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The only way validators who have staked eth make any earnings is if they perform their validator duties. If they don't do the work, they get penalized. If they

The only way validators who have staked eth make any earnings is if they perform their validator duties. If they don't do the work, they get penalized. If they abuse or attack the network, they get slashed. Since a validator's earnings come from their own work, the whole 'To be derived from the efforts of others' prong completely fails. There are pretty decent arguments why the other prongs fail as well. What can be a security, is if a provider offered a managed yield service promising a certian return and guaranteed instant liquidity and then used staking in the background to generate that yield. This is what got Kraken in trouble. And why they settled so easily. Where Coinbase falls is going to heavily depend on the specific facts of their service.

polygamous_bat 4y ago
> The only way validators who have staked eth make any earnings is if they perform their validator duties. If they don't do the work, they get penalized. If they abuse or attack the network, they get slashed. Since a validator's earnings come from their own work, the whole 'To be derived from the efforts of others' prong completely fails. Validating by running your own node is a-ok. Sending your tokens to Coinbase, a registered public company, who is pinky-promising you they will give you 8% returns every year, without registering this product with SEC, is not a-ok. How is that hard to understand?