships and initiatives that could drive adoption and recognition of its technology.

Losing Ground to Competitors: With other blockchain platforms, such as Algorand, making strategic moves in India, Cardano may be falling behind in terms of recognition and adoption in the region. This could make it more difficult for the foundation to catch up in the future.

Lack of Education and Development: The lack of focus on education and development in India could result in a shortage of skilled blockchain developers in the country, reducing the potential for growth and innovation in the region.

Missed Opportunities for Social Impact: By not being a part of initiatives aimed at addressing critical social and environmental issues, such as climate change, Cardano may be missing out on opportunities to make a positive impact and demonstrate its commitment to sustainable development.

In conclusion, the lack of focus in India by the Cardano Foundation may prove costly in the future, as the country presents a huge opportunity for the growth of blockchain-based solutions. By not establishing a strong presence in the region, Cardano may be missing out on potential partnerships, education and development opportunities, and opportunities for social impact.

Cardano ecosystem summary

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