For anyone curious what the merge means, in my limited understanding:
1. Transactions will get slightly cheaper, but only because they're increasing the block rate from every 13 seconds to every 12 seconds, not anything specific to the other cool stuff in the merge
2. The network will switch from proof-of-work to proof-of-stake, meaning that there will no longer be GPU demand or substantial energy consumption attributable to the Ethereum network.
3. For a cryptocurrency to be secure there has to be some barrier to participating in consensus. Now, instead of having to have a fancy GPU to run an Ethereum validator, the barrier will be that you instead have to "stake" 32 Ethereum (and risk losing it if your validator misbehaves). A staking reward of (I think) 5% a year will be issued for your trouble.
4. The Ethereum network will be more resistant to "short-range" forks, that is, forks that diverged from the proper chain "recently". (More resistant in the sense that it will be more expensive to execute an attack like that.)
5. Once you've staked your 32 Ethereum, you currently can't "unstake" it. The ability to withdraw your stake will be added in a future eth fork. It will have to be gated by some delay (maybe you can only withdraw your stake 6 months after you staked it). Attacking the chain via a "long-range" fork, that is, a fork that diverges from the proper chain longer ago than the withdrawal period, will be much cheaper or possibly even free.
6. Ethereum will still favor liveness over consistency. An attacker can't stop the chain, but they can prevent it from finalizing for a time (at expense to themselves).
7. Token issuance will go down, probably to below the burn rate, so the base Ethereum supply will go down over time
8. The chain will get deterministic finality after some number of blocks (I think something like a day's worth). That means that, once a block is finalized, it will never be rewritten. Network outages or attacks can prevent blocks from finalizing.
True, my phrasing was misleading (I used the Ethereum terminology, where a validator is not just any node that validates the chain, but one that participates in consensus). Edited my comment accordingly
I run one of the eth validator serious for LIDO. We have 10 validator keys for testnet (prater/goerli now just Goerli) and around 1000 for mainnet ethereum on the beacon chain (which will be the consensus chain post mainnet merge).
I don't see how this reduces energy consumption. To buy into being a validator node you need Ethereum, to get Ethereum you need to do proof of work, if the number of people doing it falls then mining Eth will get easier, and the most cost-effective investment in Eth would be running a large number of validator nodes to collect the payment (you know, all sitting in the same DC). So of course expanding your mining operation still makes sense since it will fund the increase in your validator node operation.
Why would anything change when the economic incentives haven't? Mining isn't getting less lucrative or necessary.
You can buy ethereum on an exchange. Essentially they're changing the economic commitment required to participate in the consensus from demonstration of computational work to a monetary stake.
The end state of that is that all Ethereum winds up being staked. There's no reason not to stake Ethereum if there's no Ethereum inflation, and so the only new source of Ethereum would be PoW-mining.
PoW-mining is being turned off. The source of new ETH will be ETH holders selling ETH to meet liquidity needs. People cannot save 100% of their income forever.
Most of it probably. And the more tokens you have the easier is to put majority of them in the stake, also any fees are irrelevant on the large scale operations, unlike the small transfers. So The biggest holders of tokens become the biggest stakers, and thus become the biggest earners. Since the rate of token accumulation will only increase because the of compounding of the tokens in the stake (new profits will be staked too).
Honest question - if you get deterministic finality in a day (#8), then how can you attack the chain with a "long-range" fork (#5). Doesn't #8 solve #5?
The answer as I understand it, is that anyone who's continuously running a node won't be confused by such a fork, but someone who just joined the network has no way of telling which fork is the true one.
Put another way, if you know the true chain at time T, you also know it at time T+1. But if you're just joining the network, or you went offline for a bit, that means you don't know which chain is the true one and need some outside-of-protocol way of determining which fork to trust.
What can users do to get certainty over which one is the correct fork? In POW you can check the POW. Is there a trustless solution for this in POS? Or is the only solution essentially to ask around and hope that people aren't lying to you?
In practice, it's the same as with Bitcoin: you have to get the correct, current software. It's just that the software will include a block hash from a few months back.
You might argue that Bitcoin is defined as the chain with the most hashpower, period. That would remove all subjectivity from Bitcoin, but it would mean that a 51% attacker could arbitrarily change the rules and steal people's funds. That's not how it actually works; a 51% attacker still has to follow the rules of the protocol for their blocks to be accepted by the non-mining nodes, and that means there's social consensus on the correct software to run the protocol.
That's not how it works. Hashpower decides the canonical chain, not the rules of the system. Hashpower makes sure that the blockchain can't be rewritten. Hashpower can't change the rules of the system, because those blocks would be invalid and rejected by the network.
There's no consensus needed on which rules to use. Everyone can use whichever rules they want, by using different versions of the software. Different rules define a different currency, like euro or dollar. Using the best currency with the best rules is just a game theoretic focal point. Everyone chooses to use the best version of the software, because they assume that everyone else does so too, even in the absence of communication. There is no "correct, current" software in Bitcoin, because it would be a single point of failure.
There's no objective protection against long-range attacks in PoS, because there's no hashpower to prove the canonical chain. It requires the provider of the "correct, current" software to decide which chain is the right one.
>>Hashpower decides the canonical chain, not the rules of the system.
No, hash power and the rules decide it. If you have invalid signatures in your blocks, it doesn't matter how much hashpower your fork has, it won't be accepted as canonical by other forks.
51% attacks can not arbitrarily change the rules nor can they steal funds. They can double spend or prevent finality. Nodes enforce the rules of the network by rejecting blocks they deem invalid.
- wait a bit to make sure that you can talk to different people on the network and see what each of them see
- check checkpoints on twitter or websites like etherscan (are they seeing the same thing I’m seeing?)
In projects like Mina, since you do not download the history of the chain (there’s a single zero knowledge proof of a few kB that covers the whole history) you must rely on a marker for “chain quality “ to differentiate potential forks.
Note that there was also some research on how to get signal from the transactions you see that you’re on the correct fork (from some ex colleagues working on libra): https://eprint.iacr.org/2019/1440.pdf
If you're running a node, and it finalizes a block, that means your node will refuse to ever revert that block.
A long-range attack is when a validator withdrawals their stake, waits the withdrawal period (e.g. the 6 month delay delay mentions above), and then creates a fake chain starting from before they withdrew their staked eth.
Because in the "real" history (e.g. the ones that most nodes have seen over the past 6 months) the validator doesn't have Eth locked up still, there's no way to punish them. Thus, these long range attacks get very cheap (you could even imagine someone who pays validators for old keys -- aka, you don't even need to be a validator yourself).
These two facts together mean that PoS blockchains require some "weak subjectivity" - which pretty much means when you download and start syncing your node, you need to know a "finalized" block hash from the past 6 months (or within the withdrawal delay). This ensures you won't get tricked by a cheap long-range attack.
In practice, I don't think this will be much of a problem - clients can just do a new release with a new block has every few months for new users!
There must be some part of the attack I am missing here.
Let's say I'm an attacker and I do this. But now none of the subsequent blocks on the original chain will validate anymore because of hashes mismatching. I could of course validate new blocks but 6months+ of blocks from only one or a small number of validators (depending on how much validator capital one can amass for the attack) is going to be pretty obvious.
Unless the attacker can get a significant percentage of validators part of the attack, I can' see it work out in practice.
What do you mean by obvious? Your crypto client is a computer and unless you go and check what it is connected to this will be opaque to you (and so not obvious).
Long-range fork is possible if network participants are manipulated or forced to switch to another fork. In practice, the correct fork is communicated from entities who control the majority stake, such as exchanges. In the case of network disruptions, there might be multiple valid forks, and choosing the correct one is arbitrary, because there isn't one. There's no objective consensus similar to proof-of-work.
Ethereum's PoS is really two consensus algorithms. The first converges rapidly but has probabilistic finality. The second has true finality, in the sense that a finalized block can't be reverted without destroying a large percentage of total stake, but it takes a while before that finality kicks in.
Most of these are pretty spot on. The one thing I will note is that the staking rewards are not a constant 5%, they are a function of the network demand. Stakers are rewarded a portion of transactions, so the volume of demand per block will increase the gas price, and the validator rewards. If the number of validators on the network increases, each individuals rewards will drop.
That being said, the adoption of layer 2 technologies has taken off, and significantly impacted the demand for layer 1 blockspace.
Is there anywhere I can read a technical version of how proof-of-stake work?
I'm still confused at what happens if you create a valid block with the Ethereum you stake and then that block doesn't end up being part of the main branch.
You get assigned by a random number generator to create the next block. If you fail to create it your only penalty is the opportunity cost (i.e., you miss on the reward that you would have gotten for creating one).
So at any given time only one validator is going to create a block. If you create it, it's going to be included in the blockchain. If you don't create it (or you create but due to network problems fail to communicate it), then the blockchain skips a beat and someone else will create the next one.
In proof of work the leader election (the thing that decides who gets to write the next page/block of the ledger) is based on how much money you can put in computing power or how big your mining pool is. The more computing power, the more lottery tickets you get to write the next block.
In proof of stake, the more crypto tokens you have, the more lottery tickets you get to win the right to write the next block.
In PoW the lottery is solving puzzles, that’s the energy inefficiency, in PoS the lottery is decided like a real lottery: with a random number generator (a distributed one at that, so that people agree that it was generated honestly)
A bunch of nodes generate random numbers and publish their hashes.
After all hashes have been published all nodes reveal their random number, verify that their number actually corresponds to their hash.
Xor all the numbers together and as long as at least one node was honest and generated a random number the result will be a random number.
I don't recall if this is exactly what proof of work does but I think it's pretty solid.
PoW as used in bitcoin and ethereum is a bit different. It's designed to reduce the communication needed between nodes.
Each block is published with a hash which is based on all the previous blocks plus its own data. All participants are racing to solve a puzzle: basically a big guessing game where the first to guess the winning number gets to make the next block. The game is to find a number which when combined with the previous hash and put through an expensive hash function comes up with a result which has a specific number of binary zeros at the end. Since hashes are one way functions the only way to solve the problem is for everyone to guess until the solution is found.
The first participant to find the solution gets to create the new block. They also check the last few blocks to see if anyone's been cheating by adding fraudulent transactions. If fraud is detected they just ignore those nefarious blocks like they never happened.
The algorithm scales with the number of participants by automatically making the "difficulty" higher by changing the size of the pattern that needs to be matched.
You should check out drand (https://drand.love), which is based on threshold cryptography and the group running the network is composed of 16 independent organisations, none of which can manipulate or predict the next beacon. Beacons can be consumed from the public HTTP APIs (https://drand.love/developer/http-api/).
Lots of exciting features to land very soon that include Timelock Encryption, among several others.
Wondering the same thing myself. The entire problem with proof of stake is that the only thing in the digital realm that can be relied on as a source of objective truth is computation, hence proof of work.
How do you get verified (true) randomness without an oracle and without a connection to the analog world (proof of work)?
It would be amusing if the answer was randomness that came from a proof of work algorithm.
I don't know how they do it but it seems easy in practice. You hash the concatenation of chunks of data submitted by participants. Adding more data to the hash can only make it more random, not less. As long as at least one participant wants the outcome to be random and therefore they submitted actual random bits, the result will be random no matter how unrandom all the other participants' data chunks were.
It's almost certainly better for the environment / our continued existence than proof-of-work, if we must suffer cryptocurrency, but I don't trust people who were willing to continue to engage with proof-of-work for years to create an ethical (or even functional) alternative.
For anyone who might be concerned by the claim here; it’s really a political argument and not a technical one. Proof of stake as implemented by Ethereum makes a tradeoff which requires some small amount of trust (to identify the correct chain more quickly) which does not create a centralization risk.
But this is always the way; leveraging trust where appropriate can allow great increases in efficiency, this is how society works, so you have a political spectrum where Ethereum is “responsibly pro social” and Bitcoin is still a kind of super trust less money with enormous energy costs to enable this somewhat superficial security property.
For sure. In this comment I'll be using "validators" to mean "nodes participating in consensus".
The "true" chain according to the new protocol is the one that has more signatories. Validators sign blocks as they're produced, and when a block gets more than 2/3rds of the signatures, it's finalized on the chain and won't be rewritten. (Well, it's much more complicated than that, but that's the general intuition.) When you sign a block, you get a reward on that chain, to incentivize people to participate in consensus.
So the question is, when there's a fork, what stops people from just signing blocks on both forks so they get the signing reward no matter which fork "wins"?
The protocol disincentivizes this by requiring validators to put up a stake of 32 eth, that gets "slashed" if you do that. Put another way, if there's a fork and you sign blocks on both sides of the fork, you lose part of your stake.
But that threat only works if you actually have a stake to lose. If it's been ${withdrawal_delay} months and you no longer have any eth staked, you can start signing blocks from a long time ago and the protocol can't slash you as punishment. So a group of 2/3rds of the former-validators could freely start a fork from ${withdrawal_delay} months ago, sign a bunch of blocks on it, and if their fork loses they'd face no penalty. Someone currently participating in consensus can see this is happening and won't be confused, but someone just joining the network will be.
The solution is pretty easy, if inelegant. When entering the network for the first time, if there are multiple competing forks, you'll just find someone you trust IRL and ask them which chain is the real one. If you've been offline for less than ${withdrawal_delay} months, you won't have to worry about this, but it is a problem for fresh users.
If you set ${withdrawal_delay} to infinity, this isn't a problem, but probably you don't want to do that. Once withdraws are enabled, there'll be some tooling to make it easy to figure out which chain is the real one, but I don't expect there'll be many forks that are remotely convincing.
In theory, a very large staker could run a large share of the network, exit (either normally or get slashed), then rewind the chain prior to the exit, run it on their own independently, and then pop up after a while with a competing fork. This makes syncing from the beacon chain's genesis risky because you could end up following the attacker's fork.
To make up for this risk, Ethereum then relies on distributing recent 'weak subjectivity' snapshots (through other known nodes, block exploers, baked into client releases, etc) to make sure new folks can join the legitimate network and ignore an attacker's. Those snapshots basically rely on social legitimacy to help folks get going with the 'legitimate' chain. It is a trust assumption.
In contrast (at least in theory), in a proof of work network you can 'objectively' determine which of competing forks of a chain is the legitimate one by a simple metric, the 'longest chain with the highest difficulty'. The presumption made here though is that you will have an open internet and honest client software that will not censor the legitimate chain. A trust assumption is still made that those that introduce you to the p2p network aren't hiding a longer chain from you.
1. Transactions won't change noticeably since the gas costs won't change and the network won't have more capacity.
2. The 'demand' from mining for GPUs is over-rated. It was a brief problem years ago. You are correct that energy usage for validation will go down.
3. One difference between bitcoin and eth... ethash is a memory hard algo so it doesn't require the fastest GPU. 4-5 year old GPUs are more ROI efficient. Everything is bound in the speed of the memory controller.
4. To be seen.
5. 'staking' today is just depositing ETH into an ETH1 contract that doesn't have a withdraw function. It will require forks to add that functionality.
6. Correct.
7. Correct. Although this likely won't have an impact on price like people think.
2) The latest earning from NVIDIA and AMD showed that about 30% of their GPU were to crypto miners, so no, the shortage was not an exaggeration and certainly not from many years ago.
The shortage was due to demand from people beyond mining wanting GPUs (including a new problem... scalpers) and there not being enough production. In effect, it was a manufactured shortage. There are a ton of articles that talk about all the aspects that went into the shortage and miners are definitely not the only reason. Easy scapegoat though...
Link #1 and #3 mention crypto as one of the causes of the shortage.
Like #2 is a statement by Nvidia who has a vested interest in lying, and has lied about the exact same issue so blatantly that they got fined by the SEC for it.
I just gave some random links I googled... feel free to keep digging, there are more that back me up.
You're wrong about scalpers too. They know the market... of course they know to prey on every opportunity.
Your 'evidence' is really nothing. That's a few thousand gpus... not that many, honestly. They are also not top of the line gpus... which gamers want to buy. older rx470 polaris class gpus are more than enough for large mining farms.
full disclosure: i'm a huge gpu miner, so i definitely have some experience in this area.
Then you have a vested interest in playing down the effect that this waste of energy bubble had/is.
> They are also not top of the line gpus... which gamers want to buy. older rx470 polaris class gpus are more than enough for large mining farms.
Way off the mark there, gamers not in the 1% don't buy top of the line GPU (as reflected in the Steam survey), they buy the budget to mid range price. When miners started buying GPU left and right in pallets, NVIDEA and AMD saw it and shift the manufacturing to the top of the line GPU where they have the highest margins even if the waffer would yield a lot less, because miners would buy them ASAP anyway. This reduced the amount of lower tier GPUs in the market.
Funny you mention the RX470, a GPU famously never in stock because of this dumb piramid scheme.
> Then you have a vested interest in playing down the effect that this waste of energy bubble had/is.
Nope, not at all. My business model doesn't depend on mining forever. I'm not playing down anything. I'm just saying that mining isn't the only reason (and at most 30% the reason) that GPUs were hard to find.
> Funny you mention the RX470, a GPU famously never in stock because of this dumb piramid scheme.
It came out 5 years ago and newer models replaced it.
>Scalpers buy up GPUs. There is less supply. That creates a problem.
Those GPUs are then sold immediately to real users. Scalpers do not increase demand.
Scalpers provide a service. They have automation or a way to buy stock fast at MSRP or closer to MSRP. Then they sell it to people who are willing to pay more in order to have the product now or avoid spending time to search for stock.
Scalpers cannot exist unless demand is greater than supply.
We are going to have to agree to disagree on this one. In the second link, it is in reference to tickets. At the end of the day, tickets are all the same. If you can't get the front row of the show, you'll accept something back a bit... because you want to see the show.
GPUs are different. Miners want specific brands and models and won't / can't accept anything else.
Still the same, the more GPUs are added to the network the harder it is to mine, the harder is to mine the more GPUs are added until it is no longer profitable, all this while drawing more power.
If you have a good understanding of ETH PoS perhaps I can ask this question.
The only issue I’m still confused about is the incentive to add hardware to the network. Obviously the network needs to be resilient to attack on consensus but it also needs networking and physical hardware resilience. How is that incentivized in the PoS?
The stakers have to perform consensus network and block building actions continuously online, or they are penalised by losing value from their stake over time rather than gaining it. The penalty is reasonable so a small downtime during updates and such isn't a problem.
This incentivizes them to have reliable networking and hardware, running 24x7.
However they are heavily penalised if they are seen to do things like double-voting by accident, so they can't just put up duplicate systems and forget about it. High availability failover is something they can only do carefully.
This is different from the current proof-of-work miners. If a miner stops or screws up, they won't gain mining fees during the stop, but they don't lose anything either.
I understand all that but what I don’t understand is what encourages more physical nodes with high quality bandwidth because it seems like if me and you both want to stake for PoS then we can even be better off sharing the same hardware and buying higher quality hardware than we could individually, and this is a sub-linear incentive which I would think would result in the physical hardware footprint significantly shrinking. Am I missing something?
Now you might say well isn’t that a good thing for less resources but without an incentive to decentralize physically won’t there be a risk of centralization and potentially catastrophic outcomes for the network?
One factor fighting against this is that the validator inactivity fees spike to be larger if a lot of validators are offline at once. So if you think all the existing validators are in e.g. AWS us-west, you are taking more risk by putting your validator in AWS us-west too, because your failures are more likely to be correlated with other validator failures.
> what I don’t understand is what encourages more physical nodes with high quality bandwidth because it seems like if me and you both want to stake for PoS then we can even be better off sharing the same hardware and buying higher quality hardware than we could individually.
For the same reason that there are a number of mining companies too. But you're right, PoS doesn't 'fix' that problem.
A common approach is staking pools, which incentivize decentralization for the greater good of the network.
One of the largest ones for eth and several other chains ($7B TVL) is LIDO, of which I’m an eth mainnet and testnet validator node operator. They distribute stake over many high quality validators and have very rigorous operational guidelines to ensure high quality operators only are allowed. I’m not shilling for LIDO but they are a very professional and well ran DAO that truly cares about what’s they’re doing.
One of the cool things they do is liquid staking. In most PoS networks, your funds are locked during a given time boundary, generally referred to as an Epoch. You start staking at an epoch beginning and can not access funds until the beginning of the next epoch. Validators are rewarded for reliably and securely (no double signing!) performing their task via staking rewards. Staking rewards are quite akin to inflation in more traditional monetary systems.
The staking reward is for collateralized validators only (a small % of the network)
Overall issuance can potentially be negative due to the burn effects of eip1559 - where the base transaction fee of an eth transaction is deleted from the network forever (akin to using oil/gas/petrol & then it's gone)
Exactly, it's my opinion. What's wrong with sharing my opinion? The whole purpose of this site is sharing opinions and points of view with others. Do you think I'm looking for comments written by you and posting "negative" replies? You're crazy.
5. Staking today also means you're running a validator on the beacon chain, and accumulating a balance that will be respected by the future withdraw function.
They decided to do proof-of-stake first, putting shards off until later.
Also it started looking like zkrollups could do everything without loss of security or convenience, and with way better scaling than they ever hoped to get with the original sharding plan. So they removed execution from sharding, using it instead as just data for rollups.
Then someone came up with "danksharding" which is more like a RAID system than actual sharding.
That's exactly the problem. As someone who does not have access to 32 Eth, you need to trust a pool operator with your money.
This is a direct parallel of issues like home and car ownership. If you're not rich enough, you have to trust a 3rd party, and also get less for your money.
Obviously I need to have friends who already want to invest a significant amount into Eth, otherwise I'm just "that guy" shilling some scheme to their family and friends.
Under what possible scenario do I have a few k$ spare, but not 10k$ spare, to invest in a speculative asset, and also have a large number of friends and family already in exactly the same position?
The only one I can see would make me the "cryptobro", to use the currently-popular phrase.
It's also quite ironic that you suggest the basis of Eth consensus be based on the strength of inter-personal trust. If that's how it works, then why bother with the complexities of Eth?
I'm not saying the basis of ETH consensus is based on inter-personal trust. The conversation started by a complaint of 32 ETH required to run a validator being out of reach of normal people, so I provided multiple other options for how a normal person can take part in this.
You gave one suggestion, which was based on inter-personal trust. This removes a major benefit of taking part in the Ethereum ecosystem. If it became a widespread way for people to take part in Ethereum's staking mechanism then yes, Ethereum's consensus would effectively be based on interpersonal trust (which is something that the developers have gone to great pains to avoid).
Both of which (essentially the same thing - "be in a pool") require trust, which destroys a key advantage of Ethereum (and cryptocurrencies in general).
Another stage of the grift where all the scammers get double the coins and cash out even more. The miners aren't going to stop mining. There will be another "classic" fork situation. Maybe we're near the end after all?
I introduced the Serenity (proof of stake) step of the Ethereum release process in this 2015 blog post for the Foundation. You might find it interesting to look back and see how we got here.
> You can literally run an Ethereum PoS node in a Raspberry Pi.
I know one of the stated goals is for people to be able to run validators on commodity hardware, and as you've pointed out, builds exist for ARM devices and have been shown to run on a Raspberry Pi, but it remains to be seen if you can "in practice" run a mainnet validator on a Raspberry Pi. That would be ideal, though!
There is a decent group of folks in the rocketpool community that are doing this right now, running their nodes with 8gb pi 4's, running mainnet validators. The main dev of the rocketpool node stack has put a lot of work into making it viable, including pushing the client teams to ship better optimised arm docker builds.
It is somewhat risky in my opinion as you don't have the resources to track multiple chain heads in the event of a split, but it does work under nominal chain circumstances.
The irony here is that long term, ETH will use ASICs for zk-snarks. Vitalik just published a document where he said that is his preference [1].
"Type 1 aims to replicate Ethereum exactly, and so it has no way of mitigating these inefficiencies. At present, proofs for Ethereum blocks take many hours to produce. This can be mitigated either by clever engineering to massively parallelize the prover or in the longer term by ZK-SNARK ASICs. ... Personally, my hope is that everything becomes Type 1 over time, through a combination of improvements in ZK-EVMs and improvements to Ethereum itself to make it more ZK-SNARK-friendly."
They will need to financially incentivize people to run this hardware and will create an arms race around it. Just like Bitcoin.
The demand for zk-prover hardware will be no where near the same extent as for pow miners. Those zk proofs only need to be generated once, by a single party, and then they can be verified, easily and cheaply by anyone with minimal hardware. There isn't anywhere near the competitive rat race to accumulate as much hardware as possible.
The more people mining in proof of work, the more random hashes needed to secure a block. This is what makes it demand so much energy.
This isn’t the case with ZK provers. Each computation yields a solution, like regular fixed arithmetic math. Using more powerful FPGAs and adding more parallel provers, you can prove the same circuits in less time and less energy.
The more people using ETH, the more computation that will need to be done. The more hardware that will be needed to support everything. The end goal is scalability, right?
Yes, like computers, the internet, electric trains. Computers used to take up a room and compute a few thousand cycles per second. Now they can fit in our pockets and compute billions of cycles per second.
As hardware accelerated and parallel ZK proving technology increases, the amount of users and applications built on this technology can also increase. This is the opposite of Proof of Work, where more efficient mining rigs and higher hash rates will not lead to more network throughput or activity.
I'm saying that zk is being targeted for ASICs (Vitalik said it himself) and that zk will require some very specific compute needs that not everyone is going to be able to provide.
Sure, we are in agreement then. It is a great thing as it will enable the blockchain to continue to scale for more users and more applications, and it is the opposite of the energy inefficiencies of the current PoW system.
Well... I do think that the power usage overall isn't going to go down. Certainly ETH switching off PoW will be a great reset, but over time... people will find ways to continue to use more power when it comes to compute. Put it another way, the datacenter market isn't getting smaller any time soon.
To put this in perspective, there are hundreds of thousands of validators already online and the amount of energy consumed by them while running is less than the energy consumed by videogame consoles around the world while idling.
Every gamer (PC or console) that has used the "look at how much energy is being wasted" argument to be anti-crypto will have to eat their GPUs after the merge.
Then it is an issue of bitcoin and all the PoW blockchains, not of crypto in general.
You can be pro-crypto without being in favor of Bitcoin, you know? In fact, those who oppose crypto due to environmental concerns would help immensely if they stopped generalizing and became more specific about their arguments.
And Friendster was once the largest social network and the first successful one. Your point?
Bitcoin was a good first prototype, but it is clearly a failed experiment. It's not used as a currency, the "store of value" narrative is bogus. All it took was the first asset bubble to pop to demonstrate how BTC is only correlated with other stock prices.
It already loses to Ethereum in many metrics: transaction volume, number of wallets, decentralization (number of nodes participating in block validation) and so on. Layer-2 systems in Ethereum hold more Wrapped Bitcoin than lightning by orders of magnitude. Even if you really want to use BTC, the best way to transact bitcoin today is by wrapping it and using it on Ethereum.
Bitcoin is not going to go away just because lots of people criticize it. Bitcoin is only going to go away when we build an alternative that has (most) of its (perceived) benefits and fewer of its drawbacks.
IOW, stop criticizing "crypto" and start focusing on criticizing "Bitcoin". Be specific about your arguments, otherwise everyone will feel like they are on a Mexican standoff and you will never get the support to win the good fight.
The chief perceived benefit of Bitcoin is its speculative asset value. We may try to unseat this with a new, less environmentally harmful speculative asset, but it's unethical to deliberately attempt to suck people into a negative-sum scheme, plus it won't work: crypto coins move in tandem with each other.
You are reversing cause and effect. The original promise of Bitcoin was to become a p2p payment system that could be an alternative (not a replacement) for cash. All of the speculation around it comes from that.
The unethical thing is to keep BTC around just because there are so many sunk costs associated with it.
Friendster isn't currently the largest social network. The point is that people associate the biggest product of the category with the category itself. Like web search is synonymous with Google.
the problem though is that the argument is unhelpful and disingenuous at that point: people--apparently including yourself--argue against "crypto" painting a broad brush because of how a handful of projects work. Are you against the concept of chat applications as a whole due to the privacy issues of the dominating players? If so, that would suck, as there are certainly projects in the space of chat that don't exhibit those properties. But when you just go around yelling "crypto is bad because X" when X isn't really a property of crypto you might emotionally feel justified but hopefully you know that intellectually you are holding back progress with FUD.
Ether market cap alone is about 50% of Bitcoin's (~230 vs ~470 billion USD).
Look at Coingecko's list of ERC20 tokens, all of the top 60 tokens have a market cap above $1 billion. You can go ahead and remove Tether if you want, there is still another ~$100B there.
Bitcoin is not so dominant as the maxis would like to believe. It won't take much for Ethereum (as an ecosystem) to catch up, and when it does the flippening will come fast.
Regulations will take care of that. I expect that bitcoin will either be banned, or miners will be forced to reduce their computations, or users will be required to pay a pollution tax at exchanges. Move to greener chain if you have bitcoin, that’s my advice
If the Merge works (and PoS chains remain secure), then it'll be proof in practice that PoW is unnecessarily wasteful, so regulators have extra incentive to scrutinize Bitcoin.
I confess deep ignorance, here, but: Why would miners go along with this switch, given it's going to eliminate their profits? Why wouldn't they just fork the chain and continue to run a PoW version? What would force people to switch to the new PoS version?
Ultimately it would be the community deciding to value the PoS fork as "real Ethereum". Something similar happened with ETH and Ethereum Classic, where classic is the unforked version that nobody cares about. A PoW fork will almost certainly exist, but that doesn't mean anyone has to use it and indeed some major players like Chainlink have already announced that they will not support a PoW fork
ETC has been pumped lately by former eth miners. I know because I've participated in this scam as a miner. ETC is one of the more volatile top 50 "coins" or "cypto", constantly being pumped and dumped, there is nothing actively being "developed" for it and there never will be. Just read the associated forums if you don't believe me, it's a pump and dump. Simple as.
Yes I've profited and no I won't give it to charity.
My opinion will never change, it's all a scam for pump and dumps schemes. There will never be a killer app attached to crypto. NEVER.
I've only lost a few hundred dollars in crypto, so my knowledge is limited :P, but if fees went below 1.29%, it would be cheaper than Visa merchant fees. Plus, they usually have some POS equipment fee. If the fees reduced enough to "make sense" for merchants, would that be good enough? Is this even possible? Or would Visa and the like adjust their fees to stay competitive?
To be pedantic - mainnet Ethereum didn't 'roll-back' those hack transactions either. They are still there on etherscan if you want to look for them. The DAO hard fork introduced an unsigned transaction that moved the hacker's funds to a refund to a refund contract.
I found about this fairly recently. You seem knowledgeable about the topic. Can I ask you how did the community react to this/what do they think of this episode today? Because having full control over the coins is one of the big reasons why proponents are against regular banks and state-issued currency, yet here there was a clear breach of that control.
The developers don't have full control like that. They were only able to execute TheDAO hard fork because the community was very small at the time and was reasonably united behind the developers in carrying it out. It was something of a unicorn of circumstances that it was even possible because the funds were still locked up for a period of time and the hacker couldn't sell them, which meant there was only a single loser in the fork (the hacker), and a large community of winners or people who weren't directly effected either way. I personally think the refund stage of things should not have happened and the funds should have been burned instead, simply as a means to make sure the investors learned that risks of interacting with ethereum contracts were still very real. But that said I wasn't involved in crypto at all then, so, what do I know...
There was a huge debate over it, and in the end everybody got to run whichever version of the protocol they preferred. Both chains still exist today, but most of the ecosystem went with the one that made the change, so that one accumulated a lot more value.
This made me chuckle. How anyone thinks Sun has any interest in anything besides enriching himself is delusional. Pro pump and dumper, thats all. He is an artist at the top of his game, I'll give him that!
I wondered about this for a long time as well. Exchanges, RPC providers like Infura, wallet developers, dapp websites, etc., wouldn't endorse such a fork, so it wouldn't gain adoption. It might still happen, but it would fail to capture much value, similar to Ethereum Classic.
If the crypto crash has demonstrated anything, it's that there's an enormously incestuous relationship between these organizations. We have exchanges running mining operations, market participants investing in crypto mining companies, etc.
A massive economic implosion in the mining community is going to have knock-on effects throughout the ecosystem, and I can imagine market participants not wanting that to happen.
In the end I suspect you're right, but I don't think it's safe to say that only the miners are interested in preserving the status quo, and I don't think it's a foregone conclusion that a major PoW-based fork won't live on and divide the ecosystem.
> but I don't think it's safe to say that only the miners are interested in preserving the status quo
I also am sure the miners will keep the PoW based chain alive. But I have trouble finding reasons why users, developers and businesses would support the PoW based chain in the long term.
Another reason that I’ve seen brought up is that miners aren’t so coordinated. Somebody will have to actually fork the code, remove the difficulty bomb, change the magic parameters to not interfere with the PoS P2P network, etc. Then they have to get enough miners on board to use that particular fork. I think it’s a weak argument, but so far I haven’t seen any coordinated effort to continue mining after the Merge, so it could be a factor.
I think it boils down to a coordination/signalling problem again. Miners want to mine on the fork that they expect to succeed, but it will only succeed if it gets listed on exchanges, exchanges will only list it after it gains serious adoption, but it will only get serious adoption if miners agree on a fork, etc.
A historical example of this is SegWit2x in Bitcoin. It was originally proposed as a protocol upgrade, seemed to gain broad support, but miners and exchanges weren’t universally signalling that they would adopt it, and in the end everybody chickened out, and the change failed to be adopted.
> But I have trouble finding reasons why users, developers and businesses would support the PoW based chain in the long term.
I explained why: Cross-investment within the ecosystem.
If, I dunno, say Coinbase has a large investment in a mining operation (and I'm completely making this up, to be clear), they're not gonna want a move to PoS because it'll destroy that investment.
We know for a fact that there's a ton of this type of cross-investment in the ecosystem, as evidenced by the ripple effects from the collapse of organizations like 3AC. It's not at all unreasonable to conclude that similar relationships could create incentives to keep the miners solvent.
Fwiw, Coinbase and Kraken both hold large amounts of staked ETH for their customers, and skim off a percentage of the staking rewards. They won't be able to access those profits until about six months after the merge. So they both have an interest in the PoS chain doing well.
Anyone in the community who's been paying attention has been well aware that staking was coming. The staking network has been running in parallel since December 2020, and about 12% of the current supply of ETH is deposited on it.
From a user perspective it doesn't matter all that much whether it's PoW or PoS, right? I see equally little reason for a user to choose the PoS chain over the PoW one.
Usability is a little better on the PoS chain. Blocks come out every 12 seconds, instead of randomly with just an average time of 13 seconds.
The PoS chain takes less than a minute to converge to a state where it's very unlikely for your transaction to revert, and in 12 minutes your transaction is finalized, meaning it can't revert without destroying a large percentage of staked ETH.
PoS ETH will have the researcher and dev community building on top of it for another decade or so. There's a long list of further improvements in the roadmap, including major increases in scalability.
Most of the ecosystem is moving to PoS. The popular rollups will be connected to the PoS chain, not to PoW. Major stablecoins backed by off-chain assets have already said they'll be backing the PoS chain, not PoW. Etc.
You're right, if users disregard the difference in energy consumption there is little reason for them to choose the PoS chain over the PoW one.
For devs and businesses the PoS one seems to matter though, I think it is likely the activity and innovation will be there in the end.
Also a user would have to make an effort to keep using the PoW one AFAIK.
They almost certainly will, as has happened before (see Ethereum classic) but the Ethereum foundation and thus most of the users will continue on to the proof of stake chain.
Nothing forces people to follow any set of consensus rules. There will be a fork that continues on with PoW, but most users will choose to follow PoS because that's where all the business and developer support is.
For those interested, this is a site that predicts when the merge will happen based on the current hash-rate. Currently looking like September 15! https://bordel.wtf/
Clearly there is some group of people with the power and influence to make this decision. How does that group compare to, say, US central bankers, in terms of transparency and democratic accountability?
Edit: To be clear, I’m not talking about banking operations, I’m talking about decision making by central bank leadership. One of the purported benefits of crypto is independence from the shadowy cabals that run the US dollar.
Except the Treasury isn’t actually all that shadowy - the staff have names, and are appointed through an ultimately democratic process. Whereas I really have no idea who is pulling the strings behind crypto and who they are accountable to. The original vision was for decentralized finance where nobody could pull the strings, but the level of coordination on display here in the PoW-to-PoS switch makes it obvious that strings exist and they are capable of being pulled.
The development is in the open, happening through PRs on GitHub and across several independent client teams. You can join the R&D discord (I’m there as a casual observer) and watch or engage in technical discussions. You can propose EIPs or make suggestions about how the chain should work, and everybody can collectively decide it is a good or bad idea for the protocol.
Overall it’s very open, although they do have to draw the line somewhere and I assume the core dev’s weekly zoom calls and standups are not open to everybody to join lest it degrade into madness (these devs work across a range of independent companies and orgs fwiw). Even these calls and notes are shared btw.
The core devs have implemented a “difficulty bomb” in order to pressure the community to adopt their changes. If you don’t accept their hard forks you will stuck operating on a chain where you can’t mint new blocks.
It’s not quite force or coercion but it’s something close. It allows the Ethereum team to operate similar to a software company and retain tight control over the so called decentralized network.
This is a primary example of why many people argue that Ethereum operates more like a security.
There is one key thing to realize. The current Ethereum team can remove / post-pone the difficulty bomb. But so could a competing team. It doesn't favor one over the other. All it does is disincentivize stagnation.
At first bluff, I'd expect a ton of example and implementation code to be open-sourced. I still don't know what nightmare code is crawling CSV/ZIP (forget which) files daily doing ACH transfers, but afaik that's still how electronic banking is done? Would love to learn I'm outdated there.
From my very limited understanding, with Bitcoin the separation of powers comes from the miners ability to reject an update. With ETH Proof of stake, that is less clear - can the people staking refuse to accept a new protocol version/update?
The people who run the validators can, but validators on the old version will be incompatible with the rest of the network (if the rest of the network did update), and they will not be able to sync. It's no different from Bitcoin in that sense.
I read the Bitcoin whitepaper+some other technical document (I think) and have a real solid grasp on how that works. Ethereum, although I have used defi/erc20/uniswap/etc, I've got no idea how it works. Validators, shards, miners... is there a single source I can go to to learn it all? I've got a pretty high technical threshold so if it gets mathy I'm not intimidated. I just want to finally know how it works.
Hopefully you’ve heard by now that Ethereum has pivoted to a rollup-centric roadmap. No more execution shards – Ethereum will instead optimize for data-hungry rollups. This is achieved via data sharding (Ethereum’s plan, kind of) or big blocks (Celestia’s plan).
I've been following crypto for years and could probably explain Bitcoin in a pinch, but I'll cheerfully admit I have no clue what that means.
That scares me. I’d want it to be a system so simple anyone could grasp the fundamentals very quickly. Reason being, it’s so important and complexity breeds oversights and bugs. Security is hard.
Most things in society start out simple and grow more complex as we add more speed, security, applications, and so on. See also: medicine, science, flight, computers, the internet.
Bitcoin is a very simple system and very limited in its capabilities, but as far as modern blockchains go it is like the early room-size computers, Ford Model T, or Wright Flyer.
Random brain dump of questions: Does proof-of-stake generally mean the more money you have the more influence you get over the consensus? If yes, how could this manifest itself if a bad actor had a lot of ETH and tried to manipulate the chain? Could they theoretically jump favored transactions to the front of the line and/or charge less fees for their own transactions? How does this affect mining pools? Is a 51% attack any easier/harder/different?
> Does proof-of-stake generally mean the more money you have the more influence you get over the consensus?
Ethereum does not have on-chain governance, so having more stake doesn't grant you more influence over the network or the rules of its consensus algorithm. What it gives you is a higher probability to be called to do your duty as a validator and get rewarded for it. But what that duty entails is defined in the protocol and implemented in code.
> If yes, how could this manifest itself if a bad actor had a lot of ETH and tried to manipulate the chain?
You would need to get 33% or 66% of the total stake to be able to do some damage. With 33% you can prevent the network from finalizing, i.e. agreeing that a block is part of the forever history of the network. With 66% you could write wrong blocks and make them part of the forever history of the network. The protocol has on-chain mechanisms to deal with the first situation but there are no on-chain mechanisms to deal with the second one and a solution would require social consensus off-chain.
> Could they theoretically jump favored transactions to the front of the line and/or charge less fees for their own transactions?
Anyone creating a block is free to order the transaction however they please and decide which ones are included. You cannot not charge fees, though. To use the network you have to pay certain amount of ETH and this amount gets spent or burnt as it's also referred, it simply disappears from existence.
> How does this affect mining pools?
They disappear, there is no more mining.
> Is a 51% attack any easier/harder/different?
Different and harder. Different for some of the explanations above (the % necessary are different and what can be done at this thresholds also changes). Harder because it's much much more expensive to acquire the stake necessary to attack, so the chain is more secure. But also because an attacker will get its stake slashed (destroyed) and will not be able to do it again. While in PoW, once you have the hashrate you can keep attacking the network ad infinitum or until the rest of the network gets more hashrate than you. It's as if an attacker in PoS would gets mining rigs burnt. PoW cannot do that because it delegates its security to an activity outside the chain (burn energy with specialized HW), but in PoS the stake is on-chain so there are more tools to deal with nefarious actors.
You can halt the chain with 1/3 of the stake though. In Ethereum, that would trigger an inactivity leak that eats away your stake until it’s less than 1/3 of the stake, and consensus can be achieved again.
> If yes, how could this manifest itself if a bad actor had a lot of ETH and tried to manipulate the chain?
With the current price of ETH, it’s unlikely that a single entity could gain enough of the supply to do anything like this, but it is a valid concern for smaller chains.
> Could they theoretically jump favored transactions to the front of the line and/or charge less fees for their own transactions?
Block proposers can already do this. How often you get to be block proposer, is proportional to the amount of stake you have.
I'm not sure how the incentives will play out. It takes $60k at the time of writing to become a validator, and they've yet to implement the mechanism to exit your stake; so I think there will be some hesitancy to become one. The more validators there are, the worse odds that yours will be chosen to handle a block; and I believe as the number of validators increases the reward per block also decreases (though it's been a while since I read the proposal).
Ethereum uses signature aggregation to allow for a very large number of full-fledged staking nodes. Most PoS chains have a small number of full-fledged nodes, and everybody else delegates their stake to one of those.
Yes, it’s been running for years on many other chains and most new chains have adopted PoS (I can’t remember the last time I heard about PoW in state of the art blockchains).
How does Ethereum plan to deal Proof of Stake naturally monopolizing block creation and the Ether supply? In my estimation there are many compounding factors such as MEV and liquid staking with a massive economy of scale for first movers that combined with staking interest might make the top staking provider eventually hold the vast majority of Ether.
If the company that runs Lido is responsible for validating 99% of the blocks and the US Treasury Department comes knocking with a list of bad actors to blacklist, what happens next?
What pushes towards centralization are two factors; economies of scale and barriers of entry. For those mathematically inclined you can imagine plotting economic reward (y-axis) vs economic input (x-axis). Economies of scale determine the shape and growth of the curve while barriers of entry determine the cut with the y-axis. Obviously, the greater the barriers of entry or the higher the reward as your economic scale grows the bigger the push towards centralization. In the first case because you forbid small actors to participate in the game, in the second case because you reward bigger actors more generously.
So how does this graph look for Ethereum? Pretty simple, if you have more than 32 ETH it's basically flat. You get the same APY irrespectively of your size. And if you have less than 32 ETH? Well, you can then stake with RocketPool (a decentralized staking pool) in which case your APY is 0.85 the full APY. So the graph for Ethereum is:
- 0.85 * APY between [0 ETH, 32 ETH)
- APY between [32 ETH, infty ETH)
Where APY is the yield returned by the network which depends on total amount staked in the network and network fee revenues.
This is a remarkably flat curve, which highlights that there are almost non-existent economies of scale in PoS as designed in Ethereum. If you do the same analysis for PoW you will find it requires significant investment in specialized HW (either top of the line GPU or ASICS), and there are significant economies of scale in the form of access to cheap or unusable sources of energy.
> You get the same APY irrespectively of your size
On-chain, yes. But there is an off-chain cost to operating the validators, and there is economy of scale there. You can run many 32-ETH validators on a single machine using almost the same resources as running a single one, so the amortized cost of the hardware goes down. And when you do need to expand to multiple machines, the same applies; you don’t need 10× the people to manage 10× the machines. Of course, you can pay somebody to operate the validator for you, and those parties benefit from economy of scale.
Indeed. So let me flesh it out a bit more. You can run a validator using 100W (conservative figure) of energy and an Intel NUC with 2 TiB SSD (you can even run it on a Raspberry Pi but no need to be too greedy in HW resources).
That's 876 kWh in a year and 1000 $ in HW. Energy costs vary from place to place but let's pick 0,2 $ / kWh. Which results in 175 $/year in energy. The computer can easily last you 5 years if not more, so 200 $ per year. Let's add internet costs too. 30$ x 12 = 360 $ / year.
Those are the operational costs. Once you have 32 ETH this is pretty negligible.
There is also the people cost. If you’re a hobbyist you could argue those are zero or there is only some opportunity cost. But for a professional validator, SRE salaries dwarf the hardware cost.
True, but these are costs that affect large scale operators so they are not a barrier to entry. If anything they highlight that in some ways a small hobbyist is positioned to be as profitable as a large scale operator.
You don't take into account the social factors. People having a ton of tokens can easily freeze majority of them in the stake. People having a small amount of tokens won't be able to do so - first because they need them for a living expenses, second because they will be hit by transfer fees much more that people moving big amounts. This is all fine, but the system is deflatory, so this discrepancy will only increase and rate of it will also increase over time (accelerate). Basically big holders at the moment of the PoS switch will be the only big owners forever in the human history, and no new big holders can appear ever again.
A short technical answer is the beacon chain network wouldn't function properly if it had too many nodes (unless other parameters were also changed undesirably), so the number is limited.
32ETH was calculated to be approximately the sweet spot, optimising various parameters.
When this decision was made, back in 2018, it cost very much less than it does now.
There are secondary mechanisms for staking with less (RocketPool) but in these, below a certain threshold you don't participate in the beacon chain directly. Instead your stake is combined with others to allow someone to run a beacon chain node on your behalf collectively, with the rewards shared back to you, and a small cut taken off. The cut is why the graph changes below 32ETH.
It's probably not an engineering failure given current-day knowledge, because (as far as I know) nobody knows how to engineer a network that scales arbitrarily to any number of nodes while achieving total consensus (agreement) on all state every few seconds in a fair-decentralised and consistent manner.
The Ethereum blockchain does scale to more nodes and use scalable P2P networking algorithms. It is only the active beacon chain nodes which are constrained. Just as many users with "full nodes" in the current PoW network do not run a mining operation, not everyone needs to run a beacon chain validator to participate in a decentralised way in the PoS network.
You may think it sounds easy or natural to scale, but actually there are some difficult trade-offs when coordinating global consensus over all state at once. Because communication grows faster than O(n) for n nodes in a flat structure, one of the solutions to that is an uneven power-law network (like a hierarchy), or communication latency rising (along with costs), but both of those are undesirable factors when optimising for fair decentralisation with reasonable latency and costs.
These issues don't arise on other P2P applications such as file sharing and VPN onion routing. That's because they don't need to provide a real-time global consensus of all state on a fixed time scale.
Some blockchains offer low latency local-only consensus, or optimistic consensus which might be rolled back, but those are also a negative for some purposes.
There are some techniques for arbitrary scaling while keeping all the other desirable properties, but they are still open research problems. Some of the most promising techniques use zero-knowledge proofs, but those are mathematically very compute intensive and the current techniques can't run something as complex as Ethereum in real-time yet on an ordinary high-end PC.
Even the PoS beacon chain being readied for the Ethereum merge depends on fairly advanced mathematical cryptography to work.
Your note on Lido being responsible for validating 99% may have been hyperbolic, but just for reference - https://beaconcha.in/pools
There's an argument to be made that there is a centralizing force in the role of the consensus/security layer for the chain, because the asset being earned (ETH) can be staked and earn further returns - However, this role and phenomenon is mirrored in the PoW world. The difference is that the centralization happens one step removed from the on-chain asset - PoW miners consolidate profit into further mining investments, such that an increasing amount of the hash rate is owned by the largest miners, who can acquire improved access to electricity and/or equipment relative to smaller miners. One could argue that a PoS system actually has less room for exploitation, however, since you can't restrict a solo-stakers access to ETH, while you could restrict (or provide severe barriers to entry) on the competition of electricity/equipment.
The concern of the "top staking provider eventually holding the vast majority of Ether" is highly unlikely. Given that the asset will soon have ETH issuance cut by 90+% as part of the merge, and the fact that there is no mechanism by which top staking providers are incentivized more than the small solo-stakers, this would soon enter the realms of the purely theoretical, and seemingly take lifetimes to happen if one could even envision it happening at all without a reallocation into other investments.
MEV is being democratized as well (whether a good thing or not, will let you be the judge), with even solo-stakers being able to use an MEV client alongside validation clients in order to benefit from additional income on block proposals (see Flashbots mev-boost client, releasing alongside the merge).
Would love to better understand whether that better informs your perspectives on the subject, or what other concerns you still have.
In PoW, mining has real-world ongoing costs (electricity, hardware) and so miners need to continually liquidate their earnings to stay afloat. This counterbalances the effect of wealth centralization. If you try to remove real-world costs from that equation, you lose the counterbalancing effect.
At least in Ethereum -
- Stakers earn far less then miners since they aren't burning capital to validate. They only need to be paid for their opportunity cost over putting that capital to use elsewhere.
- Their stake does not automatically compound. Each validator maxes out at a weight of 32 eth, and it takes 32 to get a new validator going.
- Earnings have to be skimmed back to the execution layer in order to be manually re-staked (if there is 32 eth worth). Those earnings then enter the 'dominion and control' of the staker, so at that point taxes have to be paid on that income.
In contrast, mining can drastically improve the return on capital by operating at larger and larger scales so as to get better and better deals on equipment and electricity. That kind scaling doesn't happen with proof of stake.
> In contrast, mining can drastically improve the return on capital by operating at larger and larger scales so as to get better and better deals on equipment and electricity. That kind scaling doesn't happen with proof of stake.
Yes and No. We saw what happened to very large mining farms that got wiped out in a matter of weeks as mining was cracked down on in china. Large ETH stakers wont be forced to liquidate their stake in the event they get kicked out of their current jurisdiction. In short, uncertainty about the future of crypto regulation makes it easier to be a staker than it does a miner.
> This counterbalances the effect of wealth centralization
Yes, this ensures a limited supply with PoW, right?
> If you try to remove real-world costs from that equation, you lose the counterbalancing effect.
I assume you can't remove real-world costs in the case of PoS, but yes I can see how the real-world costs will be much, much lower.
Are you saying that there is a good reason to keep those real-world costs higher? (pardon my ignorance, I haven't looked into the principle you describe here before).
I don’t have a source handy, but eventually block production will centralize and the protocol will allow a “block proposer” role which will require lower resources. The proposer will be able to force a producer to include specific transactions and if they aren’t included, the producer will be punished (via their stake being slashed).
If a centralized entity is told to include transactions by a proposer and they refuse for any reason, they will eventually lose their stake and fall out of the producer role.
The difference is that if a miner does nothing, eventually they stop making money regardless of how many coins they have. If a staker does nothing, they continue to collect and collect even more indefinitely with no additional investment beyond running a very cheap node (or just letting someone else host it). Staking is just trivial in comparison, it's apples and oranges.
> If a staker does nothing, they continue to collect and collect
They do, but the supply of the token also goes up, so their share of the supply doesn’t grow as much, and relative to other stakers, it doesn’t grow in proportion at all. It is true that inflation rewards effectively move value from non-stakers to stakers, but nothing prevents most of the supply from being staked, especially with liquid staking derivatives.
> Staking is just trivial in comparison
I agree that staking is, but operating the node is not! Operating a validator is actually more demanding than operating a miner. For a miner, there is no disadvantage in being offline except for the opportunity cost. But a validator has a duty, and will be penalized for downtime. (Granted, the requirements on Ethereum are quite lax — on purpose, to make it easier for enthusiasts and other non-professionals to operate a node.) Operating a validator requires monitoring and maintenance like any other software. Your server will run out of disk space, your node will disconnect if you don’t update the node software in time, etc. Most validators in most of the PoS networks are operated by professional companies with dedicated SRE teams because of this.
For a major staker, are you saying that running a validator is equivalent in work/cost to running a warehouse full of miners? Remember, we're talking about major players, not just some random guy doing this in his closet.
The flip side of this though is that stakers can have their capital burned because of misbehavior. If a staker gets too entrenched and the other folks in the network don't want them around anymore, their stake can be slashed. Proof of work cannot destroy the equipment of a hostile miner, only wipe everyone's equipment out with an algorithm change.
The problem of pools getting too big (Lido, CeXes, etc) is worrying. I think once withdrawals are enabled (shangai fork), liquid staking won't be that attractive, so the situation will improve.
> If the company that runs Lido is responsible for validating 99% of the blocks and the US Treasury Department comes knocking with a list of bad actors to blacklist, what happens next?
The company that employs most of the Lido contributors is based in a region where the US has little influence. But aside from that, the Lido node operators (who operate the validators) consist of more than a dozen companies, registered in various countries, using servers in different locations. Diversity of jurisdictions is an explicit criterion for node operator selection. Possibly some of them could be forced to censor transactions, but I think it’s not the lowest hanging fruit (going after the client software developers might be a more impactful avenue, there are fewer of those than validators, though fortunately Ethereum has multiple client implementations).
But suppose somehow 99% of the blocks are produced by validators who censor certain actors. Then it depends a bit on how far-reaching the censorship is.
If validators refuse to include certain transactions in their blocks, but still accept other’s blocks for consensus, then I expect that blacklisted actors will find it more difficult and more expensive to get their transactions included, but it would still be possible. If they offer a juicy transaction fee, they will have to wait on average 50 blocks to get their transaction in, but then a validator will be more than happy to include it.
If validators refuse to include certain transactions in their blocks, and also refuse to vote on blocks that do for consensus, then they will be able to enforce their censorship. One way to think about this, is that the censorship has been built into the protocol, and the 1% of validators still willing to include the blacklisted transactions, are producing what the others consider invalid blocks. Consensus can tolerate 1/3 of the stake misbehaving.
99% is an extreme case though; if the censorship is limited to less than 1/3 of the stake, then the opposite happens. Validators who refuse to vote on certain blocks don’t fulfil their duty of voting, which incurs a penalty. If the validator is not allowed to vote on even a descendant of a block that contains a blacklisted transaction, then effectively it will be prevented from ever voting again, and its stake will slowly evaporate due to penalties.
An interesting case arises when censoring nodes control more than 1/3 of the stake, but less than 2/3. This could result in a liveness failure, where no blocks get finalized (because neither the censoring nor the non-censoring nodes can get the required 2/3 majority). This triggers an “inactivity leak”, where the stake of the misbehaving nodes gets destroyed, until there is less than 1/3 of it left, and consensus can be achieved again. Of course, who is “misbehaving” here depends on your point of view, and the situation is symmetric, so this would lead to the chain forking into one where the censors have a supermajority, and one where the non-censors have a supermajority. The side which had most stake will be the first to achieve consensus again.
(Because of this risk, there is an ongoing discussion in Lido about whether it should self-impose a limit to not control more than 1/3 of the stake. But it’s a tough situation, because the way it looks right now is that that stake would instead be controlled by centralized exchanges who offer staking services.)
- Farcaster [https://farcaster.xyz/] is another one, that takes a more hybrid approach of using Ethereum for trustless identity, but stores social stuff in a "sufficiently decentralized" way.
- Radicle [https://radicle.xyz/] is a decentralized Github basically, that (optionally) uses Ethereum to store the Git HEAD of a "project" essentially.
- Arweave [https://www.arweave.org/] stores files permanently using a cool "endowment" mechanism. Currently, the network has secured its storage for like 1000 years in theory.
“ Arweave [https://www.arweave.org/] stores files permanently using a cool "endowment" mechanism. Currently, the network has secured its storage for like 1000 years in theory.”
2 issues spring to mind:
- What happens when someone puts illegal content on it? Eg child porn. It claims to be censorship-resistant (not censorship-proof), but I imagine any system that cannot expunge data like this won’t be around for long.
- Where are the details on the 1000 years of storage? Have they got financing arranged (and already in trust funds/isolated from the rest of the business) for this storage, the maintenance of the software throughout the next 1000 years etc? Or are they relying on people to contribute resources? If I pay money to store data here (say precious, irreplaceable family photos), then come back in 50 years, what’s the odds that I will still be able to access them?
RE the first point: you don't have to store/host 100% of the data, content can be blocklisted based on hash or other attributes so your node doesn't replicate or retransmit it. The censorship resistant claim assumes there's at least 1 node on the network willing to host your content.
RE the second point: highly recommend taking a look at the arweave white paper. They use an interesting pricing mechanism that tries to account for the cost of the next 200 years of storage (dunno where 1000 came from, the spec plans for 200).
> The censorship resistant claim assumes there's at least 1 node on the network willing to host your content.
That’s a weak claim then. I wouldn’t call that censorship resistant at all. That’s no better than China imo. Wouldn’t be surprised- if this got popular- for people to publish blacklists you can subscribe to.
Re the pricing mechanism, if the project fails/people abandon it (because the arweave economy crashes for whatever reason) what happens to the data? Paying out an endowment over time to fund the storage only works if you have people who put value in the tokens. Which could no longer exist.
Just because you come from a place of great financial privilege and a liberal society does not mean others have no use for a censorship resistant form of money.
Look at the dates, now look at the prices. Every single one of these people got rekt. That poor Ukranian man who put $2000USD into Bitcoin in March now has $1100. You're looking at this as a solution, and I'm looking at it as a shameful example of the problem. These folks are the least able to bear risk and folks are advocating they put all their money into speculative plays on US dollar liquidity. It's shameful. This isn't financial inclusion, it's financial exclusion.
If they'd put it all into USDC they'd still have all their money. It's by no means a perfect solution but it's spiritually in the right direction. Time for Rohan Grey's e-cash or a CBDC. That's how this actually gets improved.
Who says they didn't put money into USDC? I have talked to people there who definitely use USDC as a primary savings device, with btc and eth mixed in on the side for long term holding
You can think of Ethereum as a DB+VM existing in the extreme end of the High Availability spectrum and whose operation is uncensorable and unstoppable by any actor. Obviously many use cases do not require this kind of characteristics but it's very hard to argue that these properties serve no use for any use case.
A global financial system could very likely be built on top of a system like this. A global identity/credentials system could also benefit from such kind of properties.
If you disagree it would then be interesting you explained where you put the cut-off, i.e. define how many sigmas should be enough for any use case and define who should we be willing to trust the operation.
> A global financial system could very likely be built on top of a system like this.
No it can't.
Two major reasons (and this isn't an exhaustive list, just the first couple that spring to mind): 1) the lack of scalability both in transaction rate and data volumes, and 2) the lack of transaction reversibility.
I always find interesting the people that claim with certainty that technology cannot solve X when there are no known physical laws forbidding it.
Scalability is already being tackled, rollups are already scaling Ethereum today. In combination with data sharding they will allow scaling Ethereum to the order of 10 million TPS by the end of the decade. But much earlier than that we will see multiple orders of magnitude increased scalability.
Transaction reversibility is a non issue. Any trustworthy ledger is non-reversible. The way you implement a reverse transaction in a pen and paper ledger is by writing a new transaction that undoes the effect of a previous one. Not by erasing the previous one. Ethereum itself is non reversible but this exact logic can be implemented over Ethereum in your smart contract if so desired. And, in fact, there is smart contracts that operate like that. For example, USDC the stablecoin by Circle has this logic built in, it can freeze funds and take control of them at which point it can do whatever it needs, send it to law enforcement, reverse a transaction, etc... This is one of the lamest counterarguments people put forward.
It's hard to argue with them because they have a financial stake in the system, it's in their interest to spread it as far and wide as possible because it will enrich them. Money clouds judgement.
The hope for global adoption just means "I got in first so I deserve to be rewarded". An honest answer would be that no one care about all the technology as long as number goes up.
Now as they usually say, cope and seethe, nocoiner.
It's hard to argue with your philosophy because the goal posts never stop moving.
Bitcoin worth anything above $0 would have been an absurd thought 10 years ago, now it's a global asset class worth hundreds of billions of dollars. Unstoppable money not backed by any state is an amazing accomplishment. This alone is a mind blowing fact to me, but again, to the HN crypto hater it's meaningless, because the definition of "success" is constantly moving.
Blockchain and finance are deeply intertwined, so a lot of applications built on digital financial rails (blockchains) are naturally around capital formation, derivatives, trading, etc. but to the socialist / statist that should be outlawed (not just in crypto but likely Wall Street itself) so that isn't anything to you.
One counterpoint is the HN shibboleth of Stripe. Stripe is barely a tweak on PayPal, or at least it was at first, yet everyone on HN ejaculated in amazement at the ability to take a credit card with a javascript function. Of course I think Stripe is a great company, I just want to put into context how on HackerNews, Stripe = "Amazing incredible glorious $100 billion epic company" and cryptocurrency = "Wow a trillion dollar asset built on pure computer science and economic principles created by mysterious cypherpunk, who cares".
>
It's hard to argue with your philosophy because the goal posts never stop moving.
I'm not the one that picked that list of projects. You're the one who described them as having "promise", not me.
If there's some projects out there that have lived up to their promises and aren't just gambling enablement, please, list them!
I'll take a quick crack at a few:
Helium, which actually purported to use crypto to build a real-world impacting product? Fraud.
NFTs generally? Speculation, gambling, mostly fraud, rug manufacture (not in the textile sense).
Exchanges, derivatives, "yield" farming, etc. Mix of gambling, fraud, and simple wealth transfers.
Various DAO-style projects. My favourite is projects like Spice, buying real-world assets to leverage them in some way. All failures, some comically so.
Cheap money transfers? Nope. Gas fees, etc.
Store of value? Nope. Massively volatile.
Currency usable for real-world purchases/transactions? Nope. Too slow (also gas fees, etc).
And now I'm at the limit of what comes up off the top of my head.
The fact that billions of dollars have swept into a massively speculative market during a period of historically low yields isn't a surprise. The prospect of wealth transfers from the gullible to the rich will always draw in investors. But that isn't evidence of actual value or success, unless your measure of success is "how many people got rich on the backs of a lot of losers".
The other side of the table is so clearly entrenched in their viewpoint that I just laugh now.
Someone asking me at the bar "but what's the value?" when they are an experienced technologist does not get my engagement. They haven't done enough homework to even propose a potential answer to the question they're nongenuinely asking
It has been interesting. The liberal technology community is so emboldened by "muh environment" FUD this cycle that they're actually more blind to the growing sector than ever before.
Ultimately, for the finance-minded developer, there is a gargantuan shortage of web3/crypto devs. I'm not talking about scammy VC web3. I'm referring to the people capable of building what's coming. Overnight, every company is gonna need devs and the shortage will be exaggerated.
It's all optics, their supposed "progressive" view. Wealthy people angry that GPUs got so expensive, overpowered energy suckers they'd gladly use for high-end gaming whilst having the AC on full blast. Nobody cares one bit about high energy use. Calling out crypto is a great distraction though to virtue signal that you're "on the good side".
As was the case with the Mozilla incident. Mozilla had been accepting crypto donations for many years. Until somehow this got back into the news and some influential "progressives" applied the very typical mob pressure, forcing Mozilla to stop.
And all is right again in the world. Except that people willing to give crypto (which is a form of money) now won't or can't. Less income for Mozilla whilst crypto in itself is in absolutely no way harmed. It's still there, same energy use, I guess it will now be spent elsewhere.
That's the new progressive. Obsessively cleaning your self-image, whilst outcomes are completely ignored or achieve the exact opposite.
Is there a mechanism in place to stop people from laundering money with ethereum? This is a serious question, I’m a total noob when it comes to crypto.
You can’t stop crime, otherwise murder wouldn’t happen. If you give people a modicum of freedom then some amount of them will act with criminal intent.
Arguably the blockchain makes detecting and prosecuting money laundering easier than our opaque legacy financial system.
Right, in the same way that in the hypothetical Blockchain utopia anyone seeing you eat at a coffeeshop can also see what porn sites you visit, how often you shop at the dispensary, and which escorts you prefer to visit.
> You can’t argue in good faith with people who don’t want to learn.
You can’t argue in good faith with people who don’t agree with the ideology behind crypto and decentralization. I'm a "crypto" person. I work for a "crypto" company. I do so for primarily ideological reasons. The tech is cool, but I'm here for the ideas and the possibility of a different world. Most people on HN are creating developer tools and SaaS software for corporations. Different ideology. They simply don't agree with the worldview that crypto is offering developers/users.
> I've also noticed a more disturbing trend: HR and head hunters increasingly filter out Solidity/Ethereum/Blockchain keywords on resumes as public sentiment towards anything crypto is souring. During interviews, I see candidates who answer yes to whether they had worked on a blockchain or crypto projects being blacklisted.
Some of the best engineers and researchers I've ever worked with were in the blockchain space. Companies that do this are shooting themselves in the foot. I work for a pretty cool startup in the defense sector that appreciated the experience I've had in distributed systems from my several years working on projects like Cardano.
> Companies that do this are shooting themselves in the foot.
Not companies that care about PR and want to distance themselves from crypto space. Those engineers and researchers unfortunately have been tricked into thinking that crypto would be here to stay as were the hundreds and thousands of investors that were duped into an elaborate Rube Goldberg machine that serves no real purpose other than the monetary incentives of a closed few.
Crypto prices have gone down a bit from their peak, but it sure seems like crypto is here to stay. In fact, I'd be happy to make a bet that the crypto industry will exist in 10 years, and will have a larger market cap than it does today.
I'm not calling people who got scammed sore losers, but rather people who, after 10 years of blockchain still being around and kicking, will refuse to attribute even a shred of legitimacy to the technology and to ever admit they were wrong, still claiming that "it's a scam" and various iterations of "crypto bad".
What companies are those? I can see people who worked at Terra Labs having issues but I don't know if it'll be any harder for them to find work than say those at Theranos when it closed - high profile fraud will impact you sure.
"I see candidates who answer yes to whether they had worked on a blockchain or crypto projects being blacklisted." - If widespread this is the best sign of health for the tech industry I have seen in years
You do not want that to be the norm. It just so happens that, right now, they are discriminating towards something that you believe to be "wrong". What is "wrong" may change in the future or someone else's "wrong" may not align with your own. And considering we're talking about people's jobs and means to survive, it's not at all something to be taken lightly. At all.
The applicant might not even have an interest in what they worked for, or might even opposed to it. Maybe they worked there just to survive and the pay was good. Has that ever happened to you? I know for a fact that I could not give a single fuck about few of the sectors I worked for, some of them I actively believe to be cancerous to society. I do not have the right to discard people based exclusively on their past work experience, as I'd discard myself.
It just doesn't make sense from a moral standpoint, not to mention it also doesn't make sense from a competitive standpoint: I'd have a smaller pool of talent to choose from, and would discard brilliant minds simply by association to something I do not agree with (or simply don't understand) and ... for what, exactly? To make a point?
There is a difference between industries that are cancerous to society (of which there are many and very few of us have clean hands at this standard) and open, obvious scams. Scams where the software IS the scam and so the software developers involved are culpable. If someone put on their resume that they had previously been employed writing malware then I think it is quite fair to blacklist them too.
I get the overall point you are making, but it is just a rehash of the free speech absolutist position which, in my opinion (that you will not change), inevitably and continuously attempts to shield the worst abusers of society.
And if it turns out that I end up working on something horrible and don't get out immediately and scrub it off my resume? Then I deserve to take reputational damage
You have decided that ALL blockchain technology is a scam and everyone involved with it is culpable enough to be blacklisted from the industry with a zero tolerance policy.
Do you believe that to be a reasonable position to have?
there is plenty of work within web3, at least for the engineers and advisors. support staff and marketing personnel are the ones being laid off with less prospects, from what I can tell.
its also pretty common to form a resume for the job you want, omiting less helpful or unrelated things.
I went the whole decade never telling any web2 startup I worked for about crypto, who cares if its another bear market and people are yet again souring on it
Indeed, according to our colleagues from The Block, several assumptions have been made by Ethereum developers regarding the tentative timeframes for The Merge’s implementation.
I am looking forward to the moment, when all the people who consider this the 2nd coming of christ equivalent for the crypto world realize that it's just business as usual.
Hasn’t Cardano already shown that POS works and it did not have the effect that you predict? I’m afraid most people in the crypto world don’t care one bit about the carbon foot print of these technologies.
Cardano has a tiny market compared to Bitcoin or Ethereum. And as we've seen over the years, a lot of problems only show up at scale. So if Ethereum is able to run PoS safely, it will be a much bigger deal.
Bitcoin and crypto use an obscene amount of energy and are basically impossible to ban. A working proof-of-stake system in a non-shitcoin will pile pressure on all cryptocurrencies to move to that system to use less energy.
Most crypto projects and blockchains aside from Bitcoin and Ethereum are already using proof of stake for consensus. But otherwise I agree, it will give more confidence in PoS to see it securing Ethereum.
Rinkeby is pretty rough, and has basically no other reputation than being dodgy either. So someone likes to pick the rougher spots. Maybe someone who likes rap and they are mentioned in lyrics or something like that.
I'll stand by my statement. I'm not sure why I should give my etherium proceeds away to "charity". What's your rationale for that statement?
Maybe I should be more clear, without ANY application or use for ANY crypto besides pump and dump schemes, ALL crypto, IMO, is a scam. Crypto has been a thing for 10 years, longer if you count egold and liberty cash (or whatever that was called).
And to clarify again, my eth has been locked up in "staking" for what 2 years now without me being able to sell it. I'm looking forward to offloading it all and reap my gains, doesn't change how I feel about it.
I've said in another comment I've participated in the scam, 5 years ago, I'll take my gains and walk. Back then I was under the impression that there would be some sort of killer app by now. There isn't and never will be. I've identified the scam, it's all pump and dump and an inflation sink.
But by taking your gains, you mean selling your ETH to a sucker who doesn't know it's a scam... Doesn't that make you a scammer? At the very least, it makes you a participant in the scam. It seems the only ethical option would be to destroy your ETH.
You sure do make alot of assumptions. I've addressed your concerns about my "ethics" in another thread however I'll address them here once again.
There is no application nor will there ever be any application for crypto that cannot be done more efficiently elsewhere. It is no longer a currency so you can scratch that off the definition, there has been nothing but scams, going back to Mt Gox all the way upto this year of literally billions in theft. Why don't you address the ethics of the scams and thievery?
The only truly ethical thing to do would be to destroy all crypto.
For anyone curious what the merge means, in my limited understanding:
1. Transactions will get slightly cheaper, but only because they're increasing the block rate from every 13 seconds to every 12 seconds, not anything specific to the other cool stuff in the merge
2. The network will switch from proof-of-work to proof-of-stake, meaning that there will no longer be GPU demand or substantial energy consumption attributable to the Ethereum network.
3. For a cryptocurrency to be secure there has to be some barrier to participating in consensus. Now, instead of having to have a fancy GPU to run an Ethereum validator, the barrier will be that you instead have to "stake" 32 Ethereum (and risk losing it if your validator misbehaves). A staking reward of (I think) 5% a year will be issued for your trouble.
4. The Ethereum network will be more resistant to "short-range" forks, that is, forks that diverged from the proper chain "recently". (More resistant in the sense that it will be more expensive to execute an attack like that.)
5. Once you've staked your 32 Ethereum, you currently can't "unstake" it. The ability to withdraw your stake will be added in a future eth fork. It will have to be gated by some delay (maybe you can only withdraw your stake 6 months after you staked it). Attacking the chain via a "long-range" fork, that is, a fork that diverges from the proper chain longer ago than the withdrawal period, will be much cheaper or possibly even free.
6. Ethereum will still favor liveness over consistency. An attacker can't stop the chain, but they can prevent it from finalizing for a time (at expense to themselves).
7. Token issuance will go down, probably to below the burn rate, so the base Ethereum supply will go down over time
8. The chain will get deterministic finality after some number of blocks (I think something like a day's worth). That means that, once a block is finalized, it will never be rewritten. Network outages or attacks can prevent blocks from finalizing.
> to be secure there has to be some barrier to running a validator
There only has to be a barrier for receiving rewards. Bitcoin full nodes validate everything but receive no rewards, and need no barriers.
True, my phrasing was misleading (I used the Ethereum terminology, where a validator is not just any node that validates the chain, but one that participates in consensus). Edited my comment accordingly
And the barrier of 32 ETH.
I run one of the eth validator serious for LIDO. We have 10 validator keys for testnet (prater/goerli now just Goerli) and around 1000 for mainnet ethereum on the beacon chain (which will be the consensus chain post mainnet merge).
For those curious, 32ETH is between $1-3k USD depending on where you're temporarily located within the last 6 months, currently ~1.8k.
?? no thats closer to $58k USD..
OP probably made the mistake because if you Google "32 ETH in USD" it shows you how much 1 ETH in USD is.
I don't see how this reduces energy consumption. To buy into being a validator node you need Ethereum, to get Ethereum you need to do proof of work, if the number of people doing it falls then mining Eth will get easier, and the most cost-effective investment in Eth would be running a large number of validator nodes to collect the payment (you know, all sitting in the same DC). So of course expanding your mining operation still makes sense since it will fund the increase in your validator node operation.
Why would anything change when the economic incentives haven't? Mining isn't getting less lucrative or necessary.
You can buy ethereum on an exchange. Essentially they're changing the economic commitment required to participate in the consensus from demonstration of computational work to a monetary stake.
The end state of that is that all Ethereum winds up being staked. There's no reason not to stake Ethereum if there's no Ethereum inflation, and so the only new source of Ethereum would be PoW-mining.
PoW-mining is being turned off. The source of new ETH will be ETH holders selling ETH to meet liquidity needs. People cannot save 100% of their income forever.
Most of it probably. And the more tokens you have the easier is to put majority of them in the stake, also any fees are irrelevant on the large scale operations, unlike the small transfers. So The biggest holders of tokens become the biggest stakers, and thus become the biggest earners. Since the rate of token accumulation will only increase because the of compounding of the tokens in the stake (new profits will be staked too).
Won't it end up being deflationary under pow?
Honest question - if you get deterministic finality in a day (#8), then how can you attack the chain with a "long-range" fork (#5). Doesn't #8 solve #5?
The answer as I understand it, is that anyone who's continuously running a node won't be confused by such a fork, but someone who just joined the network has no way of telling which fork is the true one.
Put another way, if you know the true chain at time T, you also know it at time T+1. But if you're just joining the network, or you went offline for a bit, that means you don't know which chain is the true one and need some outside-of-protocol way of determining which fork to trust.
What can users do to get certainty over which one is the correct fork? In POW you can check the POW. Is there a trustless solution for this in POS? Or is the only solution essentially to ask around and hope that people aren't lying to you?
In practice, it's the same as with Bitcoin: you have to get the correct, current software. It's just that the software will include a block hash from a few months back.
You might argue that Bitcoin is defined as the chain with the most hashpower, period. That would remove all subjectivity from Bitcoin, but it would mean that a 51% attacker could arbitrarily change the rules and steal people's funds. That's not how it actually works; a 51% attacker still has to follow the rules of the protocol for their blocks to be accepted by the non-mining nodes, and that means there's social consensus on the correct software to run the protocol.
That's not how it works. Hashpower decides the canonical chain, not the rules of the system. Hashpower makes sure that the blockchain can't be rewritten. Hashpower can't change the rules of the system, because those blocks would be invalid and rejected by the network.
There's no consensus needed on which rules to use. Everyone can use whichever rules they want, by using different versions of the software. Different rules define a different currency, like euro or dollar. Using the best currency with the best rules is just a game theoretic focal point. Everyone chooses to use the best version of the software, because they assume that everyone else does so too, even in the absence of communication. There is no "correct, current" software in Bitcoin, because it would be a single point of failure.
There's no objective protection against long-range attacks in PoS, because there's no hashpower to prove the canonical chain. It requires the provider of the "correct, current" software to decide which chain is the right one.
>>Hashpower decides the canonical chain, not the rules of the system.
No, hash power and the rules decide it. If you have invalid signatures in your blocks, it doesn't matter how much hashpower your fork has, it won't be accepted as canonical by other forks.
*by other nodes
51% attacks can not arbitrarily change the rules nor can they steal funds. They can double spend or prevent finality. Nodes enforce the rules of the network by rejecting blocks they deem invalid.
It’s the same as with Bitcoin:
- wait a bit to make sure that you can talk to different people on the network and see what each of them see
- check checkpoints on twitter or websites like etherscan (are they seeing the same thing I’m seeing?)
In projects like Mina, since you do not download the history of the chain (there’s a single zero knowledge proof of a few kB that covers the whole history) you must rely on a marker for “chain quality “ to differentiate potential forks.
Note that there was also some research on how to get signal from the transactions you see that you’re on the correct fork (from some ex colleagues working on libra): https://eprint.iacr.org/2019/1440.pdf
If you're running a node, and it finalizes a block, that means your node will refuse to ever revert that block.
A long-range attack is when a validator withdrawals their stake, waits the withdrawal period (e.g. the 6 month delay delay mentions above), and then creates a fake chain starting from before they withdrew their staked eth.
Because in the "real" history (e.g. the ones that most nodes have seen over the past 6 months) the validator doesn't have Eth locked up still, there's no way to punish them. Thus, these long range attacks get very cheap (you could even imagine someone who pays validators for old keys -- aka, you don't even need to be a validator yourself).
These two facts together mean that PoS blockchains require some "weak subjectivity" - which pretty much means when you download and start syncing your node, you need to know a "finalized" block hash from the past 6 months (or within the withdrawal delay). This ensures you won't get tricked by a cheap long-range attack.
In practice, I don't think this will be much of a problem - clients can just do a new release with a new block has every few months for new users!
There must be some part of the attack I am missing here.
Let's say I'm an attacker and I do this. But now none of the subsequent blocks on the original chain will validate anymore because of hashes mismatching. I could of course validate new blocks but 6months+ of blocks from only one or a small number of validators (depending on how much validator capital one can amass for the attack) is going to be pretty obvious.
Unless the attacker can get a significant percentage of validators part of the attack, I can' see it work out in practice.
What do you mean by obvious? Your crypto client is a computer and unless you go and check what it is connected to this will be opaque to you (and so not obvious).
Because they don't actually have "deterministic finality" in any meaningful sense. It's not possible.
PoS is, as usual, vulnerable to attacks like grinding, and you can only paper over this.
Can you link more details on this? (am n00b, genuine curiosity)
Long-range fork is possible if network participants are manipulated or forced to switch to another fork. In practice, the correct fork is communicated from entities who control the majority stake, such as exchanges. In the case of network disruptions, there might be multiple valid forks, and choosing the correct one is arbitrary, because there isn't one. There's no objective consensus similar to proof-of-work.
It sounds like there is if you wait for the deterministic finality
By the way I was under the impression that Ethereum will still have forks, and thus probabilistic finality
Ethereum's PoS is really two consensus algorithms. The first converges rapidly but has probabilistic finality. The second has true finality, in the sense that a finalized block can't be reverted without destroying a large percentage of total stake, but it takes a while before that finality kicks in.
Most of these are pretty spot on. The one thing I will note is that the staking rewards are not a constant 5%, they are a function of the network demand. Stakers are rewarded a portion of transactions, so the volume of demand per block will increase the gas price, and the validator rewards. If the number of validators on the network increases, each individuals rewards will drop.
That being said, the adoption of layer 2 technologies has taken off, and significantly impacted the demand for layer 1 blockspace.
Is there anywhere I can read a technical version of how proof-of-stake work?
I'm still confused at what happens if you create a valid block with the Ethereum you stake and then that block doesn't end up being part of the main branch.
You get assigned by a random number generator to create the next block. If you fail to create it your only penalty is the opportunity cost (i.e., you miss on the reward that you would have gotten for creating one).
So at any given time only one validator is going to create a block. If you create it, it's going to be included in the blockchain. If you don't create it (or you create but due to network problems fail to communicate it), then the blockchain skips a beat and someone else will create the next one.
If you want a user friendly introduction I recommend you Ben Edgington's book (WIP): https://eth2book.info/altair/
Or straight from the source: https://github.com/ethereum/consensus-specs
In proof of work the leader election (the thing that decides who gets to write the next page/block of the ledger) is based on how much money you can put in computing power or how big your mining pool is. The more computing power, the more lottery tickets you get to write the next block.
In proof of stake, the more crypto tokens you have, the more lottery tickets you get to win the right to write the next block.
In PoW the lottery is solving puzzles, that’s the energy inefficiency, in PoS the lottery is decided like a real lottery: with a random number generator (a distributed one at that, so that people agree that it was generated honestly)
How do you make an honest distributed random number generator, then?
A bunch of nodes generate random numbers and publish their hashes. After all hashes have been published all nodes reveal their random number, verify that their number actually corresponds to their hash. Xor all the numbers together and as long as at least one node was honest and generated a random number the result will be a random number. I don't recall if this is exactly what proof of work does but I think it's pretty solid.
PoW as used in bitcoin and ethereum is a bit different. It's designed to reduce the communication needed between nodes.
Each block is published with a hash which is based on all the previous blocks plus its own data. All participants are racing to solve a puzzle: basically a big guessing game where the first to guess the winning number gets to make the next block. The game is to find a number which when combined with the previous hash and put through an expensive hash function comes up with a result which has a specific number of binary zeros at the end. Since hashes are one way functions the only way to solve the problem is for everyone to guess until the solution is found.
The first participant to find the solution gets to create the new block. They also check the last few blocks to see if anyone's been cheating by adding fraudulent transactions. If fraud is detected they just ignore those nefarious blocks like they never happened.
The algorithm scales with the number of participants by automatically making the "difficulty" higher by changing the size of the pattern that needs to be matched.
Yeah I meant proof of stake, not proof of work
Sure but I think the question is about the random number generation used to decide in PoS who gets to do the next block.
You should check out drand (https://drand.love), which is based on threshold cryptography and the group running the network is composed of 16 independent organisations, none of which can manipulate or predict the next beacon. Beacons can be consumed from the public HTTP APIs (https://drand.love/developer/http-api/).
Lots of exciting features to land very soon that include Timelock Encryption, among several others.
Technical explainer can be found here: https://research.protocol.ai/tutorials/resnetlab-on-tour/dra... and documentation here: https://drand.love/docs/
Wondering the same thing myself. The entire problem with proof of stake is that the only thing in the digital realm that can be relied on as a source of objective truth is computation, hence proof of work.
How do you get verified (true) randomness without an oracle and without a connection to the analog world (proof of work)?
It would be amusing if the answer was randomness that came from a proof of work algorithm.
An oracle is a totally sensible approach for certain use cases, see the VRF support in chain link as an example:
https://blog.chain.link/verifiable-random-function-vrf/
I don't know how they do it but it seems easy in practice. You hash the concatenation of chunks of data submitted by participants. Adding more data to the hash can only make it more random, not less. As long as at least one participant wants the outcome to be random and therefore they submitted actual random bits, the result will be random no matter how unrandom all the other participants' data chunks were.
You use a vrf (verifiable random function) check what mina, dfinity, celo, and pretty much all the PoS coins dk
https://solana.com/news/proof-of-history
I'm not convinced proof-of-stake works at all: https://yanmaani.github.io/proof-of-stake-is-a-scam-and-the-...
It's almost certainly better for the environment / our continued existence than proof-of-work, if we must suffer cryptocurrency, but I don't trust people who were willing to continue to engage with proof-of-work for years to create an ethical (or even functional) alternative.
For anyone who might be concerned by the claim here; it’s really a political argument and not a technical one. Proof of stake as implemented by Ethereum makes a tradeoff which requires some small amount of trust (to identify the correct chain more quickly) which does not create a centralization risk.
But this is always the way; leveraging trust where appropriate can allow great increases in efficiency, this is how society works, so you have a political spectrum where Ethereum is “responsibly pro social” and Bitcoin is still a kind of super trust less money with enormous energy costs to enable this somewhat superficial security property.
Thanks for this. Can you further explain the part about forking being easier from point 5?
For sure. In this comment I'll be using "validators" to mean "nodes participating in consensus".
The "true" chain according to the new protocol is the one that has more signatories. Validators sign blocks as they're produced, and when a block gets more than 2/3rds of the signatures, it's finalized on the chain and won't be rewritten. (Well, it's much more complicated than that, but that's the general intuition.) When you sign a block, you get a reward on that chain, to incentivize people to participate in consensus.
So the question is, when there's a fork, what stops people from just signing blocks on both forks so they get the signing reward no matter which fork "wins"?
The protocol disincentivizes this by requiring validators to put up a stake of 32 eth, that gets "slashed" if you do that. Put another way, if there's a fork and you sign blocks on both sides of the fork, you lose part of your stake.
But that threat only works if you actually have a stake to lose. If it's been ${withdrawal_delay} months and you no longer have any eth staked, you can start signing blocks from a long time ago and the protocol can't slash you as punishment. So a group of 2/3rds of the former-validators could freely start a fork from ${withdrawal_delay} months ago, sign a bunch of blocks on it, and if their fork loses they'd face no penalty. Someone currently participating in consensus can see this is happening and won't be confused, but someone just joining the network will be.
The solution is pretty easy, if inelegant. When entering the network for the first time, if there are multiple competing forks, you'll just find someone you trust IRL and ask them which chain is the real one. If you've been offline for less than ${withdrawal_delay} months, you won't have to worry about this, but it is a problem for fresh users.
If you set ${withdrawal_delay} to infinity, this isn't a problem, but probably you don't want to do that. Once withdraws are enabled, there'll be some tooling to make it easy to figure out which chain is the real one, but I don't expect there'll be many forks that are remotely convincing.
Thanks!
In theory, a very large staker could run a large share of the network, exit (either normally or get slashed), then rewind the chain prior to the exit, run it on their own independently, and then pop up after a while with a competing fork. This makes syncing from the beacon chain's genesis risky because you could end up following the attacker's fork.
To make up for this risk, Ethereum then relies on distributing recent 'weak subjectivity' snapshots (through other known nodes, block exploers, baked into client releases, etc) to make sure new folks can join the legitimate network and ignore an attacker's. Those snapshots basically rely on social legitimacy to help folks get going with the 'legitimate' chain. It is a trust assumption.
In contrast (at least in theory), in a proof of work network you can 'objectively' determine which of competing forks of a chain is the legitimate one by a simple metric, the 'longest chain with the highest difficulty'. The presumption made here though is that you will have an open internet and honest client software that will not censor the legitimate chain. A trust assumption is still made that those that introduce you to the p2p network aren't hiding a longer chain from you.
Something to keep in mind is that you already mostly need such trust.
You are using that "social legitimacy" to know you are downloading the legitimate software, or viewing the legitimate source code, or documentation.
Your computer can't calculate if ethereum.org is the legitimate "Ethereum", or it's ethereum.io (just making it up).
1. Transactions won't change noticeably since the gas costs won't change and the network won't have more capacity.
2. The 'demand' from mining for GPUs is over-rated. It was a brief problem years ago. You are correct that energy usage for validation will go down.
3. One difference between bitcoin and eth... ethash is a memory hard algo so it doesn't require the fastest GPU. 4-5 year old GPUs are more ROI efficient. Everything is bound in the speed of the memory controller.
4. To be seen.
5. 'staking' today is just depositing ETH into an ETH1 contract that doesn't have a withdraw function. It will require forks to add that functionality.
6. Correct.
7. Correct. Although this likely won't have an impact on price like people think.
8. A fork could always change things.
2) The latest earning from NVIDIA and AMD showed that about 30% of their GPU were to crypto miners, so no, the shortage was not an exaggeration and certainly not from many years ago.
The shortage was due to demand from people beyond mining wanting GPUs (including a new problem... scalpers) and there not being enough production. In effect, it was a manufactured shortage. There are a ton of articles that talk about all the aspects that went into the shortage and miners are definitely not the only reason. Easy scapegoat though...
https://www.pcmag.com/news/inside-the-gpu-shortage-why-you-s...
https://gamerant.com/nvidia-gpu-shortage-not-due-crypto-mini...
https://www.pcgamer.com/why-crypto-mining-wasnt-the-only-cul...
Link #1 and #3 mention crypto as one of the causes of the shortage.
Like #2 is a statement by Nvidia who has a vested interest in lying, and has lied about the exact same issue so blatantly that they got fined by the SEC for it.
https://www.theverge.com/2022/5/6/23059930/nvidia-sec-charge...
Scalpers only come in when there's a shortage already, they don't cause shortages except at launch, they just delay items getting to the real users.
There's image and video evidence of dozens to hundreds of GPU mining rigs in a single room if you care to look.
Eg. https://cdn.discordapp.com/attachments/788512140322406473/90...
https://old.reddit.com/r/pcmasterrace/comments/r39ph3/found_...
https://old.reddit.com/r/pcmasterrace/comments/wganva/posted...
I just gave some random links I googled... feel free to keep digging, there are more that back me up.
You're wrong about scalpers too. They know the market... of course they know to prey on every opportunity.
Your 'evidence' is really nothing. That's a few thousand gpus... not that many, honestly. They are also not top of the line gpus... which gamers want to buy. older rx470 polaris class gpus are more than enough for large mining farms.
full disclosure: i'm a huge gpu miner, so i definitely have some experience in this area.
Then you have a vested interest in playing down the effect that this waste of energy bubble had/is.
> They are also not top of the line gpus... which gamers want to buy. older rx470 polaris class gpus are more than enough for large mining farms.
Way off the mark there, gamers not in the 1% don't buy top of the line GPU (as reflected in the Steam survey), they buy the budget to mid range price. When miners started buying GPU left and right in pallets, NVIDEA and AMD saw it and shift the manufacturing to the top of the line GPU where they have the highest margins even if the waffer would yield a lot less, because miners would buy them ASAP anyway. This reduced the amount of lower tier GPUs in the market.
Funny you mention the RX470, a GPU famously never in stock because of this dumb piramid scheme.
> Then you have a vested interest in playing down the effect that this waste of energy bubble had/is.
Nope, not at all. My business model doesn't depend on mining forever. I'm not playing down anything. I'm just saying that mining isn't the only reason (and at most 30% the reason) that GPUs were hard to find.
> Funny you mention the RX470, a GPU famously never in stock because of this dumb piramid scheme.
It came out 5 years ago and newer models replaced it.
What are you going to do with your gpus once the merge happens?
Scalpers cannot create supply problems. Scalpers can only exist when demand is higher than supply.
Scalpers are a symptom of the supply/demand problem. Not a cause.
> Scalpers cannot create supply problems.
Scalpers buy up GPUs. There is less supply. That creates a problem.
>Scalpers buy up GPUs. There is less supply. That creates a problem.
Those GPUs are then sold immediately to real users. Scalpers do not increase demand.
Scalpers provide a service. They have automation or a way to buy stock fast at MSRP or closer to MSRP. Then they sell it to people who are willing to pay more in order to have the product now or avoid spending time to search for stock.
Scalpers cannot exist unless demand is greater than supply.
> Scalpers do not increase demand.
That changes what you said previously and isn't what I responded to. We are talking about supply, not demand.
Scalpers do not decrease supply.
Scalpers do not increase demand.
Scalpers offer a service to users to buy hard-to-find-products now without waiting or searching.
> Scalpers do not decrease supply.
We are going to have to agree to disagree on this one. In the second link, it is in reference to tickets. At the end of the day, tickets are all the same. If you can't get the front row of the show, you'll accept something back a bit... because you want to see the show.
GPUs are different. Miners want specific brands and models and won't / can't accept anything else.
[1] https://www.reddit.com/r/buildapc/comments/pqcrg8/are_there_...
[2] https://news.ycombinator.com/item?id=4195671
How do you explain the very strong correlation of Ethereum profitability and GPU price?
https://www.3dcenter.org/news/news-des-3031-juli-2022
Scalpers.
I took it as the environmental stance not supply when I read it but can see both.
Still the same, the more GPUs are added to the network the harder it is to mine, the harder is to mine the more GPUs are added until it is no longer profitable, all this while drawing more power.
When profitability goes down, miners shut down.
If you have a good understanding of ETH PoS perhaps I can ask this question.
The only issue I’m still confused about is the incentive to add hardware to the network. Obviously the network needs to be resilient to attack on consensus but it also needs networking and physical hardware resilience. How is that incentivized in the PoS?
The stakers have to perform consensus network and block building actions continuously online, or they are penalised by losing value from their stake over time rather than gaining it. The penalty is reasonable so a small downtime during updates and such isn't a problem.
This incentivizes them to have reliable networking and hardware, running 24x7.
However they are heavily penalised if they are seen to do things like double-voting by accident, so they can't just put up duplicate systems and forget about it. High availability failover is something they can only do carefully.
This is different from the current proof-of-work miners. If a miner stops or screws up, they won't gain mining fees during the stop, but they don't lose anything either.
I understand all that but what I don’t understand is what encourages more physical nodes with high quality bandwidth because it seems like if me and you both want to stake for PoS then we can even be better off sharing the same hardware and buying higher quality hardware than we could individually, and this is a sub-linear incentive which I would think would result in the physical hardware footprint significantly shrinking. Am I missing something?
Now you might say well isn’t that a good thing for less resources but without an incentive to decentralize physically won’t there be a risk of centralization and potentially catastrophic outcomes for the network?
One factor fighting against this is that the validator inactivity fees spike to be larger if a lot of validators are offline at once. So if you think all the existing validators are in e.g. AWS us-west, you are taking more risk by putting your validator in AWS us-west too, because your failures are more likely to be correlated with other validator failures.
> what I don’t understand is what encourages more physical nodes with high quality bandwidth because it seems like if me and you both want to stake for PoS then we can even be better off sharing the same hardware and buying higher quality hardware than we could individually.
For the same reason that there are a number of mining companies too. But you're right, PoS doesn't 'fix' that problem.
A common approach is staking pools, which incentivize decentralization for the greater good of the network.
One of the largest ones for eth and several other chains ($7B TVL) is LIDO, of which I’m an eth mainnet and testnet validator node operator. They distribute stake over many high quality validators and have very rigorous operational guidelines to ensure high quality operators only are allowed. I’m not shilling for LIDO but they are a very professional and well ran DAO that truly cares about what’s they’re doing.
One of the cool things they do is liquid staking. In most PoS networks, your funds are locked during a given time boundary, generally referred to as an Epoch. You start staking at an epoch beginning and can not access funds until the beginning of the next epoch. Validators are rewarded for reliably and securely (no double signing!) performing their task via staking rewards. Staking rewards are quite akin to inflation in more traditional monetary systems.
Realistically no blockchains that I'm aware of have any incentives for that. A lot of the Ethereum ecosystem is running in us-east-1.
How do 7 and 4 work together?
If the reward for staking is fixe at 5%, what keeps the issuance rate from being net positive?
The staking reward is for collateralized validators only (a small % of the network)
Overall issuance can potentially be negative due to the burn effects of eip1559 - where the base transaction fee of an eth transaction is deleted from the network forever (akin to using oil/gas/petrol & then it's gone)
If 2>1 then net issuance is negative
Pretty cool visualization site: https://ultrasound.money/
"cool" maybe, but completely uninformative.
Ok, I see that you're now just making repeated negative comments towards me.
It is your opinion that it in uninformative, for you, but for myself and many others, it is quite informative.
Exactly, it's my opinion. What's wrong with sharing my opinion? The whole purpose of this site is sharing opinions and points of view with others. Do you think I'm looking for comments written by you and posting "negative" replies? You're crazy.
5. Staking today also means you're running a validator on the beacon chain, and accumulating a balance that will be respected by the future withdraw function.
True... although there is no absolute guarantee of that.
I thought the network will have 64 shards, increasing capacity by 64x, with finality being periodic and a bit later
whats changed in that plan?
They decided to do proof-of-stake first, putting shards off until later.
Also it started looking like zkrollups could do everything without loss of security or convenience, and with way better scaling than they ever hoped to get with the original sharding plan. So they removed execution from sharding, using it instead as just data for rollups.
Then someone came up with "danksharding" which is more like a RAID system than actual sharding.
The plan now is described in some detail here: https://members.delphidigital.io/reports/the-hitchhikers-gui...
Regarding unstaking it will be capped by a queue of around 900/day similar to what is used for staking. There won’t be an arbitrary delay.
Is the staking reward locked together with the stake as described in 5.?
So, ~$60,000 to participate. That's a bit more than a $200 video card. I guess it's time to price out the poor.
Numerous pools exist where you can combine your eth with others so you can stake .1 eth if you'd like.
Also, this is only 5% returns, which might really be negative if crypto crashed relative to USD.
That's exactly the problem. As someone who does not have access to 32 Eth, you need to trust a pool operator with your money.
This is a direct parallel of issues like home and car ownership. If you're not rich enough, you have to trust a 3rd party, and also get less for your money.
Vote with your money. There are plenty of other blockchains where this is not the case as delegation is part of the protocol.
You don't have to trust a third party. You can run a pool yourself and be the one who needs to be trusted.
If you don't have enough eth to stake, how will you persuade anyone to lend you their eth?
Have friends? People who trust you?
Obviously I need to have friends who already want to invest a significant amount into Eth, otherwise I'm just "that guy" shilling some scheme to their family and friends.
Of course. So what's the problem with that?
Under what possible scenario do I have a few k$ spare, but not 10k$ spare, to invest in a speculative asset, and also have a large number of friends and family already in exactly the same position?
The only one I can see would make me the "cryptobro", to use the currently-popular phrase.
It's also quite ironic that you suggest the basis of Eth consensus be based on the strength of inter-personal trust. If that's how it works, then why bother with the complexities of Eth?
I'm not saying the basis of ETH consensus is based on inter-personal trust. The conversation started by a complaint of 32 ETH required to run a validator being out of reach of normal people, so I provided multiple other options for how a normal person can take part in this.
You gave one suggestion, which was based on inter-personal trust. This removes a major benefit of taking part in the Ethereum ecosystem. If it became a widespread way for people to take part in Ethereum's staking mechanism then yes, Ethereum's consensus would effectively be based on interpersonal trust (which is something that the developers have gone to great pains to avoid).
I gave two suggestions - join a pool, and run a pool.
Both of which (essentially the same thing - "be in a pool") require trust, which destroys a key advantage of Ethereum (and cryptocurrencies in general).
Another stage of the grift where all the scammers get double the coins and cash out even more. The miners aren't going to stop mining. There will be another "classic" fork situation. Maybe we're near the end after all?
I introduced the Serenity (proof of stake) step of the Ethereum release process in this 2015 blog post for the Foundation. You might find it interesting to look back and see how we got here.
https://blog.ethereum.org/2015/03/03/ethereum-launch-process...
The merge and with it the transition from Proof of Work to Proof of Stake will reduce Ethereum's energy consumption by a factor of ~2000 or 99.95%.
You can literally run an Ethereum PoS node in a Raspberry Pi.
Source: https://ethereum.org/en/energy-consumption/
> You can literally run an Ethereum PoS node in a Raspberry Pi.
I know one of the stated goals is for people to be able to run validators on commodity hardware, and as you've pointed out, builds exist for ARM devices and have been shown to run on a Raspberry Pi, but it remains to be seen if you can "in practice" run a mainnet validator on a Raspberry Pi. That would be ideal, though!
There is a decent group of folks in the rocketpool community that are doing this right now, running their nodes with 8gb pi 4's, running mainnet validators. The main dev of the rocketpool node stack has put a lot of work into making it viable, including pushing the client teams to ship better optimised arm docker builds.
It is somewhat risky in my opinion as you don't have the resources to track multiple chain heads in the event of a split, but it does work under nominal chain circumstances.
The irony here is that long term, ETH will use ASICs for zk-snarks. Vitalik just published a document where he said that is his preference [1].
They will need to financially incentivize people to run this hardware and will create an arms race around it. Just like Bitcoin.[1] https://vitalik.eth.limo/general/2022/08/04/zkevm.html
The demand for zk-prover hardware will be no where near the same extent as for pow miners. Those zk proofs only need to be generated once, by a single party, and then they can be verified, easily and cheaply by anyone with minimal hardware. There isn't anywhere near the competitive rat race to accumulate as much hardware as possible.
We will see. zk is becoming more and more of a 'thing' every day.
The more people mining in proof of work, the more random hashes needed to secure a block. This is what makes it demand so much energy.
This isn’t the case with ZK provers. Each computation yields a solution, like regular fixed arithmetic math. Using more powerful FPGAs and adding more parallel provers, you can prove the same circuits in less time and less energy.
The more people using ETH, the more computation that will need to be done. The more hardware that will be needed to support everything. The end goal is scalability, right?
Yes, like computers, the internet, electric trains. Computers used to take up a room and compute a few thousand cycles per second. Now they can fit in our pockets and compute billions of cycles per second.
As hardware accelerated and parallel ZK proving technology increases, the amount of users and applications built on this technology can also increase. This is the opposite of Proof of Work, where more efficient mining rigs and higher hash rates will not lead to more network throughput or activity.
I'm not arguing for (or against) PoW.
I'm saying that zk is being targeted for ASICs (Vitalik said it himself) and that zk will require some very specific compute needs that not everyone is going to be able to provide.
Sure, we are in agreement then. It is a great thing as it will enable the blockchain to continue to scale for more users and more applications, and it is the opposite of the energy inefficiencies of the current PoW system.
Well... I do think that the power usage overall isn't going to go down. Certainly ETH switching off PoW will be a great reset, but over time... people will find ways to continue to use more power when it comes to compute. Put it another way, the datacenter market isn't getting smaller any time soon.
To put this in perspective, there are hundreds of thousands of validators already online and the amount of energy consumed by them while running is less than the energy consumed by videogame consoles around the world while idling.
Every gamer (PC or console) that has used the "look at how much energy is being wasted" argument to be anti-crypto will have to eat their GPUs after the merge.
>"look at how much energy is being wasted" argument to be anti-crypto
Bitcoin will be still wasting a crap load of energy, proportional to its value and has no plans to stop doing that.
Then it is an issue of bitcoin and all the PoW blockchains, not of crypto in general.
You can be pro-crypto without being in favor of Bitcoin, you know? In fact, those who oppose crypto due to environmental concerns would help immensely if they stopped generalizing and became more specific about their arguments.
Bitcoin is the largest and most popular crypto by far and was also the first successful one.
And Friendster was once the largest social network and the first successful one. Your point?
Bitcoin was a good first prototype, but it is clearly a failed experiment. It's not used as a currency, the "store of value" narrative is bogus. All it took was the first asset bubble to pop to demonstrate how BTC is only correlated with other stock prices.
It already loses to Ethereum in many metrics: transaction volume, number of wallets, decentralization (number of nodes participating in block validation) and so on. Layer-2 systems in Ethereum hold more Wrapped Bitcoin than lightning by orders of magnitude. Even if you really want to use BTC, the best way to transact bitcoin today is by wrapping it and using it on Ethereum.
The point being the criticism of crypto as a whole as a tremendous waste of energy will still be valid until bitcoin is a small fraction of crypto.
Bitcoin is not going to go away just because lots of people criticize it. Bitcoin is only going to go away when we build an alternative that has (most) of its (perceived) benefits and fewer of its drawbacks.
IOW, stop criticizing "crypto" and start focusing on criticizing "Bitcoin". Be specific about your arguments, otherwise everyone will feel like they are on a Mexican standoff and you will never get the support to win the good fight.
The chief perceived benefit of Bitcoin is its speculative asset value. We may try to unseat this with a new, less environmentally harmful speculative asset, but it's unethical to deliberately attempt to suck people into a negative-sum scheme, plus it won't work: crypto coins move in tandem with each other.
You are reversing cause and effect. The original promise of Bitcoin was to become a p2p payment system that could be an alternative (not a replacement) for cash. All of the speculation around it comes from that.
The unethical thing is to keep BTC around just because there are so many sunk costs associated with it.
Friendster isn't currently the largest social network. The point is that people associate the biggest product of the category with the category itself. Like web search is synonymous with Google.
the problem though is that the argument is unhelpful and disingenuous at that point: people--apparently including yourself--argue against "crypto" painting a broad brush because of how a handful of projects work. Are you against the concept of chat applications as a whole due to the privacy issues of the dominating players? If so, that would suck, as there are certainly projects in the space of chat that don't exhibit those properties. But when you just go around yelling "crypto is bad because X" when X isn't really a property of crypto you might emotionally feel justified but hopefully you know that intellectually you are holding back progress with FUD.
Ether market cap alone is about 50% of Bitcoin's (~230 vs ~470 billion USD).
Look at Coingecko's list of ERC20 tokens, all of the top 60 tokens have a market cap above $1 billion. You can go ahead and remove Tether if you want, there is still another ~$100B there.
Bitcoin is not so dominant as the maxis would like to believe. It won't take much for Ethereum (as an ecosystem) to catch up, and when it does the flippening will come fast.
Android has a far larger market share than iOS. And yet people still voice their dislike of Android without dismissing smartphones in general.
One would expect that association at a sports bar, not on hacker news.
Regulations will take care of that. I expect that bitcoin will either be banned, or miners will be forced to reduce their computations, or users will be required to pay a pollution tax at exchanges. Move to greener chain if you have bitcoin, that’s my advice
If the Merge works (and PoS chains remain secure), then it'll be proof in practice that PoW is unnecessarily wasteful, so regulators have extra incentive to scrutinize Bitcoin.
I confess deep ignorance, here, but: Why would miners go along with this switch, given it's going to eliminate their profits? Why wouldn't they just fork the chain and continue to run a PoW version? What would force people to switch to the new PoS version?
Ultimately it would be the community deciding to value the PoS fork as "real Ethereum". Something similar happened with ETH and Ethereum Classic, where classic is the unforked version that nobody cares about. A PoW fork will almost certainly exist, but that doesn't mean anyone has to use it and indeed some major players like Chainlink have already announced that they will not support a PoW fork
The market cap of ethereum classic is $6B with $2B in daily transactions. [0]
Not as big as “real ethereum” but I wouldn’t say no one cares.
[0] https://coinmarketcap.com/currencies/ethereum-classic/
ETC has been pumped lately by former eth miners. I know because I've participated in this scam as a miner. ETC is one of the more volatile top 50 "coins" or "cypto", constantly being pumped and dumped, there is nothing actively being "developed" for it and there never will be. Just read the associated forums if you don't believe me, it's a pump and dump. Simple as.
Yes I've profited and no I won't give it to charity.
My opinion will never change, it's all a scam for pump and dumps schemes. There will never be a killer app attached to crypto. NEVER.
I've only lost a few hundred dollars in crypto, so my knowledge is limited :P, but if fees went below 1.29%, it would be cheaper than Visa merchant fees. Plus, they usually have some POS equipment fee. If the fees reduced enough to "make sense" for merchants, would that be good enough? Is this even possible? Or would Visa and the like adjust their fees to stay competitive?
Market cap doesn't mean anything when it comes to cryptocurrency, especially when it comes to shitcoins.
33% of the market cap changing hands each day sounds incredibly high. How does that happen?
Morons buy, miners sell.
Wash trading.
Classic is the one that didn't rollback transactions after the DAO scam right?
To be pedantic - mainnet Ethereum didn't 'roll-back' those hack transactions either. They are still there on etherscan if you want to look for them. The DAO hard fork introduced an unsigned transaction that moved the hacker's funds to a refund to a refund contract.
I found about this fairly recently. You seem knowledgeable about the topic. Can I ask you how did the community react to this/what do they think of this episode today? Because having full control over the coins is one of the big reasons why proponents are against regular banks and state-issued currency, yet here there was a clear breach of that control.
The developers don't have full control like that. They were only able to execute TheDAO hard fork because the community was very small at the time and was reasonably united behind the developers in carrying it out. It was something of a unicorn of circumstances that it was even possible because the funds were still locked up for a period of time and the hacker couldn't sell them, which meant there was only a single loser in the fork (the hacker), and a large community of winners or people who weren't directly effected either way. I personally think the refund stage of things should not have happened and the funds should have been burned instead, simply as a means to make sure the investors learned that risks of interacting with ethereum contracts were still very real. But that said I wasn't involved in crypto at all then, so, what do I know...
There was a huge debate over it, and in the end everybody got to run whichever version of the protocol they preferred. Both chains still exist today, but most of the ecosystem went with the one that made the change, so that one accumulated a lot more value.
>but most of the ecosystem went with the one that made the change
with the one they were told to by the de facto authority of the Ethereum world, FTFY
Correct.
The only fork that matters is the one Jeremy Allaire and Paolo Ardoino back.
There will be forks, but only the PoS one will have stablecoins with actual backing (e.g. any value at all): https://decrypt.co/107094/circle-will-not-support-ethereum-p...
justin sun has said his "stable" coin usdd will support the pow fork
This made me chuckle. How anyone thinks Sun has any interest in anything besides enriching himself is delusional. Pro pump and dumper, thats all. He is an artist at the top of his game, I'll give him that!
USDD has a market cap of $745 million. By comparison, USDC is at $54 billion, USDT is $67 billion, and both are only supporting PoS.
https://cointelegraph.com/news/usdt-issuer-tether-also-confi...
What an ass
I wondered about this for a long time as well. Exchanges, RPC providers like Infura, wallet developers, dapp websites, etc., wouldn't endorse such a fork, so it wouldn't gain adoption. It might still happen, but it would fail to capture much value, similar to Ethereum Classic.
The world has changed a lot since then.
If the crypto crash has demonstrated anything, it's that there's an enormously incestuous relationship between these organizations. We have exchanges running mining operations, market participants investing in crypto mining companies, etc.
A massive economic implosion in the mining community is going to have knock-on effects throughout the ecosystem, and I can imagine market participants not wanting that to happen.
In the end I suspect you're right, but I don't think it's safe to say that only the miners are interested in preserving the status quo, and I don't think it's a foregone conclusion that a major PoW-based fork won't live on and divide the ecosystem.
> but I don't think it's safe to say that only the miners are interested in preserving the status quo
I also am sure the miners will keep the PoW based chain alive. But I have trouble finding reasons why users, developers and businesses would support the PoW based chain in the long term.
Another reason that I’ve seen brought up is that miners aren’t so coordinated. Somebody will have to actually fork the code, remove the difficulty bomb, change the magic parameters to not interfere with the PoS P2P network, etc. Then they have to get enough miners on board to use that particular fork. I think it’s a weak argument, but so far I haven’t seen any coordinated effort to continue mining after the Merge, so it could be a factor.
I think it boils down to a coordination/signalling problem again. Miners want to mine on the fork that they expect to succeed, but it will only succeed if it gets listed on exchanges, exchanges will only list it after it gains serious adoption, but it will only get serious adoption if miners agree on a fork, etc.
A historical example of this is SegWit2x in Bitcoin. It was originally proposed as a protocol upgrade, seemed to gain broad support, but miners and exchanges weren’t universally signalling that they would adopt it, and in the end everybody chickened out, and the change failed to be adopted.
> But I have trouble finding reasons why users, developers and businesses would support the PoW based chain in the long term.
I explained why: Cross-investment within the ecosystem.
If, I dunno, say Coinbase has a large investment in a mining operation (and I'm completely making this up, to be clear), they're not gonna want a move to PoS because it'll destroy that investment.
We know for a fact that there's a ton of this type of cross-investment in the ecosystem, as evidenced by the ripple effects from the collapse of organizations like 3AC. It's not at all unreasonable to conclude that similar relationships could create incentives to keep the miners solvent.
Fwiw, Coinbase and Kraken both hold large amounts of staked ETH for their customers, and skim off a percentage of the staking rewards. They won't be able to access those profits until about six months after the merge. So they both have an interest in the PoS chain doing well.
Anyone in the community who's been paying attention has been well aware that staking was coming. The staking network has been running in parallel since December 2020, and about 12% of the current supply of ETH is deposited on it.
From a user perspective it doesn't matter all that much whether it's PoW or PoS, right? I see equally little reason for a user to choose the PoS chain over the PoW one.
Usability is a little better on the PoS chain. Blocks come out every 12 seconds, instead of randomly with just an average time of 13 seconds.
The PoS chain takes less than a minute to converge to a state where it's very unlikely for your transaction to revert, and in 12 minutes your transaction is finalized, meaning it can't revert without destroying a large percentage of staked ETH.
PoS ETH will have the researcher and dev community building on top of it for another decade or so. There's a long list of further improvements in the roadmap, including major increases in scalability.
Most of the ecosystem is moving to PoS. The popular rollups will be connected to the PoS chain, not to PoW. Major stablecoins backed by off-chain assets have already said they'll be backing the PoS chain, not PoW. Etc.
You're right, if users disregard the difference in energy consumption there is little reason for them to choose the PoS chain over the PoW one. For devs and businesses the PoS one seems to matter though, I think it is likely the activity and innovation will be there in the end.
Also a user would have to make an effort to keep using the PoW one AFAIK.
They almost certainly will, as has happened before (see Ethereum classic) but the Ethereum foundation and thus most of the users will continue on to the proof of stake chain.
Nothing forces people to follow any set of consensus rules. There will be a fork that continues on with PoW, but most users will choose to follow PoS because that's where all the business and developer support is.
For those interested, this is a site that predicts when the merge will happen based on the current hash-rate. Currently looking like September 15! https://bordel.wtf/
So I should start looking for used GPU prices dropping from the 16th onwards?
Clearly there is some group of people with the power and influence to make this decision. How does that group compare to, say, US central bankers, in terms of transparency and democratic accountability?
Edit: To be clear, I’m not talking about banking operations, I’m talking about decision making by central bank leadership. One of the purported benefits of crypto is independence from the shadowy cabals that run the US dollar.
Except the Treasury isn’t actually all that shadowy - the staff have names, and are appointed through an ultimately democratic process. Whereas I really have no idea who is pulling the strings behind crypto and who they are accountable to. The original vision was for decentralized finance where nobody could pull the strings, but the level of coordination on display here in the PoW-to-PoS switch makes it obvious that strings exist and they are capable of being pulled.
The development is in the open, happening through PRs on GitHub and across several independent client teams. You can join the R&D discord (I’m there as a casual observer) and watch or engage in technical discussions. You can propose EIPs or make suggestions about how the chain should work, and everybody can collectively decide it is a good or bad idea for the protocol.
Overall it’s very open, although they do have to draw the line somewhere and I assume the core dev’s weekly zoom calls and standups are not open to everybody to join lest it degrade into madness (these devs work across a range of independent companies and orgs fwiw). Even these calls and notes are shared btw.
Who will implement the final decision?
Users and exchanges who choose to recognize the token of this new chain as "real eth"
The core devs have implemented a “difficulty bomb” in order to pressure the community to adopt their changes. If you don’t accept their hard forks you will stuck operating on a chain where you can’t mint new blocks.
It’s not quite force or coercion but it’s something close. It allows the Ethereum team to operate similar to a software company and retain tight control over the so called decentralized network.
This is a primary example of why many people argue that Ethereum operates more like a security.
There is one key thing to realize. The current Ethereum team can remove / post-pone the difficulty bomb. But so could a competing team. It doesn't favor one over the other. All it does is disincentivize stagnation.
At first bluff, I'd expect a ton of example and implementation code to be open-sourced. I still don't know what nightmare code is crawling CSV/ZIP (forget which) files daily doing ACH transfers, but afaik that's still how electronic banking is done? Would love to learn I'm outdated there.
From my very limited understanding, with Bitcoin the separation of powers comes from the miners ability to reject an update. With ETH Proof of stake, that is less clear - can the people staking refuse to accept a new protocol version/update?
The people who run the validators can, but validators on the old version will be incompatible with the rest of the network (if the rest of the network did update), and they will not be able to sync. It's no different from Bitcoin in that sense.
I read the Bitcoin whitepaper+some other technical document (I think) and have a real solid grasp on how that works. Ethereum, although I have used defi/erc20/uniswap/etc, I've got no idea how it works. Validators, shards, miners... is there a single source I can go to to learn it all? I've got a pretty high technical threshold so if it gets mathy I'm not intimidated. I just want to finally know how it works.
If you really want to dig in, here are the key papers on the PoS algorithm:
https://arxiv.org/abs/1710.09437
https://arxiv.org/abs/2003.03052
To learn about the sharding plan and various other stuff in the roadmap, this is a great technical overview:
https://members.delphidigital.io/reports/the-hitchhikers-gui...
This is a recent guide that attempts to cover everything in depth: https://members.delphidigital.io/reports/the-hitchhikers-gui...
Here's the first paragraph of actual content:
Hopefully you’ve heard by now that Ethereum has pivoted to a rollup-centric roadmap. No more execution shards – Ethereum will instead optimize for data-hungry rollups. This is achieved via data sharding (Ethereum’s plan, kind of) or big blocks (Celestia’s plan).
I've been following crypto for years and could probably explain Bitcoin in a pinch, but I'll cheerfully admit I have no clue what that means.
There are many parts to Ethereum and it’s PoS system so I don’t think you will be able to grasp it all in a short read. This is a good start:
https://eth2.incessant.ink/book/00__introduction/00__forewor...
That scares me. I’d want it to be a system so simple anyone could grasp the fundamentals very quickly. Reason being, it’s so important and complexity breeds oversights and bugs. Security is hard.
Most things in society start out simple and grow more complex as we add more speed, security, applications, and so on. See also: medicine, science, flight, computers, the internet.
Bitcoin is a very simple system and very limited in its capabilities, but as far as modern blockchains go it is like the early room-size computers, Ford Model T, or Wright Flyer.
Random brain dump of questions: Does proof-of-stake generally mean the more money you have the more influence you get over the consensus? If yes, how could this manifest itself if a bad actor had a lot of ETH and tried to manipulate the chain? Could they theoretically jump favored transactions to the front of the line and/or charge less fees for their own transactions? How does this affect mining pools? Is a 51% attack any easier/harder/different?
Will try to answer some of the questions.
> Does proof-of-stake generally mean the more money you have the more influence you get over the consensus?
Ethereum does not have on-chain governance, so having more stake doesn't grant you more influence over the network or the rules of its consensus algorithm. What it gives you is a higher probability to be called to do your duty as a validator and get rewarded for it. But what that duty entails is defined in the protocol and implemented in code.
> If yes, how could this manifest itself if a bad actor had a lot of ETH and tried to manipulate the chain?
You would need to get 33% or 66% of the total stake to be able to do some damage. With 33% you can prevent the network from finalizing, i.e. agreeing that a block is part of the forever history of the network. With 66% you could write wrong blocks and make them part of the forever history of the network. The protocol has on-chain mechanisms to deal with the first situation but there are no on-chain mechanisms to deal with the second one and a solution would require social consensus off-chain.
> Could they theoretically jump favored transactions to the front of the line and/or charge less fees for their own transactions?
Anyone creating a block is free to order the transaction however they please and decide which ones are included. You cannot not charge fees, though. To use the network you have to pay certain amount of ETH and this amount gets spent or burnt as it's also referred, it simply disappears from existence.
> How does this affect mining pools?
They disappear, there is no more mining.
> Is a 51% attack any easier/harder/different?
Different and harder. Different for some of the explanations above (the % necessary are different and what can be done at this thresholds also changes). Harder because it's much much more expensive to acquire the stake necessary to attack, so the chain is more secure. But also because an attacker will get its stake slashed (destroyed) and will not be able to do it again. While in PoW, once you have the hashrate you can keep attacking the network ad infinitum or until the rest of the network gets more hashrate than you. It's as if an attacker in PoS would gets mining rigs burnt. PoW cannot do that because it delegates its security to an activity outside the chain (burn energy with specialized HW), but in PoS the stake is on-chain so there are more tools to deal with nefarious actors.
Doesn't the same apply to PoW? The more money you have the more HW you can buy/rent to mine.
As someone with a huge number of GPUs and many megawatts of power mining ETH for many years now... it isn't that easy.
No, protocol changes are not affected by the amount of ETH staked.
> Is a 51% attack any easier/harder/different?
Harder. With Ethereum's consensus, you need 2/3 of the validators conspiring to produce an attack on the chain.
You can halt the chain with 1/3 of the stake though. In Ethereum, that would trigger an inactivity leak that eats away your stake until it’s less than 1/3 of the stake, and consensus can be achieved again.
> If yes, how could this manifest itself if a bad actor had a lot of ETH and tried to manipulate the chain?
With the current price of ETH, it’s unlikely that a single entity could gain enough of the supply to do anything like this, but it is a valid concern for smaller chains.
> Could they theoretically jump favored transactions to the front of the line and/or charge less fees for their own transactions?
Block proposers can already do this. How often you get to be block proposer, is proportional to the amount of stake you have.
Am I Right that gpu demand will crash, because nobody needs gpus for mining ethereum any more?
Yes gaming and ai, but ethereum Mining was a large part of the gpu market.
It’s likely.
So is the price of Ethereum going to go up a load now since you don’t need to buy GPUs, you just buy Ethereum itself?
I'm not sure how the incentives will play out. It takes $60k at the time of writing to become a validator, and they've yet to implement the mechanism to exit your stake; so I think there will be some hesitancy to become one. The more validators there are, the worse odds that yours will be chosen to handle a block; and I believe as the number of validators increases the reward per block also decreases (though it's been a while since I read the proposal).
Not too much hesitancy, there's already about 12% of the current supply of ETH on the proof-of-stake network.
Off-topic. What's up with that giant meaningless Ethereum logo image occupying 90% of my screen. Why are websites doing this?
Are you using NoScript or an adblocker? It is probably blocking a third-party script from loading that the site needs to render the rest of the page.
I get this too for the same reason, ad/script blocking.
It really tickles me to imagine the bewilderment of seeing a webdesign trend of starting every page with a giant static logo.
Yup I use ad blocker.
So proof of stake isn’t a holy grail? It’s completely achievable technology?
Yes, PoS has been running safely for 1-2 years. (Ethereum isn't the first working PoS chain but it will be the largest one by far.)
There's a massive difference in the decentralization of Ethereum's PoS implementation vs. Cardano, which uses delegated PoS.
If only there were other PoS chains.
How so?
Ethereum uses signature aggregation to allow for a very large number of full-fledged staking nodes. Most PoS chains have a small number of full-fledged nodes, and everybody else delegates their stake to one of those.
Yes, it’s been running for years on many other chains and most new chains have adopted PoS (I can’t remember the last time I heard about PoW in state of the art blockchains).
It will be interesting to see what happens with ETC if ETH miners switch to that after the merge.
Does hashpower follow value, or does value follow hashpower?
Will existing coins be moved over automatically?
Yes. (There's actually no "over" since it's a continuation of the same blockchain just with different consensus rules.)
One of Ethereum's core goals is decentralisation.
How does Ethereum plan to deal Proof of Stake naturally monopolizing block creation and the Ether supply? In my estimation there are many compounding factors such as MEV and liquid staking with a massive economy of scale for first movers that combined with staking interest might make the top staking provider eventually hold the vast majority of Ether.
If the company that runs Lido is responsible for validating 99% of the blocks and the US Treasury Department comes knocking with a list of bad actors to blacklist, what happens next?
What pushes towards centralization are two factors; economies of scale and barriers of entry. For those mathematically inclined you can imagine plotting economic reward (y-axis) vs economic input (x-axis). Economies of scale determine the shape and growth of the curve while barriers of entry determine the cut with the y-axis. Obviously, the greater the barriers of entry or the higher the reward as your economic scale grows the bigger the push towards centralization. In the first case because you forbid small actors to participate in the game, in the second case because you reward bigger actors more generously.
So how does this graph look for Ethereum? Pretty simple, if you have more than 32 ETH it's basically flat. You get the same APY irrespectively of your size. And if you have less than 32 ETH? Well, you can then stake with RocketPool (a decentralized staking pool) in which case your APY is 0.85 the full APY. So the graph for Ethereum is:
- 0.85 * APY between [0 ETH, 32 ETH)
- APY between [32 ETH, infty ETH)
Where APY is the yield returned by the network which depends on total amount staked in the network and network fee revenues.
This is a remarkably flat curve, which highlights that there are almost non-existent economies of scale in PoS as designed in Ethereum. If you do the same analysis for PoW you will find it requires significant investment in specialized HW (either top of the line GPU or ASICS), and there are significant economies of scale in the form of access to cheap or unusable sources of energy.
> You get the same APY irrespectively of your size
On-chain, yes. But there is an off-chain cost to operating the validators, and there is economy of scale there. You can run many 32-ETH validators on a single machine using almost the same resources as running a single one, so the amortized cost of the hardware goes down. And when you do need to expand to multiple machines, the same applies; you don’t need 10× the people to manage 10× the machines. Of course, you can pay somebody to operate the validator for you, and those parties benefit from economy of scale.
Indeed. So let me flesh it out a bit more. You can run a validator using 100W (conservative figure) of energy and an Intel NUC with 2 TiB SSD (you can even run it on a Raspberry Pi but no need to be too greedy in HW resources).
That's 876 kWh in a year and 1000 $ in HW. Energy costs vary from place to place but let's pick 0,2 $ / kWh. Which results in 175 $/year in energy. The computer can easily last you 5 years if not more, so 200 $ per year. Let's add internet costs too. 30$ x 12 = 360 $ / year.
Those are the operational costs. Once you have 32 ETH this is pretty negligible.
There is also the people cost. If you’re a hobbyist you could argue those are zero or there is only some opportunity cost. But for a professional validator, SRE salaries dwarf the hardware cost.
True, but these are costs that affect large scale operators so they are not a barrier to entry. If anything they highlight that in some ways a small hobbyist is positioned to be as profitable as a large scale operator.
Yeah, that's true.
You don't take into account the social factors. People having a ton of tokens can easily freeze majority of them in the stake. People having a small amount of tokens won't be able to do so - first because they need them for a living expenses, second because they will be hit by transfer fees much more that people moving big amounts. This is all fine, but the system is deflatory, so this discrepancy will only increase and rate of it will also increase over time (accelerate). Basically big holders at the moment of the PoS switch will be the only big owners forever in the human history, and no new big holders can appear ever again.
Interesting. Do you have any references to resources describing the theory of how economies of scale/barriers to entry interact?
So if the graph is flat above 32eth, why not reduce that amount to lower the barrier of entry ?
Great question. You can check here how the 32 ETH came to be: https://github.com/ethereum/annotated-spec/blob/master/phase...
A short technical answer is the beacon chain network wouldn't function properly if it had too many nodes (unless other parameters were also changed undesirably), so the number is limited.
32ETH was calculated to be approximately the sweet spot, optimising various parameters.
When this decision was made, back in 2018, it cost very much less than it does now.
There are secondary mechanisms for staking with less (RocketPool) but in these, below a certain threshold you don't participate in the beacon chain directly. Instead your stake is combined with others to allow someone to run a beacon chain node on your behalf collectively, with the rewards shared back to you, and a small cut taken off. The cut is why the graph changes below 32ETH.
> the beacon chain network wouldn't function properly if it had too many nodes
The fact that a decentralized P2P blockchain can have "too many nodes" is such a massive failure of engineering. It's honestly mind-blowing.
It's probably not an engineering failure given current-day knowledge, because (as far as I know) nobody knows how to engineer a network that scales arbitrarily to any number of nodes while achieving total consensus (agreement) on all state every few seconds in a fair-decentralised and consistent manner.
The Ethereum blockchain does scale to more nodes and use scalable P2P networking algorithms. It is only the active beacon chain nodes which are constrained. Just as many users with "full nodes" in the current PoW network do not run a mining operation, not everyone needs to run a beacon chain validator to participate in a decentralised way in the PoS network.
You may think it sounds easy or natural to scale, but actually there are some difficult trade-offs when coordinating global consensus over all state at once. Because communication grows faster than O(n) for n nodes in a flat structure, one of the solutions to that is an uneven power-law network (like a hierarchy), or communication latency rising (along with costs), but both of those are undesirable factors when optimising for fair decentralisation with reasonable latency and costs.
These issues don't arise on other P2P applications such as file sharing and VPN onion routing. That's because they don't need to provide a real-time global consensus of all state on a fixed time scale.
Some blockchains offer low latency local-only consensus, or optimistic consensus which might be rolled back, but those are also a negative for some purposes.
There are some techniques for arbitrary scaling while keeping all the other desirable properties, but they are still open research problems. Some of the most promising techniques use zero-knowledge proofs, but those are mathematically very compute intensive and the current techniques can't run something as complex as Ethereum in real-time yet on an ordinary high-end PC.
Even the PoS beacon chain being readied for the Ethereum merge depends on fairly advanced mathematical cryptography to work.
It really isn't as simple as you imagine.
Your note on Lido being responsible for validating 99% may have been hyperbolic, but just for reference - https://beaconcha.in/pools
There's an argument to be made that there is a centralizing force in the role of the consensus/security layer for the chain, because the asset being earned (ETH) can be staked and earn further returns - However, this role and phenomenon is mirrored in the PoW world. The difference is that the centralization happens one step removed from the on-chain asset - PoW miners consolidate profit into further mining investments, such that an increasing amount of the hash rate is owned by the largest miners, who can acquire improved access to electricity and/or equipment relative to smaller miners. One could argue that a PoS system actually has less room for exploitation, however, since you can't restrict a solo-stakers access to ETH, while you could restrict (or provide severe barriers to entry) on the competition of electricity/equipment.
The concern of the "top staking provider eventually holding the vast majority of Ether" is highly unlikely. Given that the asset will soon have ETH issuance cut by 90+% as part of the merge, and the fact that there is no mechanism by which top staking providers are incentivized more than the small solo-stakers, this would soon enter the realms of the purely theoretical, and seemingly take lifetimes to happen if one could even envision it happening at all without a reallocation into other investments.
MEV is being democratized as well (whether a good thing or not, will let you be the judge), with even solo-stakers being able to use an MEV client alongside validation clients in order to benefit from additional income on block proposals (see Flashbots mev-boost client, releasing alongside the merge).
Would love to better understand whether that better informs your perspectives on the subject, or what other concerns you still have.
In PoW, mining has real-world ongoing costs (electricity, hardware) and so miners need to continually liquidate their earnings to stay afloat. This counterbalances the effect of wealth centralization. If you try to remove real-world costs from that equation, you lose the counterbalancing effect.
At least in Ethereum - - Stakers earn far less then miners since they aren't burning capital to validate. They only need to be paid for their opportunity cost over putting that capital to use elsewhere. - Their stake does not automatically compound. Each validator maxes out at a weight of 32 eth, and it takes 32 to get a new validator going. - Earnings have to be skimmed back to the execution layer in order to be manually re-staked (if there is 32 eth worth). Those earnings then enter the 'dominion and control' of the staker, so at that point taxes have to be paid on that income.
In contrast, mining can drastically improve the return on capital by operating at larger and larger scales so as to get better and better deals on equipment and electricity. That kind scaling doesn't happen with proof of stake.
> In contrast, mining can drastically improve the return on capital by operating at larger and larger scales so as to get better and better deals on equipment and electricity. That kind scaling doesn't happen with proof of stake.
Yes and No. We saw what happened to very large mining farms that got wiped out in a matter of weeks as mining was cracked down on in china. Large ETH stakers wont be forced to liquidate their stake in the event they get kicked out of their current jurisdiction. In short, uncertainty about the future of crypto regulation makes it easier to be a staker than it does a miner.
> This counterbalances the effect of wealth centralization
Yes, this ensures a limited supply with PoW, right?
> If you try to remove real-world costs from that equation, you lose the counterbalancing effect.
I assume you can't remove real-world costs in the case of PoS, but yes I can see how the real-world costs will be much, much lower.
Are you saying that there is a good reason to keep those real-world costs higher? (pardon my ignorance, I haven't looked into the principle you describe here before).
I don’t have a source handy, but eventually block production will centralize and the protocol will allow a “block proposer” role which will require lower resources. The proposer will be able to force a producer to include specific transactions and if they aren’t included, the producer will be punished (via their stake being slashed).
If a centralized entity is told to include transactions by a proposer and they refuse for any reason, they will eventually lose their stake and fall out of the producer role.
It's the same forces which push proof of work to the same conclusion, so it's not made much difference to the problem.
The difference is that if a miner does nothing, eventually they stop making money regardless of how many coins they have. If a staker does nothing, they continue to collect and collect even more indefinitely with no additional investment beyond running a very cheap node (or just letting someone else host it). Staking is just trivial in comparison, it's apples and oranges.
> If a staker does nothing, they continue to collect and collect
They do, but the supply of the token also goes up, so their share of the supply doesn’t grow as much, and relative to other stakers, it doesn’t grow in proportion at all. It is true that inflation rewards effectively move value from non-stakers to stakers, but nothing prevents most of the supply from being staked, especially with liquid staking derivatives.
> Staking is just trivial in comparison
I agree that staking is, but operating the node is not! Operating a validator is actually more demanding than operating a miner. For a miner, there is no disadvantage in being offline except for the opportunity cost. But a validator has a duty, and will be penalized for downtime. (Granted, the requirements on Ethereum are quite lax — on purpose, to make it easier for enthusiasts and other non-professionals to operate a node.) Operating a validator requires monitoring and maintenance like any other software. Your server will run out of disk space, your node will disconnect if you don’t update the node software in time, etc. Most validators in most of the PoS networks are operated by professional companies with dedicated SRE teams because of this.
For a major staker, are you saying that running a validator is equivalent in work/cost to running a warehouse full of miners? Remember, we're talking about major players, not just some random guy doing this in his closet.
The flip side of this though is that stakers can have their capital burned because of misbehavior. If a staker gets too entrenched and the other folks in the network don't want them around anymore, their stake can be slashed. Proof of work cannot destroy the equipment of a hostile miner, only wipe everyone's equipment out with an algorithm change.
There is no such thing as a hostile miner, what do you think proof of work means?
If a staker gets too entrenched, by what mechanism will the minority slash the majority staker's stake?
The problem of pools getting too big (Lido, CeXes, etc) is worrying. I think once withdrawals are enabled (shangai fork), liquid staking won't be that attractive, so the situation will improve.
> If the company that runs Lido is responsible for validating 99% of the blocks and the US Treasury Department comes knocking with a list of bad actors to blacklist, what happens next?
The company that employs most of the Lido contributors is based in a region where the US has little influence. But aside from that, the Lido node operators (who operate the validators) consist of more than a dozen companies, registered in various countries, using servers in different locations. Diversity of jurisdictions is an explicit criterion for node operator selection. Possibly some of them could be forced to censor transactions, but I think it’s not the lowest hanging fruit (going after the client software developers might be a more impactful avenue, there are fewer of those than validators, though fortunately Ethereum has multiple client implementations).
But suppose somehow 99% of the blocks are produced by validators who censor certain actors. Then it depends a bit on how far-reaching the censorship is.
If validators refuse to include certain transactions in their blocks, but still accept other’s blocks for consensus, then I expect that blacklisted actors will find it more difficult and more expensive to get their transactions included, but it would still be possible. If they offer a juicy transaction fee, they will have to wait on average 50 blocks to get their transaction in, but then a validator will be more than happy to include it.
If validators refuse to include certain transactions in their blocks, and also refuse to vote on blocks that do for consensus, then they will be able to enforce their censorship. One way to think about this, is that the censorship has been built into the protocol, and the 1% of validators still willing to include the blacklisted transactions, are producing what the others consider invalid blocks. Consensus can tolerate 1/3 of the stake misbehaving.
99% is an extreme case though; if the censorship is limited to less than 1/3 of the stake, then the opposite happens. Validators who refuse to vote on certain blocks don’t fulfil their duty of voting, which incurs a penalty. If the validator is not allowed to vote on even a descendant of a block that contains a blacklisted transaction, then effectively it will be prevented from ever voting again, and its stake will slowly evaporate due to penalties.
An interesting case arises when censoring nodes control more than 1/3 of the stake, but less than 2/3. This could result in a liveness failure, where no blocks get finalized (because neither the censoring nor the non-censoring nodes can get the required 2/3 majority). This triggers an “inactivity leak”, where the stake of the misbehaving nodes gets destroyed, until there is less than 1/3 of it left, and consensus can be achieved again. Of course, who is “misbehaving” here depends on your point of view, and the situation is symmetric, so this would lead to the chain forking into one where the censors have a supermajority, and one where the non-censors have a supermajority. The side which had most stake will be the first to achieve consensus again.
(Because of this risk, there is an ongoing discussion in Lido about whether it should self-impose a limit to not control more than 1/3 of the stake. But it’s a tough situation, because the way it looks right now is that that stake would instead be controlled by centralized exchanges who offer staking services.)
Welcome to Congress.
The core goal is neo-feudalism and infinite rent seeking. Which totally in line with all token developments we see today.
There is growing confidence that the Ethereum Merge, scheduled for mid-September, won’t be postponed after the Goerli merge went smoothly.
There's a whole ecosystem of devs working on interesting stuff that have nothing to do with finance, they just don't get mainstream headlines today.
Copied from another reply I made a few days ago, here's some projects to check out:
- Lens Protocol [https://lens.xyz/ (one example implementation: https://lenster.xyz/)] is an early social network built on top of Polygon.
- Farcaster [https://farcaster.xyz/] is another one, that takes a more hybrid approach of using Ethereum for trustless identity, but stores social stuff in a "sufficiently decentralized" way.
- ENS [https://ens.domains/] is a universal username system.
- Unlock Protocol [https://unlock-protocol.com/] uses NFTs for tradeable subscriptions, event tickets, etc.
- Radicle [https://radicle.xyz/] is a decentralized Github basically, that (optionally) uses Ethereum to store the Git HEAD of a "project" essentially.
- Arweave [https://www.arweave.org/] stores files permanently using a cool "endowment" mechanism. Currently, the network has secured its storage for like 1000 years in theory.
“ Arweave [https://www.arweave.org/] stores files permanently using a cool "endowment" mechanism. Currently, the network has secured its storage for like 1000 years in theory.”
2 issues spring to mind:
- What happens when someone puts illegal content on it? Eg child porn. It claims to be censorship-resistant (not censorship-proof), but I imagine any system that cannot expunge data like this won’t be around for long.
- Where are the details on the 1000 years of storage? Have they got financing arranged (and already in trust funds/isolated from the rest of the business) for this storage, the maintenance of the software throughout the next 1000 years etc? Or are they relying on people to contribute resources? If I pay money to store data here (say precious, irreplaceable family photos), then come back in 50 years, what’s the odds that I will still be able to access them?
RE the first point: you don't have to store/host 100% of the data, content can be blocklisted based on hash or other attributes so your node doesn't replicate or retransmit it. The censorship resistant claim assumes there's at least 1 node on the network willing to host your content.
RE the second point: highly recommend taking a look at the arweave white paper. They use an interesting pricing mechanism that tries to account for the cost of the next 200 years of storage (dunno where 1000 came from, the spec plans for 200).
> The censorship resistant claim assumes there's at least 1 node on the network willing to host your content.
That’s a weak claim then. I wouldn’t call that censorship resistant at all. That’s no better than China imo. Wouldn’t be surprised- if this got popular- for people to publish blacklists you can subscribe to.
Re the pricing mechanism, if the project fails/people abandon it (because the arweave economy crashes for whatever reason) what happens to the data? Paying out an endowment over time to fund the storage only works if you have people who put value in the tokens. Which could no longer exist.
> dunno where 1000 came from, the spec plans for 200).
The spec plans for 200, but that's a minimum I believe.
> It doesn’t matter how much you argue with HN crypto haters, it’s always “bUt WhY nOt a SqL DaTaBaSe?”
We'll stop asking the question when we finally get a good answer.
When Vitalik goes to Argentina this is the response. https://twitter.com/OctaBidegain/status/1473508689101348868
Just because you come from a place of great financial privilege and a liberal society does not mean others have no use for a censorship resistant form of money.
Afghanistan: https://theintercept.com/2022/01/19/crypto-afghanistan-sanct...
Argentina: https://www.bbc.com/news/business-60912789
Russia: https://www.reuters.com/world/europe/navalny-ally-urges-dono...
Lebanon: https://www.reuters.com/article/lebanon-crypto-currency-yout...
Nigeria: https://www.coindesk.com/tech/2020/10/16/nigerian-banks-shut...
Ukraine: https://www.cnbc.com/2022/03/23/ukrainian-flees-to-poland-wi...
https://www.financialinclusion.tech/
Look at the dates, now look at the prices. Every single one of these people got rekt. That poor Ukranian man who put $2000USD into Bitcoin in March now has $1100. You're looking at this as a solution, and I'm looking at it as a shameful example of the problem. These folks are the least able to bear risk and folks are advocating they put all their money into speculative plays on US dollar liquidity. It's shameful. This isn't financial inclusion, it's financial exclusion.
If they'd put it all into USDC they'd still have all their money. It's by no means a perfect solution but it's spiritually in the right direction. Time for Rohan Grey's e-cash or a CBDC. That's how this actually gets improved.
Who says they didn't put money into USDC? I have talked to people there who definitely use USDC as a primary savings device, with btc and eth mixed in on the side for long term holding
You can think of Ethereum as a DB+VM existing in the extreme end of the High Availability spectrum and whose operation is uncensorable and unstoppable by any actor. Obviously many use cases do not require this kind of characteristics but it's very hard to argue that these properties serve no use for any use case.
A global financial system could very likely be built on top of a system like this. A global identity/credentials system could also benefit from such kind of properties.
If you disagree it would then be interesting you explained where you put the cut-off, i.e. define how many sigmas should be enough for any use case and define who should we be willing to trust the operation.
> A global financial system could very likely be built on top of a system like this.
No it can't.
Two major reasons (and this isn't an exhaustive list, just the first couple that spring to mind): 1) the lack of scalability both in transaction rate and data volumes, and 2) the lack of transaction reversibility.
I always find interesting the people that claim with certainty that technology cannot solve X when there are no known physical laws forbidding it.
Scalability is already being tackled, rollups are already scaling Ethereum today. In combination with data sharding they will allow scaling Ethereum to the order of 10 million TPS by the end of the decade. But much earlier than that we will see multiple orders of magnitude increased scalability.
Transaction reversibility is a non issue. Any trustworthy ledger is non-reversible. The way you implement a reverse transaction in a pen and paper ledger is by writing a new transaction that undoes the effect of a previous one. Not by erasing the previous one. Ethereum itself is non reversible but this exact logic can be implemented over Ethereum in your smart contract if so desired. And, in fact, there is smart contracts that operate like that. For example, USDC the stablecoin by Circle has this logic built in, it can freeze funds and take control of them at which point it can do whatever it needs, send it to law enforcement, reverse a transaction, etc... This is one of the lamest counterarguments people put forward.
Parent comment linked to a bunch of projects with promise, but again, the HN crypto hater doesn't care.
USDC is over $50 billion - https://www.coingecko.com/en/coins/usd-coin - so clearly the market is seeing value in a stablecoin running on crypto rails.
But then the counterpoint is "BUT NO ONE NEEDS THIS HAVEN'T YOU HEARD OF VISA DURR DURR HURR" it's exhausting to try and argue.
> Parent comment linked to a bunch of projects with promise
We've had over 10 years of crypto. At some point it'd be nice if we moved past "projects with promise" to "projects that lived up to their promises".
So far? All we have is an ecosystem that enables gambling and a truly astonishing amount of fraud.
So I have to ask: How much longer should we wait? Five more years? Ten? Or do we just keep waiting because the faith is unshakeable?
It's hard to argue with them because they have a financial stake in the system, it's in their interest to spread it as far and wide as possible because it will enrich them. Money clouds judgement. The hope for global adoption just means "I got in first so I deserve to be rewarded". An honest answer would be that no one care about all the technology as long as number goes up. Now as they usually say, cope and seethe, nocoiner.
The classic "feel free to stay poor, everyone will use [coin] in X years and it'll be worth Y million $€" answer.
Smells rather desperate in the crypto mines, doesn't it.
It's hard to argue with your philosophy because the goal posts never stop moving.
Bitcoin worth anything above $0 would have been an absurd thought 10 years ago, now it's a global asset class worth hundreds of billions of dollars. Unstoppable money not backed by any state is an amazing accomplishment. This alone is a mind blowing fact to me, but again, to the HN crypto hater it's meaningless, because the definition of "success" is constantly moving.
Blockchain and finance are deeply intertwined, so a lot of applications built on digital financial rails (blockchains) are naturally around capital formation, derivatives, trading, etc. but to the socialist / statist that should be outlawed (not just in crypto but likely Wall Street itself) so that isn't anything to you.
One counterpoint is the HN shibboleth of Stripe. Stripe is barely a tweak on PayPal, or at least it was at first, yet everyone on HN ejaculated in amazement at the ability to take a credit card with a javascript function. Of course I think Stripe is a great company, I just want to put into context how on HackerNews, Stripe = "Amazing incredible glorious $100 billion epic company" and cryptocurrency = "Wow a trillion dollar asset built on pure computer science and economic principles created by mysterious cypherpunk, who cares".
> It's hard to argue with your philosophy because the goal posts never stop moving.
I'm not the one that picked that list of projects. You're the one who described them as having "promise", not me.
If there's some projects out there that have lived up to their promises and aren't just gambling enablement, please, list them!
I'll take a quick crack at a few:
Helium, which actually purported to use crypto to build a real-world impacting product? Fraud.
NFTs generally? Speculation, gambling, mostly fraud, rug manufacture (not in the textile sense).
Exchanges, derivatives, "yield" farming, etc. Mix of gambling, fraud, and simple wealth transfers.
Various DAO-style projects. My favourite is projects like Spice, buying real-world assets to leverage them in some way. All failures, some comically so.
Cheap money transfers? Nope. Gas fees, etc.
Store of value? Nope. Massively volatile.
Currency usable for real-world purchases/transactions? Nope. Too slow (also gas fees, etc).
And now I'm at the limit of what comes up off the top of my head.
The fact that billions of dollars have swept into a massively speculative market during a period of historically low yields isn't a surprise. The prospect of wealth transfers from the gullible to the rich will always draw in investors. But that isn't evidence of actual value or success, unless your measure of success is "how many people got rich on the backs of a lot of losers".
So what am I missing?
The other side of the table is so clearly entrenched in their viewpoint that I just laugh now.
Someone asking me at the bar "but what's the value?" when they are an experienced technologist does not get my engagement. They haven't done enough homework to even propose a potential answer to the question they're nongenuinely asking
It has been interesting. The liberal technology community is so emboldened by "muh environment" FUD this cycle that they're actually more blind to the growing sector than ever before.
Ultimately, for the finance-minded developer, there is a gargantuan shortage of web3/crypto devs. I'm not talking about scammy VC web3. I'm referring to the people capable of building what's coming. Overnight, every company is gonna need devs and the shortage will be exaggerated.
It's all optics, their supposed "progressive" view. Wealthy people angry that GPUs got so expensive, overpowered energy suckers they'd gladly use for high-end gaming whilst having the AC on full blast. Nobody cares one bit about high energy use. Calling out crypto is a great distraction though to virtue signal that you're "on the good side".
As was the case with the Mozilla incident. Mozilla had been accepting crypto donations for many years. Until somehow this got back into the news and some influential "progressives" applied the very typical mob pressure, forcing Mozilla to stop.
And all is right again in the world. Except that people willing to give crypto (which is a form of money) now won't or can't. Less income for Mozilla whilst crypto in itself is in absolutely no way harmed. It's still there, same energy use, I guess it will now be spent elsewhere.
That's the new progressive. Obsessively cleaning your self-image, whilst outcomes are completely ignored or achieve the exact opposite.
We just had a $30B PoS coin/stablecoin platform evaporate into thin air this year, don’t even need to bring up Visa lol
And Deutsch Bank laundered hundreds of billions of euros for drug lords. What system is flawed again?
Is there a mechanism in place to stop people from laundering money with ethereum? This is a serious question, I’m a total noob when it comes to crypto.
You can’t stop crime, otherwise murder wouldn’t happen. If you give people a modicum of freedom then some amount of them will act with criminal intent.
Arguably the blockchain makes detecting and prosecuting money laundering easier than our opaque legacy financial system.
Right, in the same way that in the hypothetical Blockchain utopia anyone seeing you eat at a coffeeshop can also see what porn sites you visit, how often you shop at the dispensary, and which escorts you prefer to visit.
I can think both are bad.
> It doesn’t matter how much you argue with HN crypto haters, it’s always “bUt WhY nOt a SqL DaTaBaSe?”
(plug warning)
Well.... I tried that, the HN comments seemed somewhat positive to me at least:
https://news.ycombinator.com/item?id=32294951
> You can’t argue in good faith with people who don’t want to learn.
You can’t argue in good faith with people who don’t agree with the ideology behind crypto and decentralization. I'm a "crypto" person. I work for a "crypto" company. I do so for primarily ideological reasons. The tech is cool, but I'm here for the ideas and the possibility of a different world. Most people on HN are creating developer tools and SaaS software for corporations. Different ideology. They simply don't agree with the worldview that crypto is offering developers/users.
> I've also noticed a more disturbing trend: HR and head hunters increasingly filter out Solidity/Ethereum/Blockchain keywords on resumes as public sentiment towards anything crypto is souring. During interviews, I see candidates who answer yes to whether they had worked on a blockchain or crypto projects being blacklisted.
Some of the best engineers and researchers I've ever worked with were in the blockchain space. Companies that do this are shooting themselves in the foot. I work for a pretty cool startup in the defense sector that appreciated the experience I've had in distributed systems from my several years working on projects like Cardano.
The guy you’re replying to is just making this up. One of many accounts trying to foment sentiment against working for certain employers.
> Companies that do this are shooting themselves in the foot.
Not companies that care about PR and want to distance themselves from crypto space. Those engineers and researchers unfortunately have been tricked into thinking that crypto would be here to stay as were the hundreds and thousands of investors that were duped into an elaborate Rube Goldberg machine that serves no real purpose other than the monetary incentives of a closed few.
Crypto prices have gone down a bit from their peak, but it sure seems like crypto is here to stay. In fact, I'd be happy to make a bet that the crypto industry will exist in 10 years, and will have a larger market cap than it does today.
No argument here, after all Rube Goldberg machines and scammers will likely exist in 10 years as well.
Sore losers as well.
I wouldn't call people who got scammed and who've lost all their money because they've been a bit naïve 'sore losers', but you do you.
I'm not calling people who got scammed sore losers, but rather people who, after 10 years of blockchain still being around and kicking, will refuse to attribute even a shred of legitimacy to the technology and to ever admit they were wrong, still claiming that "it's a scam" and various iterations of "crypto bad".
I suspect this won't change. See /r/buttcoin.
What companies are those? I can see people who worked at Terra Labs having issues but I don't know if it'll be any harder for them to find work than say those at Theranos when it closed - high profile fraud will impact you sure.
> HR and head hunters increasingly filter out Solidity/Ethereum/Blockchain keywords on resumes
I am about as bearish on crypto as it gets but I have a very hard time believing this. It’s definitely not true at the major tech companies.
Please tell me which companies are doing that, I also would like to put them on a "places I never want to work" list.
"I see candidates who answer yes to whether they had worked on a blockchain or crypto projects being blacklisted." - If widespread this is the best sign of health for the tech industry I have seen in years
Watch out what you cheer for, dangerwill.
You do not want that to be the norm. It just so happens that, right now, they are discriminating towards something that you believe to be "wrong". What is "wrong" may change in the future or someone else's "wrong" may not align with your own. And considering we're talking about people's jobs and means to survive, it's not at all something to be taken lightly. At all.
The applicant might not even have an interest in what they worked for, or might even opposed to it. Maybe they worked there just to survive and the pay was good. Has that ever happened to you? I know for a fact that I could not give a single fuck about few of the sectors I worked for, some of them I actively believe to be cancerous to society. I do not have the right to discard people based exclusively on their past work experience, as I'd discard myself.
It just doesn't make sense from a moral standpoint, not to mention it also doesn't make sense from a competitive standpoint: I'd have a smaller pool of talent to choose from, and would discard brilliant minds simply by association to something I do not agree with (or simply don't understand) and ... for what, exactly? To make a point?
There is a difference between industries that are cancerous to society (of which there are many and very few of us have clean hands at this standard) and open, obvious scams. Scams where the software IS the scam and so the software developers involved are culpable. If someone put on their resume that they had previously been employed writing malware then I think it is quite fair to blacklist them too.
I get the overall point you are making, but it is just a rehash of the free speech absolutist position which, in my opinion (that you will not change), inevitably and continuously attempts to shield the worst abusers of society.
And if it turns out that I end up working on something horrible and don't get out immediately and scrub it off my resume? Then I deserve to take reputational damage
You have decided that ALL blockchain technology is a scam and everyone involved with it is culpable enough to be blacklisted from the industry with a zero tolerance policy.
Do you believe that to be a reasonable position to have?
there is plenty of work within web3, at least for the engineers and advisors. support staff and marketing personnel are the ones being laid off with less prospects, from what I can tell.
its also pretty common to form a resume for the job you want, omiting less helpful or unrelated things.
I went the whole decade never telling any web2 startup I worked for about crypto, who cares if its another bear market and people are yet again souring on it
I can't wait until engineers go back to working on tracking and ads, just as nature intended.
have you been paying attention at all?
Indeed, according to our colleagues from The Block, several assumptions have been made by Ethereum developers regarding the tentative timeframes for The Merge’s implementation.
I am looking forward to the moment, when all the people who consider this the 2nd coming of christ equivalent for the crypto world realize that it's just business as usual.
IMO the Merge will "prove" that PoS works and thus bring a lot of pressure to bear on PoW coins for being obviously wasteful.
Hasn’t Cardano already shown that POS works and it did not have the effect that you predict? I’m afraid most people in the crypto world don’t care one bit about the carbon foot print of these technologies.
Cardano has a tiny market compared to Bitcoin or Ethereum. And as we've seen over the years, a lot of problems only show up at scale. So if Ethereum is able to run PoS safely, it will be a much bigger deal.
I'm excited about this.
Bitcoin and crypto use an obscene amount of energy and are basically impossible to ban. A working proof-of-stake system in a non-shitcoin will pile pressure on all cryptocurrencies to move to that system to use less energy.
Most crypto projects and blockchains aside from Bitcoin and Ethereum are already using proof of stake for consensus. But otherwise I agree, it will give more confidence in PoS to see it securing Ethereum.
I don't agree that stopping gigawatts of power from being "wasted", same with GPUs, is business as usual.
Interesting choice to name it after a Berlin park known for being full of drug dealers, muggers and ne'er-do-wells.
Names of the Ethereum testnets were chosen after Metro stations. Ropsten, Sepolia, Goerli, Rinkeby, Kovan...
Görli is also close to FullNode[0], the office building where plenty of blockchain projects were based.
[0] https://www.fullnode.berlin/
Oh please. Give me a break. As if the park doesn't have a richer history than that.
It, uh, kind of doesn't? For most of its life post-WW2 it was a coal depot. The park was built ~1990 and by ~2005 it was known for its drug culture.
ETA: A defense of the "rich history" of Görli is what finally got you to comment after 3 years?!
Rinkeby is pretty rough, and has basically no other reputation than being dodgy either. So someone likes to pick the rougher spots. Maybe someone who likes rap and they are mentioned in lyrics or something like that.
Does this mean I can finally sell the coins I inadvertently locked up? After 10 plus years and no killer app I'm done supporting crypto. It's a scam.
>It's a scam.
Obviously you wouldn't want to profit from that. How about donating your profits to a charity if you feel so strongly?
Ethereum price ~10 years ago, probably less than a dollar.
Ethereum price today, ~ $1900
I'll stand by my statement. I'm not sure why I should give my etherium proceeds away to "charity". What's your rationale for that statement?
Maybe I should be more clear, without ANY application or use for ANY crypto besides pump and dump schemes, ALL crypto, IMO, is a scam. Crypto has been a thing for 10 years, longer if you count egold and liberty cash (or whatever that was called).
And to clarify again, my eth has been locked up in "staking" for what 2 years now without me being able to sell it. I'm looking forward to offloading it all and reap my gains, doesn't change how I feel about it.
> I'll stand by my statement. I'm not sure why I should give my etherium proceeds away to "charity". What's your rationale for that statement?
How can you sell your ETH in good conscience knowing that it's a scam? Wouldn't that make you a scammer?
I've said in another comment I've participated in the scam, 5 years ago, I'll take my gains and walk. Back then I was under the impression that there would be some sort of killer app by now. There isn't and never will be. I've identified the scam, it's all pump and dump and an inflation sink.
But by taking your gains, you mean selling your ETH to a sucker who doesn't know it's a scam... Doesn't that make you a scammer? At the very least, it makes you a participant in the scam. It seems the only ethical option would be to destroy your ETH.
You sure do make alot of assumptions. I've addressed your concerns about my "ethics" in another thread however I'll address them here once again.
There is no application nor will there ever be any application for crypto that cannot be done more efficiently elsewhere. It is no longer a currency so you can scratch that off the definition, there has been nothing but scams, going back to Mt Gox all the way upto this year of literally billions in theft. Why don't you address the ethics of the scams and thievery?
The only truly ethical thing to do would be to destroy all crypto.