Paxos https://en.wikipedia.org/wiki/Paxos has existed for more than 30 years. If it were easy or simple to issue a money with distributed signing, it'd have been done before Bitcoin's PoW<->Difficulty Adjustment<->Fixed Money Issuance novel art was published.
Ethereum has been "about to release PoS" for almost 6 years now and all of the initial critiques (By issuing X units of value, you incentivize ~<X units of energy to be expended)
Summarized here:
https://www.truthcoin.info/blog/pow-cheapest/
By the logic of that article asymmetric cryptography doesn't, because the value equal to what's protected by the key is magically wasted somewhere. Of course, that isn't true, because it's not possible to break asymmetric cryptography by brute force with expenditure equal to whatever is protected. Same applies to PoS.
It's maliciously created nonsense, which is most visible when he slyly equates locked tokens to wasted glucose. Wasted glucose is _real_ energy, while locked tokens are inherently worthless patterns of bits. Locking them is just a _trick_ to convince people to cooperate with each other - a game theory setting where everyone finds it most beneficial to cooperate.
The whole point of the economy is to manipulate real resources - various forms of matter and energy [1] and locking tokens is just a different way of social organization. "Liquidity" (of digital tokens) isn't a real resource. "Money" isn't a real resource. If there's less _real_ energy wasted, the new social organization system is more efficient. That's the objective metric underneath it all, and clearly PoS is a more efficient way of organizing massive human cooperation than PoW.
[1] theoretically matter is a different form of energy, but at the current technological level they are separate inputs to the human economy, except for nuclear power
> By the logic of that article asymmetric cryptography doesn't, because the value equal to what's protected by the key is magically wasted somewhere. Of course, that isn't true, because it's not possible to break asymmetric cryptography by brute force with expenditure equal to whatever is protected. Same applies to PoS.
Not quite. He's arguing that MC = MR implies that PoS is really PoW through obscure means. There's more to securing PoS than asymmetric cryptography -- namely, you have to convince everyone that your keys (and the coins attached to them) are legitimate, and not the next guy's keys and coins on a fork. Convincing people of this isn't a cost-free task, especially if there's wealth to be accumulated through convincing more and more people that your coins are legitimate, and everyone else's conflicting coins on different forks are not.
This game of convincing people that your fork is the true fork is exactly what stake-grinding is. Given a choice, and no a priori knowledge, which history of the PoS chain is the true history? What would convince you that one is legitimate, and the other is not? The article argues that the act of convincing you is, itself, a form of PoW. After all, without PoW, looking at the chainstate isn't convincing -- if you have staked coins today, you could easily create a fork of the chain history where everyone else stopped spending except for you. Without no 3rd party way to verify if that actually happened, you could go around trying to bribe people to accept that your subsequent transactions on this fork are the chain's "true" transactions. There's many tactics for doing this -- you could go on Twitter and spam everyone; you could organize events and rallies; you could even take malicious actions and disable your rivals. You and everyone trying to do the same thing would be in competition to convince everyone else that your fork is the "true" fork.
But regardless of the tactics, all of them require expenditures on your part in the forms of time, energy, health, stress, etc. Hence the "PoW by obscurity" argument. But at the end of the day, you'd be unwise spend any more than you'd expect to receive in return because of MC = MR.
Here's a concrete example. The reason you can tell that there's a lot more belief that ETH is the true Ethereum fork, and not ETC, is because ETH has a much higher PoW score than ETC. Miners can choose between ETH and ETC to mine, and they mine the one whose tokens are worth more. ETH is worth more because more people value it. Therefore, PoW is a proxy measurement of the social consensus -- more people believe in ETH than ETC.
If ETH were PoS at the time of the split, it would be a lot less obvious from the chainstate which one people would choose to use. Both chains' participants would try to make it look like their chains had more users by some other means. But the point in the article is that those "other means" are not only costly actions, but also the marginal cost each fork can afford for these actions is, in equilibrium, equal to their respective marginal revenues.
Paxos solves a different consensus problem than PoW or PoS.
The former is for when you control and trust all nodes in your network. The latter is for the more difficult problem of consensus when you don't trust the nodes - otherwise known as the Byzantine Generals problem in distributed systems research.
Pretty sure Paxos is easily extended to the byzantine setting with digital signatures (i.e. Byzantine Paxos has also been around forever). Also PBFT has been around since the 1980s.
Only distinction is classical consensus is permissioned whereas blockchains are typically permissionless.
Most people should be aware about how they defrauded everybody with the DAO and subsequent fork of Ethereum. But, of course, it has been conveniently sweeped under the rug.
In a PoW chain, Vitalik Buterin can talk, propose, and make patches to an Etherum client, but it means nothing unless miners approve the changes by running the updated client. He is the most important voice in that coin's ecosystem, but miners are the ones who decided to approve the fork.
Switching consensus to a different set of rules is entirely within the scope of a PoW system, and it's based on the same mechanism that gives legitimacy to the rest of the blockchain. The original Bitcoin paper explains this perfectly, so I won't replicate it here.
Creating a fork is not a fraud. That was and is always a possibility, people were free to disagree, and Ethereum Classic represents that disagreement. If you went through that, then you would have ETH and ETC, and a choice of what to use, develop, mine, etc.
can you be more specific?
on blockchains, differences of opinion are always solved with forks - and users follow the chain they agree with which makes it the most valuable chain.
> Without mining, less electricity is used in mining, and less silicon is used in mining chips. Are these resources available for extra production? Yes. However, these “non-wasted” resources are offset by other resources which are “wasted”.
This would seem to be the main argument of that second article you posted summarizing the economics around PoS. The idea is that if you’re backing your crypto with itself (like in a PoS), the value that is locked in the staking system could be doing something else. (This is a very real point in that it doesn’t help decentralization—the same people that would stake their coin could spend that money mining Bitcoin.)
But it doesn’t seem to address any points in the conversation around the ethics of using electricity as a basis for proof of work.
Electricity is the best form of energy to use as the basis for Proof of Work, because there is no pre-requisite on how to generate the required electricity.
compare: electric cars vs ice cars, electric cars can also end up consuming "dirty" electricity from coal fired plants, but that's an option vs. ice cars.
Paxos requires multiple parties to vote on what’s the correct result. The killer issue there is that it doesn’t solve a sybil attack - you either need a central authority in Paxos that chooses which machines run it, or you will end up with an attacker setting up a million machines in a cloud and overvoting everyone.
I think it's hypocritical to call this fraud: this contract itself was exploited for a loophole; if you declare it valid as allowed by the protocol, then simply changing the protocol (which is what was done temporarily) is also valid and according to the working of the system. I think it was within the spirit of the system to work this way.
Proof of Stake is already how our current financial system works. The people with the most money make the decisions. Proof-of-Work is provably resistant to this, as evidenced by the 2017 blocksize debate where almost every large miner and bitcoin company wanted to change the protocol and it was fought off through grassroots efforts. A PoS currency will be controlled by a cabal of US financial institutions, and indirectly by the US regulatory system. Be careful what you wish for.
It's not like cryptocurrencies achieved any of their goals so far anyway. If it's about facilitating pyramid schemes and creating a worldwide casino we might as well do it efficiently and without wasting insane amounts of resources.
I'm personally very happy for PoS and hope that it'll be successful, I would be a lot less annoyed with cryptocurrency bullshit if it wasn't so wasteful. With proof-of-stakes it basically joins the ranks of essential oils and other MLM scams, I'm fine with that.
What do you mean? We totally got what we wanted; we have a deflationary currency we trade for goods and services.
I'm 100% serious here; it's been working fine for quite a number of years. The fiat conversion is pretty noisy but BTC on average goes up in value in fiat terms at a fast pace. BTC is easy to turn it into stuff. No one has ever censored my transactions or asked for ID. Even if you buy something really expensive or totally illegal. It has literally already worked. It started working the day that guy bought a pizza and it hasn't stopped working.
I can't believe this blatant denialism still exists on HN despite the fact that Ethereum has a thriving defi ecosystem. I can get a loan peer to peer today with my ETH in a stablecoin and yet you say there's no there there? Right....
we live in an age when governments are tightening controls and are spying relentlessly on their population, as a result there seems to be a significant demand for means to escape these controls at least somehow, i think crytocurrencies answer this need, so it is not just a pyramid scheme/worldwide casino.
I agree with most everything you just wrote. But, note that the problem with Proof of Stake, in this thinking, is that you won't be able to buy tokens from your local energy company, when the regulators shut your blockchain down.
You might think Bitcoin is not a good store of value, but a lot of people disagree with you. The energy "waste" argument is just virtual signaling at this point. It has been thoroughly debunked.
Funny how everyone complains it's wasteful yet I see absolutely nobody complaining that they have some sort of electricity shortage because of Bitcoin miners.
I think you're conflating _consensus_ and _governance_; the two are quite different. It's not PoW vs PoS that allows a chain to resist a coordinated attempt by elites to force a protocol change, it's users personally verifying the chain (and so automatically rejecting chains that violate the rules even if >51% of PoW/PoS nodes support those chains). So no, PoS is not "how our current financial system works". Our current financial system doesn't give people the ability to independently verify anything at all; it's even worse than the most centralized chains in that regard.
I would actually say PoS is more resistant to cabals and regulatory systems than PoW; PoW mining requires huge and visible capital investments and electricity consumption and it's incredibly easy for governments to detect and shut down miners in their own countries (not as true for GPU mining, but GPU-friendliness is difficult to sustain long term), whereas you can be a PoS validator with the most basic computer hardware from anywhere.
I'm mostly talking about governance. The biggest "users" and governance decision makers of any PoS protocol will be regulated financial institutions (e.g. Coinbase) operating on behalf of end users. In theory Joe Schmoe can be a staker from his garage, but in practice the only stakers that matter will be regulated custodians (full disclosure, I am the CEO of a regulated custodian) other than a handful of independent ETH whales (like yourself).
Yes there will be a number of custodians "competing" with each other, but they will all largely operate under the same regulatory jurisdiction (or at least cooperating jurisdictions). If a PoS currency becomes mainstream, the Federal Reserve (because regulated banks will be the largest custodians) and Dept. of Treasury will have significant influence on governance debates.
The big issue here is that governance decisions in PoW systems are split between miners (geographically distributed), custodians (largely US based) and other economic actors. In PoS systems only custodians will call the shots. That has very serious implications because custodians are regulated financial institutions with significant network effects, miners do not have this centralizing force.
Lastly, to actually become a miner in a PoS system requires you to find or create a cheap source of energy and hardware and maintain this advantage in perpetuity. This is external to the system and can be done without paying off any existing Bitcoin actor. In a PoS system you, by definition, need to pay to play - you must purchase a sufficient stake of the currency from an existing insider if you want to have a seat at the table. It's the perfect insider game. Some may argue it aligns incentives, but it also centralizes control.
These systems all have different tradeoffs. Maybe some people are ok with these tradeoffs for switching to PoS, but I'm not.
In Ethereum, you need 32 ETH, which is around ~$120k. That's prohibitive a normal person. After EIP1559 goes into effect, it's not out of the question that the price could rise 7x given the power laws at play. What happens when the cost to stake a node is $1M+? What happens 50 years from only the very richest .00001% can afford to run a node?
I'm concerned EIP1559 and PoS is a very short sighted implementation that will move towards centralization of the network.
There should be a floating minimum, or have no minimum at all to run a node. Not sure the exact tech solution, or I'd be submitting a pull request :).
I'd further add on to say PoS has the benefit of being able to eliminate bad actors unilaterally. You can't stop anyone from attacking a PoW chain over and over again. Attacking a PoS chain is much riskier as the attacker's stakes are held on chain and are at the mercy of the community who uses the network.
Important to note that Vitalik massively gains from Ethereum transitioning to Proof-of-Stake since he controls a large percentage of total ETH due to premining it before the project launched.
With PoS one can just buy _governance_, that's all. All you need to have more influence on (PoS-based) Etherium is a huge amount of money. More power to money-bags!
> Our current financial system doesn't give people the ability to independently verify anything at all; it's even worse than the most centralized chains in that regard.
I'm sorry, that sounds incorrect, many people have been "verifying" things independently and sounding the alarm, but nothing happens.
"Roughly 90% of the hash power once threatened to change the rules of #Bitcoin believing the users didn’t matter in the decision. The users spun up 10s of thousands of full nodes & told them to go f*ck themselves." [1]
The difference is that PoW is censorship resistant. Anybody can be a miner and existing miners cannot censor new miners. Performing new work is external to the network state. In PoS, existing stakers can prevent new stakers from registering. Very important distinction.
Mining is expensive and low margin. Generally, the people who own the most Bitcoins are not the same as the people with the most mining rigs, the two parties tend to be completely divorced, and the miners tend to be strongly incentivized around not rocking the boat (for better or worse).
The other misunderstanding is that mining doesn't shape the protocol. The users shape the protocol, and can run any validation software they want. No user has to accept a block by a miner, and every block made by a miner has to conform to the protocol's rules.
I don't think your example proves proof of work isn't vulnerable to the same effect. At best it proves it's not always vulnerable to that - but the same could technically happen with proof of stake.
Like it or not the Pareto principle or 80/20 rule may well be the most powerful law of the universe. It applies to everything from physical systems like stars and galaxies to social systems and individual human achievement.
I don't see why crytocurrency should be any different. Proof of work through cost of capital investment exhibits the exact same concentration of wealth and power, but at least PoS doesn't destroy the environment as a side effect.
I'm skeptical about why we need the decentralized aspect of cryto when it ends up centralizing anyway. Seems like a very inefficient way of doing things. Maybe we just want an immutable public ledger - but I could be wrong on that. It hasn't lived up to the hype yet.
There is a very big difference. PoS collapses governance into a single group: custodians. With PoW governance is a push and pull between miners and custodians. Additionally, PoW miners need to constantly sell Bitcoin to cover operating costs, whereas stakers in a PoS system have a small fixed cost and large stakers will always stay large. Miners on the other hand need to constantly invest and expand to stay competitive.
POW just gives the power to whoever can purchase the most computing power. It also gives control of the network to those directly benefiting from high fees.
At least POS gives the power to those that actually have an interest and stake in the currency itself.
PoS will be controlled by US-based custodians, which certainly have a tremendous incentive to siphon as much value from the currency as possible.
PoW has a much more diversified set of actors with competing interests, which makes it much more difficult to change the rules. This is a feature not a bug.
Proof of work is no different in this regard: more capital, more mining power, more control.
Miners interests don't always align with the network's users interests (see gas fees).
Proof of work isn't more decentralized either (a few mining pool delegators control bitcoin), eth2 proof of stake is more secure because of the pseudorandom validator selection.
It is very different: The difference is that PoW is censorship resistant. Anybody can be a miner and existing miners cannot censor new miners. Performing new work is external to the network state. In PoS, existing stakers can prevent new stakers from registering. Very important distinction.
Correct, the US Federal Reserve is a Proof of Stake system. Members earn 6% dividends for the last 100 years, and this was to entice them to join the system at all. Just pointing out that the idea of an omnipotent US government is a fairly new concept, and it must incentivize and entice people to join its payment network as opposed to other private ones.
The private networks for final settlement are becoming more interesting to market participants. And they are also aiming for distributed (sharded) proof of stake.
>as evidenced by the 2017 blocksize debate where almost every large miner and bitcoin company wanted to change the protocol and it was fought off through grassroots efforts
Literally the opposite happened, although PoW isn't very relevant here. Grassroot enthusiasts tried to fight a cabal of developers sabotaging adoption of bitcoin - and those users failed, mostly because of massive censorship on major social places. The idea was that users would instead go to a centralized network called Liquid.
The sabotage succeeded, the Liquid part didn't, users went elsewhere. Now it's 2021 and bitcoin has lost all network effects it ever had. Did you know bitcoin used to have tokens and even dexes (although poor)? Google mastercoin and counterparty.
In the long run, it turned out well, as ethereum is a way better foundation.
It's indeed possible it wouldn't have happened with PoS, as contrary to PoW stakers are long-term oriented - miners don't really care about long-term prospects and acquiesced, dooming bitcoin in the long term, but it's possible btc stakers would be afraid of going against core developers too.
No way dude. Our current system isn’t even close to PoS. Most obviously the federal reserve controls the monetary policy. Beyond that there is no “code is law” that we can all audit and fork if we find it inadequate. If ethereum centralized you can amend the protocol and fork the blockchain. Show me how you can do that with USD.
The main value of cryptocurrencies is a provable ledger with an open API. PoS sufficiently establishes that for all economic purposes save for those wishing to make themselves feudal lords.
Currently your money is transmitted by csv copies across thousands of companies, most of whom use a semi-manual process. Moving this type of transaction to a distributed ledger will save financial institutions billions in audit costs.
> almost every large miner and bitcoin company wanted to change the protocol
If the miners really wanted to change the protocol, they would have done that. The exchanges would have followed, as they had declared that the longest chain would win, and that would be game over.
Instead the miners gave in to the perceived authority of the Core developers, who pinky promised to later raise the block size (which they backed away from).
The exchanges have no reason not to support both sides of a fork, for example the BTC/BCH split. Then the owners of the tokens ultimately decide which one is more valuable by selling their tokens on the chain they don't prefer and buying tokens on the chain they do prefer.
Please read up on UASF and Bitcoin. People can buy tons of mining factories, but if a very large amount of nodes start rejecting blocks and therefore the rewards, miners start to rethink their stance very fast. There is no discussion here, history proves it.
Why do you believe a global PoS currency will be controlled by US actors? The US has a 10--20% share of global GDP.
Regardless, history has proven that the most legitimate branch of a blockchain wins, irrespective of security model. It will not be the actor with the most hash power or stake. For reference, see the Justin Sun/STEEM drama.
We have a bad experience with this PoS principle in France. It ended in a revolution.
The assumption that people with the most stakes will act in the interest of the community has been proven flawed in many occasions. They will act in their own interest first whatever it wight be. The weak logical link is that their own interest always coincide with the interest of the community.
If someone could explain me how this assumption will always be true, I would be very happy.
Proof of work consumes a real world resource. Proof of stake does not, therefore proof of work exchanges REAL value for virtual value. It literally takes actual value in the world and deletes it. What’s the difference with the US financial institutions buying up all the big mining rigs and then buying up all the stakable tokens ?
Energy is not being exchanged for "virtual value", but rather "shared belief".
Wars have been fought to force shared beliefs. It's fairly common in history for "real world resources" to be permanently burned in order to create a shared belief system in order to facilitate trade. For example, the Roman Empire or any other empire.
I'd rather use electrons to create shared belief than bullets and bombs.
> Proof of Stake is already how our current financial system works.
This is a naive viewpoint. Ethereum (as a currency) is an "M0" token, like cash or Fed deposits. There's a lot of handwaving about bonds and whatnot, but essentially the Fed can create new money simply by changing numbers on a balance sheet, and they can make that money into folding money and change which they can issue.
The banking system is a complex system that creates IOUs on top of that base. Some of those IOUs are even better than the cash layer -- you can't buy stock, for example, for cash, you need bank IOUs to do that.
That said, then, what is PoW and PoS used for? They're essentially distributed methods of ensuring that nobody can forge money. So the equivalent in the world of dollars is not a bunch of bankers chuckling to themselves about how they're fleecing the plebes. The equivalent in the real world is a bunch of aircraft carriers and planes and bombs and people with big guns, which gives the ability to say (credibly) that it is a crime to forge dollars no matter who you are or where you live.
> The equivalent in the real world is a bunch of aircraft carriers and planes and bombs and people with big guns, which gives the ability to say (credibly) that it is a crime to forge dollars no matter who you are or where you live.
And yet people complain about cryptocurrency energy usage with a straight face!
> The equivalent in the real world is a bunch of aircraft carriers and planes and bombs and people with big guns, which gives the ability to say (credibly) that it is a crime to forge dollars no matter who you are or where you live.
Eh, I gotta say that no matter the system, speculators are gonna speculate and power hungry idiots will do everything they can to control a currency. That's fine, and human, and expected. Just please try not to melt all the ice caps while ya'll have at it.
Yes, but they then need to maintain that edge by selling their Bitcoin and buying more computer power. They have constantly growing operating expenses and there is no force that centralizes control. PoS playbook is 1) get a stake, 2) set it and forget it.
Proof of Stake is the worst form of Socialism. It is Socialism governed by the wealthiest elite
Proof of Work is brute Capitalism. It Capitalism without regard for life or health.
STX is Proof of Transfer (secured by bitcoin's hash-power and the Stacks network).
Proof of Transfer is the best of both worlds. It is community and global capitalism with community and global responsibility.
When a technology is simultaneously a store of value, & a utility, the demand for it is exponential, people will seek it in both states, but for different and individual purposes. STX earns BTC for the directed purposes of any individual and as that individual desires with minimal network effect. STX drives community demand only as demanded by the community. STX drives Network benefits only as desired by the Network.
Lets imagine a series of networked micro-communities built with sun energy using solar panels that photochemically convert the atmospheric water into liquid hydrogen. This is being done today.
That hydrogen is then stored as energy in fuel cell batteries. That energy is then used in part to mine community bitcoin.
That community bitcoin is used in part to build and maintain community infrastructure and finance community healthcare.
The community will also use a small portion of the wholesale mined bitcoin to leverage the Stacks Proof of Transfer PoX miners. The STX block reward will support the maintenance and expense of bitcoin mining. The winning PoX miner's committed bitcoin is allocated randomly to the locked Stacks token holders that are all also bitcoin miners.
The locked pools secure the stacks chain and bitcoin node operators secure the bitcoin chain.
The community through Non-fungible tokenized (NFTized) hashed identity quadratically vote on finance mechanisms using the creation of decidable language smart-contracts.
Those smart-contracts execute for community tokenized provenances or (NFT's) of decentralized communication, decentralized wealth & decentralized egalitarian and merit based commerce. And the by-product is pure H2O and clean air.
For the people who criticize as to why they've taken so long in shifting to a PoS model: consensus takes time, so does developing and testing something that definitively shouldn't go wrong.
Also, there's the inherent issue with Proof-of-Stake that Proof-of-Work doesn't have: the initial distribution of the coin has to be wide enough before it could feasibly self-maintain a PoS shift without being immediately vulnerable to consensus attacks. Ethereum is definitively mature enough by now, it wasn't a few years ago.
Here are a few of the reasons that come to mind as to why this transition has been taking us so long:
* The design of the Beacon Chain is far more optimised than our initial designs for a PoS system
* There are far more crypto-economic edge cases in a PoS system when compared to PoW
* Software development is hard and time estimates are even harder
* The use of a hybrid fork choice to balance safety and liveness trade-offs
* There is a crazy amount of value being handles on Ethereum so it is necessary to be conservative with our changes (move fast and break things is not an option)
* There are 4 concurrent implementations being developed all of which need to be inter-compatible, and production ready
* As Ethereum governance is decentralised we need a shelling point for exactly what Ethereum PoS looks like, this takes time
* We have worked hard to create, encourage, and embrace standards with other chains so that the cryptocurrency community of tomorrow is more inter-compatible (eg. IETF BLS standard or libp2p networking)
* We have spent time designing around quantum-computing resistant backups for the majority of the cryptography (eg. validators all have a Lamport backup key though most don't realise it)
* New cryptography has been developed and previously abandoned schemes revitalised (eg. Verifiable Delay Functions or the Legendre PRF)
And by far the most significant hindrance to moving away from proof of work is that there a number of significant players who have a large economic interest in PoW. Ethereum was promising this move many years ago, but it always was an extraordinarily low priority.
There are a lot of people with perverse biases. Many of the comments enthusiastically defending Bitcoin are people who are sitting on BTC and have watched it get pummelled due to its ludicrous enormous-energy-for-something-that-does-nothing-for-humanity reality (seriously -- if I see one more chart comparing the entirety of the financial industry with Bitcoin. The former powers the entire world. The latter powers some speculators, criminals, and a minuscule number of legitimate transactions).
* Its a technically flawed solution that now has so much hype, abandoning the idea would lead to further FUD, tarnishing the project's future direction. So we must go through the motions to appease the energy FUD warriors.
> the initial distribution of the coin has to be wide enough
I don't understand how proof of stake works to the depth I understand proof of work. But this reassures me that it's feasable that they'll accomplish the same distributed consensus.
So then, could I say that Ethereum proof of stake will allow the owners of the coins (ether) to be independent from the owners of the mining operations?
or uhmm...
is the independence between the computaional costs of the "mining" and actual minted ether?
Ethereum proof of work made it so the owners of the coins could be independent from the owners of the mining operations, even if in practice many miners end up keeping most of the block rewards themselves and only reinvesting what they need in new infrastructure and to maintain what they already have. Proof of stake makes it so the miners and holders are now the same (you stake the coins that you have, or you pool them up with others), however the cost to wreck the chain is much greater than it would have been 3-4 years ago.
The whole idea is that Ether is so spread out now, it'd be unfeasible for someone to snatch up enough of it for an attack, in a similar way to how an ever-increasing difficulty makes it harder for a hostile actor to coordinate enough of it to make such attack.
This is one thing I've been wondering about new projects that start with PoS. How do they have enough distribution of the coins in order for them to be resilient against attacks?
This is a good point and I think only ethereum has sufficient distribution. The sole advantage of PoW over PoS is distribution - miners sell, dumping the price, which is also likely to make other people to sell. Even many ethereum founders sold very low - Vlad Zamfir in particular sold ~100% below $20 (he tweeted about it, can't find it now).
Ethereum had 6 years of PoW now - most likely nothing else can repeat its distribution, ever. The time of PoW is visibly over.
Another point is that ethereum was icoed when crypto was tiny, few people believed smart contracts could have value and VC stayed away. Normal people are much more likely to sell just to buy a house. Now new coins start with coins distributed to VC and they are prepared to hold for years hoping for eth-tier returns.
There's an argument that not that many people even knew about the ico - but the same is true for bitcoin mining early. It's very hard to quantify precisely but I think both have almost identical coin concentration.
Be wary of manipulative statistics that ignore the inherent differences between the utxo vs account model - like percentage of coins held by top x%. The assumed practice in an account-based model is for one user to use one address, while the current practice for utxo coins is to use one address per received transaction. Same is true for value sent per timeframe - because utxo relies on change addresses the actual transferred value is much smaller.
Exactly, the devil is in the details, just like how all current "scalable" blockchains are only able to do so because they sacrificed decentralization. Ethereum is dealing with growing pains right now because it's solving scalability with an approach that doesn't sacrifice decentralization or security.
Consensus may take time, but when you're pouring gas onto a fire, arguing that you need to dump out most of the can before you can be sure you know what you're doing isn't a defensible position.
PoW was of course a naive system but this this PoS should really be called the "Oligarchy" because it takes us back to the past and very visibly separates the plebs from the aristocracy.
PoW had an implicit requirement for a global supply chain of hardware and energy which (kind of) made political and geopolitical games more difficult. With PoS, doing politics no longer requires work, which could lead to geopolicical wars. For example it might be possible to achieve wide enough consensus among stakers in Western countries to punish China (for some reason), e.g. willingly losing part of their stakes to empty major Chinese wallets. The fact that this doesn't really require physical effort but only persuasion is problematic.
ETH will be a real test about whether PoS works, as the other PoS cryptos are much smaller and less intertwined in other crypto projects. Historically, oligarchies led to wars
> it might be possible to achieve wide enough consensus among stakers in Western countries to punish China (for some reason), e.g. willingly losing part of their stakes to empty major Chinese wallets.
According to Ethereum's PoS implementation, this would require more than 33% of all staked Ethereum coordinating with modified clients in order to pull off. Then, another percentage of the stake adding up to 66% would have to be complicit in the attack, rather than actively defending against it by refusing to finalize blocks.
Compare this to PoW, where only 51% of hashrate needs to be participating/complicit to censor certain transactions, the other 49% have no way of fighting back, and the only tool the community has to fork away is to change the PoW algorithm.
Because of this, I actually believe PoS is more resistant than PoW to these kinds of attacks.
In practice a PoS network tends to have a participation rate of between 10% and 30%, and the 2-3 largest exchanges collectively tend to own between 10% and 50% of the total supply.
And then also in practice most of the staking is performed by a small number of outsourced staking firms, which increases the power concentration even more.
And it also makes hardforks more traumatic because your economy and your consensus builders are fundamentally intertwined. You can't fork an exchange off of the network without also disrupting every single user that parks funds on that exchange. The same concern doesn't exist with PoW mining.
> Compare this to PoW, where only 51% of hashrate needs to be participating/complicit to censor certain transactions, the other 49% have no way of fighting back, and the only tool the community has to fork away is to change the PoW algorithm.
This is just such a small part of the whole equation.
1. They can't continuously attack with this, as you need to expend energy as long as you want to continue with the attack.
2. Even if you have majority hash-rate, you can't change the rules of the system (this has already happened)
I'm on the PoW side. But you should note that PoW is also oligarchic in the sense that individuals have no ability to compete in terms of mining. The rich get richer is still a thing here.
That being said, PoS is very much a human centric valuation (rich peoples opinions being the value), so yes: politics and then war seem likely.
Pretty much every fiat currency has the same issues as PoS, where eventually war becomes the cheapest way to retain value.
In PoW, the "rich" have to keep selling their coins to buy more dedicated mining equipment in order to stay competitive. And because PoW hasn't reached "optimum efficiency," there's still profits to be had by building better miners and cheaper power sources. Innovations here have positive downstream effects, since innovations in cheap renewable power and efficient chip fabs and designs have many applications beyond mining.
PoS, on the other hand, requires minimal extra work from the already-rich. They just sit on their butts getting richer.
What if a government required Ethereum traders to pay taxes in Ethereum, then kept and staked it, thus increasing their Ethereum even more. Wouldn't that government eventually gain complete control of governance in Ethereum?
Then they'd quickly have a hard time collecting taxes in the future, as they would run the economy into the ground.
Also the government doesn't want to gain control of Ethereum. If the government wants to use a crypto it will roll it's own and make it law, thereby having complete control of it from the get go, with no pesky premine for the foreign developers.
On the flip side, nearly 100% of PoW mining hardware is manufactured in China. They could easily play geopolitical games with the west in that regard.
There is also a very delicate game to play if you're trying to hack a crypto for your own benefit. If a crypto network gets hacked it is likely to lose a ton of value and reputation. That's why ETH fell by 60% after the Dao hack. So you're really shooting yourself in the foot by being a malicious actor.
I was fairly into the space in 2014-2016 but stopped paying attention the last few years. It seems like lots of theorized applications actually exist and have a proof-of-concept now.
If I’m building a marketplace business in 2021, where I want to be “crypto-first” instead of relying on PayPal and Stripe Connect, where do I start?
The marketplace sells access to resources with an off-chain ACL system. It facilitates trades between resource sellers and buyers.
I assume I want a smart contract between buyer/seller to record resource grants on chain, which the access layer checks as a source of truth.
But if I were to do this on Ethereum, the gas fees would be really expensive. I’ve heard about Polygon and “optimistic roll-up.” Is this a viable solution?
> If I’m building a marketplace business in 2021, where I want to be “crypto-first” instead of relying on PayPal and Stripe Connect, where do I start?
Unless you are building a dark web market, why would you want to? It will be more convenient for the vast majority of users to pay with card or PayPal.
why does it have to be a dark-web market if blockchain payments are first class citizens? I suppose the general population isn't ready for decentralised payments yet or do you have another reason for such use-case generalization?
I believe there are some use cases. Think of a government which does not allow currency conversion to more stable currencies in a place where volatility or inflation is very high. In that situation, it might be worth adopting a crypto-first approach, no?
This is a great solution called zk-rollup (zero knowledge rollup) https://zksync.io/
It is just as secure as the base chain (unlike polygon) and has low fees and has been live for the past few months. This is a perfect solution to simple payments.
The difference between optimistic rollups and zero knowledge rollups is that you can’t deploy arbitrary smart contracts to zk rollup, it only supports a limited set of use cases, such as simple payments for now. Read more here https://vitalik.ca/general/2021/01/05/rollup.html
If you as a reader are interested in math & crypto the stuff being done in the zero knowledge space w.r.t. cryptocurrencies is really cool regardless of your opinion on cryptocurrencies in general.
Polygon & "optimistic roll-ups" are generally referred to as L2. In general this part of the etherum ecosystem is just starting up and the only one that has seen much adoption so far is Polygon (which did 4M tx yesterday & still has low fees).
Using an L2 system will mean that your user will need to be using that specific L2 system as well, but the UX doesn't seem so bad (at least for ETH -> polygon, and for the cryptocurrecny space so far).
ETH 2.0 will reduce gas fees somewhat on the mainchain, but it's fairly obvious that there's huge demand, the sharding that ETH 2.0 will do is create 1 shard for execution & 63 for data only. Most L2 systems will mostly use the data shards, so we appear to be heading towards an L2 future.
In short if I were building a company in the space I'd be looking at deploying both on the mainchain (L1) and on a L2 system, but prioritize the L2 system. Unfortunately we may end up in a world where there are dozens or more L2 systems and either the users or the companies have to pay the cost to hop between them.
Realistically, you can't. Unless you want to be a very early adopter, no mainstream businesses are accepting payments in crypto. Techwise, Coinbase has a thing: https://commerce.coinbase.com/
To add my experience. I looked at rolling out Coinbase commerce a couple of years ago and then again a couple of months ago. I found their current integrations lacked support or were seemingly abandoned.
Contacting general or merchant support often took over 2 weeks to get a response, which was a deal-breaker for any service that would inevitably impact customers on our end.
Low fees - but only once you're in the crypto ecosystem.
If you're after dollars or euros, the on-ramp and off-ramp at exchanges adds a comparable, if not higher layer of fees than existing payment mechanisms, kind of defeating the whole purpose.
Maybe this is a good time and place to ask - let's say I want to buy something using Ethereum. Is it correct that when I look at, say, https://ycharts.com/indicators/ethereum_average_transaction_... , you have to pay USD 20 just as payment fees? I wrote off Bitcoin as a payment mechanism a long time ago because of this (although it seems BTC tx costs are now lower than ETH?), is this the direction tx costs for all crypto coins go?
To directly answer your question: currently, ethereum has the same fundamental scaling problems that bitcoin has (limited global throughput)
Bitcoin's attempted solution on this front is off-chain scaling via lightning network. As far as I can ascertain, this has had highly limited adoption.
Eth's attempted solution on this front is sharding. I can't claim to be an expert in this, but from my understanding after proof-of-stake is deployed, ethereum plans to deploy something like 64 separate "shards" which, from my understanding, are like extra blockchains for conducting transactions, and using some kind of complicated proof of stake system to keep it consistent. In this case, while the main-net still has limited global throughput, scaling up to add more side chains will allow scaling additional throughput. You can read more here https://ethereum.org/en/eth2/
As with lightning, we don't know how well this will actually end up going until it's deployed.
Ethereum has set aside sharding temporarily to focus on PoS. The plan to scale in the short-term is to use technology called "rollups" which put a transaction's signature data off-chain while keeping its data on-chain, effectively "batching" a bunch of transactions into one.
Eth has a sidechain called Polygon with orders of magnitude more usage than bitcoin's lightning network. There are a number of other promising "scaling solutions" launching in the coming weeks. Sharding is unlikely to happen in 2021.
For a basic transfer, it's probably best to use a gas tracker like: https://etherscan.io/gastracker to check on costs. It's about $6-8 at the moment. The average tx cost is going skew much higher because of DeFi transactions. Uniswap V3 is scheduled to deploy on Optimism potentially in a few weeks which may help alleviate fee pressure (although as you can see from the linked gas tracker, Uniswap V2 is still consuming a large portion of txs). The bet is that a combination of L1 and L2 improvements will bring transaction fees back to reasonable levels in the next year or so. If it doesn't, there are a host of new competitors like Algorand or Solana that are looking to supplant Ethereum (and do currently provide much higher transaction throughput and lower costs).
In general, fees go up as the token price goes up since fees are usually charged as a function of transaction size or complexity, and also fees rise as a protocol hits its tx limits, but not always. Nano is an interesting cryptocurrency that is fee-less (although they just had to roll out an emergency update to improve spam resistance), so it's possible to design a fee-less system, but it's certainly even more experimental atm.
There are, however a number of cryptos that currently (and by intent) have <$0.01 (sometimes significantly less) fees. This includes (just going down by market cap): Ripple, Bitcoin Cash, Stellar, or Dash. For transactions, even though fees are a bit higher (about $0.06), I like Monero since it's one of the most private and widely used cryptocurrencies out there, and it's fees have actually significantly decreased due to technical improvements in transaction efficiency, dynamic blocksize, and an algorithm that can actually reduce fees as volume increases.
That is correct, to run an on-chain transaction is fairly expensive. There is a lot of ongoing work to address this: Layer 2 solutions like optimistic rollup, arbitrum, etc. EIP-1559 itself will address this problem on layer 1. But the ecosystem is not mature yet. If/when the scaling problem is finally solved, the legacy financial system will change rapidly.
$20 is a little high. ETH transactions are variable cost; more complex transactions cost more. In order to get the price of a simple transfer you can take the current gas price (for example, from https://ethgasstation.info/index.php), which is 87 right now, multiply that by 21000 (cost in gas of a transfer) and divide that by 1 billion. So a transfer costs 0.001827 ETH or ~$6 if you want to happen within a few minutes.
So yes, it's currently not practical for microtransactions.
That chart is highly misleading, as it includes all smart contracts. In ETH a basic transfer (like BTC) is often cheap (although it needs to be even less!), however interacting with a smart contract can be more expensive. If you want to interact with a highly complex smart contract that pulls a lot of state it can be 100x the cost of a basic transfer... just depends on the code.
Just to put an anecdote to the question, I made a withdrawal from my mining pool to my wallet 2 days ago and for an nearly instant transaction it cost me ~$2USD. Higher than I'd want in any currency, but it definitely wasn't $20USD
Strange. I made ~5 ETH transactions a few days ago (interacting with a smart contract) and paid ~$90 each. Around the same time I made a few transfers, and spent about $25 each.
Nobody knows whether or not cryptocoins are currencies of the future but I'm certainly willing to let them innovate for the next few decades figuring out if there's a path forward.
However, I cannot abide by a money speculation mechanism which uses as much electricity to mine worldwide as the Netherlands use in total. That's absolutely asinine to me.
> I wrote off Bitcoin as a payment mechanism a long time ago because of this (although it seems BTC tx costs are now lower than ETH?), is this the direction tx costs for all crypto coins go?
No. There are developers who actually prioritize on-chain scaling. For instance Bitcoin Cash and Monero have very cheap fees, and they will stay cheap for the foreseeable future.
Yep. Not much, if anything, has improved since you wrote off Bitcoin. One of the problems is nobody really cares about having a new payment mechanism. You can explain fractional reserve banking to people, explain how the 2008 financial crisis happened, even give small scale advantages like sending money overseas, and the vast majority of people just don't care. Until people start caring, nothing will change, and crypto will remain a zero-sum pyramid scheme.
Not sure how it all works, but I assume it's broken down for a purchase on something like Coinbase card - eg. they bundle a load of card transactions into a ETH to fiat conversion for Visa
The last time I received a Bitcoin payment, it cost $0.36 in network fees. The network is currently more congested, so the fees are higher at the moment.
Algorand has been Proof of Stake for years (2019 MainNet launch) and it's actually carbon-negative [1]. It's a shame more people don't know about it. Its founder is a Turing-award-winning MIT professor (Silvio Micali) who solved the blockchain trilemma [2] with the Pure Proof of Stake consensus algorithm. The tech is leaps and bounds ahead of other cryptos.
That sounded interesting but I couldn't understand from the links how a blockchain can be carbon negative:
>To achieve a carbon-negative network, Algorand and ClimateTrade will implement a sustainability oracle which will notarize Algorand’s carbon footprint on-chain for each epoch (a set amount of blocks). With its advanced smart contracts, Algorand will then lock the equivalent amount of carbon credit as an ASA (Algorand Standard Asset) into a green treasury so that its protocol keeps running as carbon-negative.
I'm pretty familiar with the basics of cryptocurrency and blockchains, but the above paragraph makes almost no sense to me.
They're going to buy carbon credits to offset the carbon emissions derived from using the network, then lock them away so they can't trade them off at a later time. That is definitely some marketing lingo tied around "we buy carbon credits".
It's times like this I ask myself whether I'm slow, or whether the text in question is needlessly complex.
My pessimistic side suggests this could be purposeful obfuscation of implementation by using complex language. No one will question their solution if no one can understand it.
On the other hand, I'm a big proponent of the Algorand project and based on the general quality of their work (the tech, docs, tutorials, etc.), I'd be surprised if there were anything malignant going on.
I just read about it. It seems highly susceptible to disruption by a minority stake, via the birthday paradox.
If only a fraction of the stake holders are validators at any given time, but the set of 1000 validators is selected randomly from token holders, then all you technically need is 1000 tokens (or more) and given enough time you will be selected as the only validator, right? You can then validate a fraudulent transaction, breaking security.
Now perhaps the amount of time it would take for this to occur would be longer than the heat death of the universe if you only have 1000 tokens, but at the very least, this substantially reduces the stake required to mount such an attack below the 51% required in a PoW system, right?
thats why currently the minimum stake amount is 32 eth. Also, you'd learn you were the validator for the cycle only when you are awarded eth. If you try to push through a false transaction you can get slashed (Losing some of your stake). all in all, makes it impractical at best.
Would it be reasonable to assert pure proof of stake is less risky than delegated proof of stake? I don't claim to be an expert in crypto but from what I've read it seems like pure proof of stake is a leap ahead of other consensus algorithms in terms of security, energy usage, etc.
It's a shame people don't understand that there's multiple aspects. Ethereum is much more decentralized, secure, have more dev mindshare, better community, tooling, and ecosystem. Let's also not forget that Algorand is powered by and centralized around team-run nodes.
I don't think the initial "It's a shame more people..." is meant to make people forget about Ethereum. I think it's to signal that not a lot of people know about Algorand, and doesn't anything about other projects.
Since you seem to indicate that you know what you're talking about, care enough to make a proper argument? You say Ethereum is more decentralized, secure and better tooling, but you never actually make a cohesive argument, only giving a list of "reasons" without any backing. I'm mostly interested in why you think Ethereum is "more secure" than Algorand, and what threat model are you considering here even?
> Algorand is powered by and centralized around team-run nodes
Hm, I run a Algorand node but I don't work for the Algorand team. What do you mean that Algorand is run by team-run nodes really? How do you even know which node belongs to who in the first place?
Readit News
https://news.ycombinator.com/item?id=27194586&p=2
https://news.ycombinator.com/item?id=27194586&p=3
https://news.ycombinator.com/item?id=27194586&p=4
https://news.ycombinator.com/item?id=27194586&p=5
(Posts like this will go away once we turn off pagination.)
Ethereum has been "about to release PoS" for almost 6 years now and all of the initial critiques (By issuing X units of value, you incentivize ~<X units of energy to be expended) Summarized here: https://www.truthcoin.info/blog/pow-cheapest/
If the curious reader is interested in reading more about the scope of fraud that the ethereum protocol has fueled read the post here: https://web.archive.org/web/20201214170136if_/https://www.re...
Why link to the archive.org copy and not the original? Ethereum people got mod access to the subreddit and deleted everything pointing out the fraud.
By the logic of that article asymmetric cryptography doesn't, because the value equal to what's protected by the key is magically wasted somewhere. Of course, that isn't true, because it's not possible to break asymmetric cryptography by brute force with expenditure equal to whatever is protected. Same applies to PoS.
It's maliciously created nonsense, which is most visible when he slyly equates locked tokens to wasted glucose. Wasted glucose is _real_ energy, while locked tokens are inherently worthless patterns of bits. Locking them is just a _trick_ to convince people to cooperate with each other - a game theory setting where everyone finds it most beneficial to cooperate. The whole point of the economy is to manipulate real resources - various forms of matter and energy [1] and locking tokens is just a different way of social organization. "Liquidity" (of digital tokens) isn't a real resource. "Money" isn't a real resource. If there's less _real_ energy wasted, the new social organization system is more efficient. That's the objective metric underneath it all, and clearly PoS is a more efficient way of organizing massive human cooperation than PoW.
[1] theoretically matter is a different form of energy, but at the current technological level they are separate inputs to the human economy, except for nuclear power
Not quite. He's arguing that MC = MR implies that PoS is really PoW through obscure means. There's more to securing PoS than asymmetric cryptography -- namely, you have to convince everyone that your keys (and the coins attached to them) are legitimate, and not the next guy's keys and coins on a fork. Convincing people of this isn't a cost-free task, especially if there's wealth to be accumulated through convincing more and more people that your coins are legitimate, and everyone else's conflicting coins on different forks are not.
This game of convincing people that your fork is the true fork is exactly what stake-grinding is. Given a choice, and no a priori knowledge, which history of the PoS chain is the true history? What would convince you that one is legitimate, and the other is not? The article argues that the act of convincing you is, itself, a form of PoW. After all, without PoW, looking at the chainstate isn't convincing -- if you have staked coins today, you could easily create a fork of the chain history where everyone else stopped spending except for you. Without no 3rd party way to verify if that actually happened, you could go around trying to bribe people to accept that your subsequent transactions on this fork are the chain's "true" transactions. There's many tactics for doing this -- you could go on Twitter and spam everyone; you could organize events and rallies; you could even take malicious actions and disable your rivals. You and everyone trying to do the same thing would be in competition to convince everyone else that your fork is the "true" fork. But regardless of the tactics, all of them require expenditures on your part in the forms of time, energy, health, stress, etc. Hence the "PoW by obscurity" argument. But at the end of the day, you'd be unwise spend any more than you'd expect to receive in return because of MC = MR.
Here's a concrete example. The reason you can tell that there's a lot more belief that ETH is the true Ethereum fork, and not ETC, is because ETH has a much higher PoW score than ETC. Miners can choose between ETH and ETC to mine, and they mine the one whose tokens are worth more. ETH is worth more because more people value it. Therefore, PoW is a proxy measurement of the social consensus -- more people believe in ETH than ETC.
If ETH were PoS at the time of the split, it would be a lot less obvious from the chainstate which one people would choose to use. Both chains' participants would try to make it look like their chains had more users by some other means. But the point in the article is that those "other means" are not only costly actions, but also the marginal cost each fork can afford for these actions is, in equilibrium, equal to their respective marginal revenues.
The former is for when you control and trust all nodes in your network. The latter is for the more difficult problem of consensus when you don't trust the nodes - otherwise known as the Byzantine Generals problem in distributed systems research.
Only distinction is classical consensus is permissioned whereas blockchains are typically permissionless.
Vitalik Buterin & co. have no integrity.
Most people should be aware about how they defrauded everybody with the DAO and subsequent fork of Ethereum. But, of course, it has been conveniently sweeped under the rug.
Switching consensus to a different set of rules is entirely within the scope of a PoW system, and it's based on the same mechanism that gives legitimacy to the rest of the blockchain. The original Bitcoin paper explains this perfectly, so I won't replicate it here.
Deleted Comment
This would seem to be the main argument of that second article you posted summarizing the economics around PoS. The idea is that if you’re backing your crypto with itself (like in a PoS), the value that is locked in the staking system could be doing something else. (This is a very real point in that it doesn’t help decentralization—the same people that would stake their coin could spend that money mining Bitcoin.)
But it doesn’t seem to address any points in the conversation around the ethics of using electricity as a basis for proof of work.
compare: electric cars vs ice cars, electric cars can also end up consuming "dirty" electricity from coal fired plants, but that's an option vs. ice cars.
We use Eth 2.0 since December. Staking is even available with insurance on coinbase.
If you keep your copy pasta up to date, your FUD will be more believable.
I'm personally very happy for PoS and hope that it'll be successful, I would be a lot less annoyed with cryptocurrency bullshit if it wasn't so wasteful. With proof-of-stakes it basically joins the ranks of essential oils and other MLM scams, I'm fine with that.
I'm 100% serious here; it's been working fine for quite a number of years. The fiat conversion is pretty noisy but BTC on average goes up in value in fiat terms at a fast pace. BTC is easy to turn it into stuff. No one has ever censored my transactions or asked for ID. Even if you buy something really expensive or totally illegal. It has literally already worked. It started working the day that guy bought a pizza and it hasn't stopped working.
Because digital currency can't just be taken down, those that don't want to live under an inflationary de-facto tax, now have that option.
I would actually say PoS is more resistant to cabals and regulatory systems than PoW; PoW mining requires huge and visible capital investments and electricity consumption and it's incredibly easy for governments to detect and shut down miners in their own countries (not as true for GPU mining, but GPU-friendliness is difficult to sustain long term), whereas you can be a PoS validator with the most basic computer hardware from anywhere.
Yes there will be a number of custodians "competing" with each other, but they will all largely operate under the same regulatory jurisdiction (or at least cooperating jurisdictions). If a PoS currency becomes mainstream, the Federal Reserve (because regulated banks will be the largest custodians) and Dept. of Treasury will have significant influence on governance debates.
The big issue here is that governance decisions in PoW systems are split between miners (geographically distributed), custodians (largely US based) and other economic actors. In PoS systems only custodians will call the shots. That has very serious implications because custodians are regulated financial institutions with significant network effects, miners do not have this centralizing force.
Lastly, to actually become a miner in a PoS system requires you to find or create a cheap source of energy and hardware and maintain this advantage in perpetuity. This is external to the system and can be done without paying off any existing Bitcoin actor. In a PoS system you, by definition, need to pay to play - you must purchase a sufficient stake of the currency from an existing insider if you want to have a seat at the table. It's the perfect insider game. Some may argue it aligns incentives, but it also centralizes control.
These systems all have different tradeoffs. Maybe some people are ok with these tradeoffs for switching to PoS, but I'm not.
I'm concerned EIP1559 and PoS is a very short sighted implementation that will move towards centralization of the network.
There should be a floating minimum, or have no minimum at all to run a node. Not sure the exact tech solution, or I'd be submitting a pull request :).
So “fresh” idea :)
I'm sorry, that sounds incorrect, many people have been "verifying" things independently and sounding the alarm, but nothing happens.
At least the environmental problems are reduced with PoS
"Roughly 90% of the hash power once threatened to change the rules of #Bitcoin believing the users didn’t matter in the decision. The users spun up 10s of thousands of full nodes & told them to go f*ck themselves." [1]
[1] https://twitter.com/TheCryptoconomy/status/13940065488763084...
Mining is expensive and low margin. Generally, the people who own the most Bitcoins are not the same as the people with the most mining rigs, the two parties tend to be completely divorced, and the miners tend to be strongly incentivized around not rocking the boat (for better or worse).
The other misunderstanding is that mining doesn't shape the protocol. The users shape the protocol, and can run any validation software they want. No user has to accept a block by a miner, and every block made by a miner has to conform to the protocol's rules.
POS isn't permissionless -- you literally have to buy a stake from existing holders in order to participate.
So, the absolute worst case for PoS is already pretty much the case for PoW.
Like it or not the Pareto principle or 80/20 rule may well be the most powerful law of the universe. It applies to everything from physical systems like stars and galaxies to social systems and individual human achievement.
I don't see why crytocurrency should be any different. Proof of work through cost of capital investment exhibits the exact same concentration of wealth and power, but at least PoS doesn't destroy the environment as a side effect.
I'm skeptical about why we need the decentralized aspect of cryto when it ends up centralizing anyway. Seems like a very inefficient way of doing things. Maybe we just want an immutable public ledger - but I could be wrong on that. It hasn't lived up to the hype yet.
At least POS gives the power to those that actually have an interest and stake in the currency itself.
PoW has a much more diversified set of actors with competing interests, which makes it much more difficult to change the rules. This is a feature not a bug.
PoS just solidifies current stakeholders so that they no longer have to worry about competition from new players.
The private networks for final settlement are becoming more interesting to market participants. And they are also aiming for distributed (sharded) proof of stake.
Can you tell more about this? Specially the "and this was to entice them to join the system at all." part.
Crypto has made very little(perhaps zero) progress toward any solution in decentralizing power.
Also with Monero anyone can cpu mine it, and transaction participants are obfuscated.
With ARRR, miners don't know the identity of transaction participants.
Literally the opposite happened, although PoW isn't very relevant here. Grassroot enthusiasts tried to fight a cabal of developers sabotaging adoption of bitcoin - and those users failed, mostly because of massive censorship on major social places. The idea was that users would instead go to a centralized network called Liquid.
The sabotage succeeded, the Liquid part didn't, users went elsewhere. Now it's 2021 and bitcoin has lost all network effects it ever had. Did you know bitcoin used to have tokens and even dexes (although poor)? Google mastercoin and counterparty.
In the long run, it turned out well, as ethereum is a way better foundation.
It's indeed possible it wouldn't have happened with PoS, as contrary to PoW stakers are long-term oriented - miners don't really care about long-term prospects and acquiesced, dooming bitcoin in the long term, but it's possible btc stakers would be afraid of going against core developers too.
In a proof of work system, you can buy your way to the grown-ups table by throwing enough money at mining gear.
In contrast, a proof-of-stake system requires someone to sell you enough of a stake to be relevant.
I suppose the question is whether it's easier to get someone to sell out their community, or find a bunch of graphics cards these days.
Currently your money is transmitted by csv copies across thousands of companies, most of whom use a semi-manual process. Moving this type of transaction to a distributed ledger will save financial institutions billions in audit costs.
If the miners really wanted to change the protocol, they would have done that. The exchanges would have followed, as they had declared that the longest chain would win, and that would be game over.
Instead the miners gave in to the perceived authority of the Core developers, who pinky promised to later raise the block size (which they backed away from).
Regardless, history has proven that the most legitimate branch of a blockchain wins, irrespective of security model. It will not be the actor with the most hash power or stake. For reference, see the Justin Sun/STEEM drama.
Vitalik Buterin has an interesting blog post on legitimacy: https://vitalik.ca/general/2021/03/23/legitimacy.html.
The assumption that people with the most stakes will act in the interest of the community has been proven flawed in many occasions. They will act in their own interest first whatever it wight be. The weak logical link is that their own interest always coincide with the interest of the community.
If someone could explain me how this assumption will always be true, I would be very happy.
Wars have been fought to force shared beliefs. It's fairly common in history for "real world resources" to be permanently burned in order to create a shared belief system in order to facilitate trade. For example, the Roman Empire or any other empire.
I'd rather use electrons to create shared belief than bullets and bombs.
This is a naive viewpoint. Ethereum (as a currency) is an "M0" token, like cash or Fed deposits. There's a lot of handwaving about bonds and whatnot, but essentially the Fed can create new money simply by changing numbers on a balance sheet, and they can make that money into folding money and change which they can issue.
The banking system is a complex system that creates IOUs on top of that base. Some of those IOUs are even better than the cash layer -- you can't buy stock, for example, for cash, you need bank IOUs to do that.
That said, then, what is PoW and PoS used for? They're essentially distributed methods of ensuring that nobody can forge money. So the equivalent in the world of dollars is not a bunch of bankers chuckling to themselves about how they're fleecing the plebes. The equivalent in the real world is a bunch of aircraft carriers and planes and bombs and people with big guns, which gives the ability to say (credibly) that it is a crime to forge dollars no matter who you are or where you live.
And yet people complain about cryptocurrency energy usage with a straight face!
Largely funded by forging dollars.
"Turkeys voting for Christmas" comes to mind.
Cryptocurrency offers the opportunity to break away from the current hegemony - only for people to hand over the power back to the powerful.
Perhaps the world is in the current state - because that's what we deserve? (because we keep voting for it?)
Proof of Work is brute Capitalism. It Capitalism without regard for life or health.
STX is Proof of Transfer (secured by bitcoin's hash-power and the Stacks network).
Proof of Transfer is the best of both worlds. It is community and global capitalism with community and global responsibility.
When a technology is simultaneously a store of value, & a utility, the demand for it is exponential, people will seek it in both states, but for different and individual purposes. STX earns BTC for the directed purposes of any individual and as that individual desires with minimal network effect. STX drives community demand only as demanded by the community. STX drives Network benefits only as desired by the Network.
Lets imagine a series of networked micro-communities built with sun energy using solar panels that photochemically convert the atmospheric water into liquid hydrogen. This is being done today.
That hydrogen is then stored as energy in fuel cell batteries. That energy is then used in part to mine community bitcoin.
That community bitcoin is used in part to build and maintain community infrastructure and finance community healthcare.
The community will also use a small portion of the wholesale mined bitcoin to leverage the Stacks Proof of Transfer PoX miners. The STX block reward will support the maintenance and expense of bitcoin mining. The winning PoX miner's committed bitcoin is allocated randomly to the locked Stacks token holders that are all also bitcoin miners.
The locked pools secure the stacks chain and bitcoin node operators secure the bitcoin chain.
The community through Non-fungible tokenized (NFTized) hashed identity quadratically vote on finance mechanisms using the creation of decidable language smart-contracts.
Those smart-contracts execute for community tokenized provenances or (NFT's) of decentralized communication, decentralized wealth & decentralized egalitarian and merit based commerce. And the by-product is pure H2O and clean air.
Also, there's the inherent issue with Proof-of-Stake that Proof-of-Work doesn't have: the initial distribution of the coin has to be wide enough before it could feasibly self-maintain a PoS shift without being immediately vulnerable to consensus attacks. Ethereum is definitively mature enough by now, it wasn't a few years ago.
* The design of the Beacon Chain is far more optimised than our initial designs for a PoS system
* There are far more crypto-economic edge cases in a PoS system when compared to PoW
* Software development is hard and time estimates are even harder
* The use of a hybrid fork choice to balance safety and liveness trade-offs
* There is a crazy amount of value being handles on Ethereum so it is necessary to be conservative with our changes (move fast and break things is not an option)
* There are 4 concurrent implementations being developed all of which need to be inter-compatible, and production ready
* As Ethereum governance is decentralised we need a shelling point for exactly what Ethereum PoS looks like, this takes time
* We have worked hard to create, encourage, and embrace standards with other chains so that the cryptocurrency community of tomorrow is more inter-compatible (eg. IETF BLS standard or libp2p networking)
* We have spent time designing around quantum-computing resistant backups for the majority of the cryptography (eg. validators all have a Lamport backup key though most don't realise it)
* New cryptography has been developed and previously abandoned schemes revitalised (eg. Verifiable Delay Functions or the Legendre PRF)
There are a lot of people with perverse biases. Many of the comments enthusiastically defending Bitcoin are people who are sitting on BTC and have watched it get pummelled due to its ludicrous enormous-energy-for-something-that-does-nothing-for-humanity reality (seriously -- if I see one more chart comparing the entirety of the financial industry with Bitcoin. The former powers the entire world. The latter powers some speculators, criminals, and a minuscule number of legitimate transactions).
I don't understand how proof of stake works to the depth I understand proof of work. But this reassures me that it's feasable that they'll accomplish the same distributed consensus.
So then, could I say that Ethereum proof of stake will allow the owners of the coins (ether) to be independent from the owners of the mining operations?
or uhmm...
is the independence between the computaional costs of the "mining" and actual minted ether?
The whole idea is that Ether is so spread out now, it'd be unfeasible for someone to snatch up enough of it for an attack, in a similar way to how an ever-increasing difficulty makes it harder for a hostile actor to coordinate enough of it to make such attack.
Ethereum had 6 years of PoW now - most likely nothing else can repeat its distribution, ever. The time of PoW is visibly over.
Another point is that ethereum was icoed when crypto was tiny, few people believed smart contracts could have value and VC stayed away. Normal people are much more likely to sell just to buy a house. Now new coins start with coins distributed to VC and they are prepared to hold for years hoping for eth-tier returns. There's an argument that not that many people even knew about the ico - but the same is true for bitcoin mining early. It's very hard to quantify precisely but I think both have almost identical coin concentration.
Be wary of manipulative statistics that ignore the inherent differences between the utxo vs account model - like percentage of coins held by top x%. The assumed practice in an account-based model is for one user to use one address, while the current practice for utxo coins is to use one address per received transaction. Same is true for value sent per timeframe - because utxo relies on change addresses the actual transferred value is much smaller.
And also "audit the auditors". So they don't end up on a future rekt.news leaderboard.
What remains is to change the legacy clients to use the PoS network for choosing blocks, instead of miners. That has a working multi-client testnet.
PoW had an implicit requirement for a global supply chain of hardware and energy which (kind of) made political and geopolitical games more difficult. With PoS, doing politics no longer requires work, which could lead to geopolicical wars. For example it might be possible to achieve wide enough consensus among stakers in Western countries to punish China (for some reason), e.g. willingly losing part of their stakes to empty major Chinese wallets. The fact that this doesn't really require physical effort but only persuasion is problematic.
ETH will be a real test about whether PoS works, as the other PoS cryptos are much smaller and less intertwined in other crypto projects. Historically, oligarchies led to wars
According to Ethereum's PoS implementation, this would require more than 33% of all staked Ethereum coordinating with modified clients in order to pull off. Then, another percentage of the stake adding up to 66% would have to be complicit in the attack, rather than actively defending against it by refusing to finalize blocks.
Compare this to PoW, where only 51% of hashrate needs to be participating/complicit to censor certain transactions, the other 49% have no way of fighting back, and the only tool the community has to fork away is to change the PoW algorithm.
Because of this, I actually believe PoS is more resistant than PoW to these kinds of attacks.
And then also in practice most of the staking is performed by a small number of outsourced staking firms, which increases the power concentration even more.
And it also makes hardforks more traumatic because your economy and your consensus builders are fundamentally intertwined. You can't fork an exchange off of the network without also disrupting every single user that parks funds on that exchange. The same concern doesn't exist with PoW mining.
This is just such a small part of the whole equation.
1. They can't continuously attack with this, as you need to expend energy as long as you want to continue with the attack.
2. Even if you have majority hash-rate, you can't change the rules of the system (this has already happened)
That being said, PoS is very much a human centric valuation (rich peoples opinions being the value), so yes: politics and then war seem likely.
Pretty much every fiat currency has the same issues as PoS, where eventually war becomes the cheapest way to retain value.
PoS, on the other hand, requires minimal extra work from the already-rich. They just sit on their butts getting richer.
Also the government doesn't want to gain control of Ethereum. If the government wants to use a crypto it will roll it's own and make it law, thereby having complete control of it from the get go, with no pesky premine for the foreign developers.
There is also a very delicate game to play if you're trying to hack a crypto for your own benefit. If a crypto network gets hacked it is likely to lose a ton of value and reputation. That's why ETH fell by 60% after the Dao hack. So you're really shooting yourself in the foot by being a malicious actor.
If I’m building a marketplace business in 2021, where I want to be “crypto-first” instead of relying on PayPal and Stripe Connect, where do I start?
The marketplace sells access to resources with an off-chain ACL system. It facilitates trades between resource sellers and buyers.
I assume I want a smart contract between buyer/seller to record resource grants on chain, which the access layer checks as a source of truth.
But if I were to do this on Ethereum, the gas fees would be really expensive. I’ve heard about Polygon and “optimistic roll-up.” Is this a viable solution?
Unless you are building a dark web market, why would you want to? It will be more convenient for the vast majority of users to pay with card or PayPal.
It is just as secure as the base chain (unlike polygon) and has low fees and has been live for the past few months. This is a perfect solution to simple payments.
The difference between optimistic rollups and zero knowledge rollups is that you can’t deploy arbitrary smart contracts to zk rollup, it only supports a limited set of use cases, such as simple payments for now. Read more here https://vitalik.ca/general/2021/01/05/rollup.html
If you as a reader are interested in math & crypto the stuff being done in the zero knowledge space w.r.t. cryptocurrencies is really cool regardless of your opinion on cryptocurrencies in general.
Using an L2 system will mean that your user will need to be using that specific L2 system as well, but the UX doesn't seem so bad (at least for ETH -> polygon, and for the cryptocurrecny space so far).
ETH 2.0 will reduce gas fees somewhat on the mainchain, but it's fairly obvious that there's huge demand, the sharding that ETH 2.0 will do is create 1 shard for execution & 63 for data only. Most L2 systems will mostly use the data shards, so we appear to be heading towards an L2 future.
In short if I were building a company in the space I'd be looking at deploying both on the mainchain (L1) and on a L2 system, but prioritize the L2 system. Unfortunately we may end up in a world where there are dozens or more L2 systems and either the users or the companies have to pay the cost to hop between them.
But I've absolutely never seen it in the wild.
(Tesla has recanted 'for now').
Contacting general or merchant support often took over 2 weeks to get a response, which was a deal-breaker for any service that would inevitably impact customers on our end.
If you're after dollars or euros, the on-ramp and off-ramp at exchanges adds a comparable, if not higher layer of fees than existing payment mechanisms, kind of defeating the whole purpose.
Bitcoin's attempted solution on this front is off-chain scaling via lightning network. As far as I can ascertain, this has had highly limited adoption.
Eth's attempted solution on this front is sharding. I can't claim to be an expert in this, but from my understanding after proof-of-stake is deployed, ethereum plans to deploy something like 64 separate "shards" which, from my understanding, are like extra blockchains for conducting transactions, and using some kind of complicated proof of stake system to keep it consistent. In this case, while the main-net still has limited global throughput, scaling up to add more side chains will allow scaling additional throughput. You can read more here https://ethereum.org/en/eth2/
As with lightning, we don't know how well this will actually end up going until it's deployed.
https://ethereum-magicians.org/t/a-rollup-centric-ethereum-r...
sharding + L2 rollups*
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In general, fees go up as the token price goes up since fees are usually charged as a function of transaction size or complexity, and also fees rise as a protocol hits its tx limits, but not always. Nano is an interesting cryptocurrency that is fee-less (although they just had to roll out an emergency update to improve spam resistance), so it's possible to design a fee-less system, but it's certainly even more experimental atm.
There are, however a number of cryptos that currently (and by intent) have <$0.01 (sometimes significantly less) fees. This includes (just going down by market cap): Ripple, Bitcoin Cash, Stellar, or Dash. For transactions, even though fees are a bit higher (about $0.06), I like Monero since it's one of the most private and widely used cryptocurrencies out there, and it's fees have actually significantly decreased due to technical improvements in transaction efficiency, dynamic blocksize, and an algorithm that can actually reduce fees as volume increases.
1559 addresses fee stability and will help reduce fee spikes. It's purpose is not to reduce fees in general.
So yes, it's currently not practical for microtransactions.
BTC refuses to scale, Lightning is permanently broken.
Ethereum will reduce the fees with sharing, but that will take time.
Compared to other crypto, or on the scale of Visa and MasterCard?
If you check the incoming transaction ID I'm sure you'll see it contained many many endpoint wallets.
That's how mining pools offer free withdrawals periodically. If you split it up amongst 100s of users, per user tx cost is very low.
However, I cannot abide by a money speculation mechanism which uses as much electricity to mine worldwide as the Netherlands use in total. That's absolutely asinine to me.
No. There are developers who actually prioritize on-chain scaling. For instance Bitcoin Cash and Monero have very cheap fees, and they will stay cheap for the foreseeable future.
https://help.coinbase.com/en/coinbase/trading-and-funding/ot...
As of writing, a Bitcoin transaction costs $4.76.
The last time I received a Bitcoin payment, it cost $0.36 in network fees. The network is currently more congested, so the fees are higher at the moment.
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[1]: https://www.algorand.com/resources/news/carbon_negative_anno...
[2]: https://www.algorand.com/resources/blog/silvio-micali-lex-fr...
>To achieve a carbon-negative network, Algorand and ClimateTrade will implement a sustainability oracle which will notarize Algorand’s carbon footprint on-chain for each epoch (a set amount of blocks). With its advanced smart contracts, Algorand will then lock the equivalent amount of carbon credit as an ASA (Algorand Standard Asset) into a green treasury so that its protocol keeps running as carbon-negative.
I'm pretty familiar with the basics of cryptocurrency and blockchains, but the above paragraph makes almost no sense to me.
My pessimistic side suggests this could be purposeful obfuscation of implementation by using complex language. No one will question their solution if no one can understand it.
On the other hand, I'm a big proponent of the Algorand project and based on the general quality of their work (the tech, docs, tutorials, etc.), I'd be surprised if there were anything malignant going on.
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If only a fraction of the stake holders are validators at any given time, but the set of 1000 validators is selected randomly from token holders, then all you technically need is 1000 tokens (or more) and given enough time you will be selected as the only validator, right? You can then validate a fraudulent transaction, breaking security.
Now perhaps the amount of time it would take for this to occur would be longer than the heat death of the universe if you only have 1000 tokens, but at the very least, this substantially reduces the stake required to mount such an attack below the 51% required in a PoW system, right?
https://capitalgram.com/posts/history-of-cryptocurrencies/
It's a shame people don't understand that there's multiple aspects. Ethereum is much more decentralized, secure, have more dev mindshare, better community, tooling, and ecosystem. Let's also not forget that Algorand is powered by and centralized around team-run nodes.
Since you seem to indicate that you know what you're talking about, care enough to make a proper argument? You say Ethereum is more decentralized, secure and better tooling, but you never actually make a cohesive argument, only giving a list of "reasons" without any backing. I'm mostly interested in why you think Ethereum is "more secure" than Algorand, and what threat model are you considering here even?
> Algorand is powered by and centralized around team-run nodes
Hm, I run a Algorand node but I don't work for the Algorand team. What do you mean that Algorand is run by team-run nodes really? How do you even know which node belongs to who in the first place?
How is it “leaps and bounds” ahead of e.g. PoS Ethereum?