Yet Ethereum is pretty centralized with stuff like the premine, and it's even more centralized with ETH 2.0, the Merge, which moves it to Proof-Of-Stake. Now, the richest (read: Vitalik and co) are the ones who can change the course of ETH. Well, they could before too with the hard fork but now they can do it even more so.
Validators in proof of stake have less control than miners had in proof of work. They don't control the rules, they just control the order transactions get into blocks. They can't even censor transactions unless a majority of validators/miners work together to do so. Unlike in proof of work, in proof of stake any validators that are seen attempting double-spending attacks can have their invested stake slashed; in proof of work, miners that attempt double-spend attacks don't lose their mining hardware and are free to continue attempting to manipulate the system.
The nothing-at-stake problem was solved many years ago by introducing slashing. The earliest proof of stake systems did not have slashing (they did not actually put validators' funds "at stake"; the use of the word "stake" wasn't so literal yet) and were vulnerable to the nothing-at-stake problem because of that. A decent write-up: https://medium.com/coinmonks/understanding-proof-of-stake-th...
And this slashing process does not solve the issue. Or well, it does, but it makes the whole system centralized and introduces a single point of trust.
The bounty hunters, who find misbehaving validators which signed orphaned blocks, will slash the validators stake. But those bounty hunters are programs which are being run in Vitalik‘s basement. Not everyone will be able to run one like a normal validator. They are trusted entities within the network.
Where did you get the idea that slashing is done by centralized/trusted bounty hunters? It's completely wrong and I'm not sure how someone could come to that idea in good faith. (Maybe you're misunderstanding some unrelated criticism made of an L2 system like Optimism from before it implemented fraud proofs?)
Miners in Proof of Work don’t control the rules. There have been multiple attempts to exercise hash power as political control in Bitcoin that have failed. There already exists precedent regarding the political power of running your own node with incredibly low capital requirements relative to mining.
Ethereum is already in a battle over what consensus rules actually exist. Large scale staking enterprises such as exchanges are signaling their intent to follow extra-protocol conventions, and if they control a supermajority of staked ETH, they control the right to slash. The only way to have a voice in it is by acquiring $50,000 in ETH.
> There are also people who try to claim that PoS allows big stakeholders to control the protocol, but I think those arguments are just plain wrong. They rest on a misconception that PoW and PoS are governance mechanisms, when in reality they are consensus mechanisms. All they do is help the network agree on the right chain. A block that violates the protocol rules (eg. if it tries to print more coins than the protocol rules allow) will not be accepted by the network, no matter how many miners or stakers support it. Governance is a completely separate process, involving users freely choosing to download software, and BIPs and EIPs and all core devs calls and other bureaucracy to coordinate which changes get proposed. The funny thing is that bitcoiners (who tend to be the most pro-PoW) should understand this well, as the Bitcoin civil wars in 2017 demonstrated really well that miners are quite powerless in the governance process. In PoS, it's exactly the same; stakers don't choose the rules, they just execute the rules and help order transactions
He's right, PoS or PoW never were related to governance in Ethereum: the governance process has always been entirely controlled by the Ethereum foundation in a centralized way.
but his argument about “bitcoin civil war”, is disingenuous at best, concluding that miners are “powerless” about governance process is really a strange way to analyze this event (which illustrated that they where not in fact “all powerful” which is quite different from being “powerless” …)
He's also making a common, but misleading claim here:
> A block that violates the protocol rules (eg. if it tries to print more coins than the protocol rules allow) will not be accepted by the network, no matter how many miners or stakers support it
He's separating “miners and stackers” from “the network” which is a common position trope, but in reality a blockchain is a node of validators (miners, or stackers) with optional spectators, most of which don't even have enough data to take positions on whatever the validators are doing. Only the (scarce) full nodes can see that something fishy is happening, but they actually have no control on what happens on chain, all they can do is blow the whistle.
What makes a blockchain work is the game theory incentives alignment which helps making sure miner/stakers don't collude together, not because “the network” (miners/stakers aside) can do anything to prevent malicious actions from a cartel of validators.
> the governance process has always been entirely controlled by the Ethereum foundation in a centralized way.
The EF has little to no say in the protocol nowadays. One of the reasons that multiple protocol teams exist and all decisions are made in the open is so decision making can be transparent and criticized.
Ownership of the minting policy of any currency is ownership of the governance of said currency.
By locking minting behind the gates of riches, you give those same people a perpetual license to govern. They spread their tokens how they wish; they choose which projects live and die by their usage of currency.
Because they are embedded in the minting process perpetually, their stack keeps growing. They can stake earnings and their stack grows at a compounding rate. With exponential growth, they create an accelerating divide between themselves and no stakers.
The limit of this pattern results in a small minority owning a money tree which allows them to feed scraps to the innovators, creators, etc and decide who lives and who dies.
With that money, they also have the influence necessary to dictate what core devs work on.
A lot more to say but the summary is: I am not sure if Vitalik is talking in bad faith (he seems genuine and honest) or he is just naive (he became rich very young and doesn’t seem to be connected with reality). It seems to me he has a surface level understanding of freedom, tyranny, poverty, wealth, etc but a deep technical understanding and he is only focused on achieving the technical goals. This is very dangerous.
Most mafia bosses don't have to kill people; they get people to do it for them. They facilitate the killing. One might suggest they _develop the ecosystem_ that rewards murderers.
Also, you're free to look at his actual statements and evaluate them based on how reasonable they seem to you. Not everything has to be evaluated from the perspective of conflict of interest
No, crypto as a whole offer no advantage over fiat but major inconveniences, and it is built on top of the worst piece of technology ever created by mankind.
It's not like it is just some fact of nature that Ethereum is migrating to proof of stake, and Vitalik is trying to find some post-hoc justification for it. It's migrating exactly because Vitalik and others convinced a lot of people involved in Ethereum that it should migrate to PoS. And why did he convince them of that? Because he believes it is a better system.
Have you presented what you believe to be the flaws in the system to any Ethereum developers? Do you think you understand PoS generally or specifically their PoS implementation better than they do?
Why does centralization or regulatory capture imply destruction of the network? Maybe it means the opposite and more people will be willing to use it for financial transactions?
Well, I don't think it does. But if one is calling it a "monumental blunder", I have to assume one thinks the network is going to be damaged in some way.
I disagree with both the points made about both Bitcoin, and Ethereum made by Vitalk. Proof of Work (PoW) is more 'decentralized' and censorship resistant than Proof-of-Stake (PoS) at the cost of burning up the planet and PoS is the direct opposite, and Vitalik knows this and has to do everything he can to protect this and his bags / holdings for the Ethereum fans and maximalists.
The problem with Bitcoin is that it cannot realistically be used as a form of payment and it is effectively useless for on-chain payments and unable to scale properly with lots of users just to be better than the current existing payments system as it was meant to be a "decentralized peer-to-peer electronic cash system".
Before someone says Lightning, it isn't Bitcoin and defeats the point of using Bitcoin for on-chain payments as the system tends to centralization. As Ethereum becomes more centralized with the Merge, I would expect it to abandon the claim of it being 'decentralized', so it will be just like any other permissioned validator chain that eventually needs to comply with regulations and validators will begin censoring addresses.
So for them to be regarded as remotely 'useful', they have to abandon their claims of 'decentralization' because without centralization, they are both useless.
This bit in particular was interesting, talking about the comparative security of proof-of-stake Ethereum and proof-of-work Bitcoin.
> In the case of Bitcoin, I'm worried for two reasons. First, in the long term, Bitcoin security is going to come entirely from fees, and Bitcoin is just not succeeding at getting the level of fee revenue required to secure what could be a multi-trillion-dollar system. Bitcoin fees are about $300,000 per day and haven't really grown that much over the last five years. Ethereum is much more successful at this, because the Ethereum blockchain is much more designed to support usage and applications. Second, proof of work provides much less security per dollar spent on transaction fees than proof of stake, and Bitcoin migrating away from proof of work seems to be politically infeasible. What would a future look like when there's $5 trillion of Bitcoin, but it only takes $5 billion to attack the chain?
I can't bold here, but if I could I would have bolded "What would a future look like when there's $5 trillion of Bitcoin, but it only takes $5 billion to attack the chain? ".
Yes, that's a good one. He goes on to say"Of course, if Bitcoin actually gets attacked, I do expect that the political will to switch to at least hybrid proof of stake will quickly appear, but I expect that to be a painful transition."
which I thought was funny because he's tweaking them a little by saying they're eventually going to have to accept PoS anyway
If so, that won't be the Bitcoin my node will switch to. You can't force the network to do what you want. UASF and the many forks before, during, and after the fork wars have proven this.
I would just not do anything and continue on the original chain. Yes, if most of the world moves to the other chain, that fork will be Bitcoin for the rest of the world. The issue is if my time preference is low enough to await/speculate on the demise of the chain due to the issues I've identified and made me not switch.
Pretty sure node runners would prefer a UASF to hybrid PoS or at least a different PoW algo over constant 51% attacks.
I love Bitcoin, but you have to be able to consider hypotheticals like this. Similarly... a tail emission should be on the table. Mentioning it used to be totally third rail [0], but these days folks like Peter Todd are speaking up.
Consistent 51% attacks rely on Bitcoin already being more-or-less worthless. If it is, then yes, the cost of terrorizing the network will be low. The same follows based on Vitalik’s argument for why PoS is supposedly too expensive to attack.
The difference is if you want to terrorize Bitcoin, you need to find energy and compute at relatively low cost compared to everyone still on the network. With Ethereum, you just need to acquire ETH.
Attacking bitcoin uses energy but does not degrade the computer or the energy infrastructure required to do the attack. Attacking PoS ethereum degrades the resource you use to attack.
When bitcoin was created there weren't hashpower markets where you could attack a chain without ever having invested in it and then move on the next minute, your hardware investment still earning you money. I think satoshi thought there would only be one chain and the game theory with many is different.
Considering he thought Bitcoin block space was too scarce, and now not scarce enough, and considered people running their own nodes a “weird mountain man fantasy”, but has now built a political topology that depends on something like Bitcoin’s UASF and thus on people running their own nodes, I wouldn’t trust his predictions much.
The attack surface of Ethereum’s PoS is pretty huge, and derivative staking already has a runaway accumulation problem. Bitcoin’s entire critique of money is based on not being something like Proof of Stake.
Where could I educate myself on the vulnerabilities of PoS?
It seems like for PoW, the vulnerability comes from variability of computing power of miners - if miners capacity dips for a few hours because of external events, attacker can use that opportunity and bring online a lot of resources to do a 51% attack.
Doesn't a PoS attack require 51% of coin ownership? How would an attacker obtain that without being massively rich to begin with?
Overall I’d just argue that because PoS doesn’t involve external resources to create blocks, the cost of producing a block won’t be well understood and thus there will be opportunities for rent extraction - which we’re already seeing with Lido staking.
>>Considering he thought Bitcoin block space was too scarce, and now not scarce enough,
He never said that. He said there isn't enough fee revenue. Fee revenue can increase as blockchain space becomes less scarce, and more bytes are sold to transaction generators.
>>that depends on something like Bitcoin’s UASF and thus on people running their own nodes, I wouldn’t trust his predictions much
An Ethereum based UASF by no means requires every one running their own nodes. It just requires people recognizing - via either an upgrade to their own node, or choosing a third party node that has upgraded to pull data from - the chain that slashes the coins of those who are executing 51% attacks.
What would the absolute worst outcome of that attack be? Miners don't have the option of spending from addresses they don't have the private keys of; all they can do is rewrite history to a certain extent.
Would it be bothersome? Yes.
Would a globally used bitcoin monetary base layer have complete backing of nation-states using it? Yes.
Would people be hesitant to transact during the attack? Probably.
None of these things are of immediate consequence, while the attacker spends its funds rewriting history and getting blowback from everyone online.
Then there is the issue of getting to 51% in the first place, and retaining that 51% once it is clear something nefarious is happening. Many miningpools are conglomerates of individual miners, who certainly have the option of switching to other parties at their whim.
I think proof of work is the only viable way currently known to man to ensure a fair, even monetary playing field at global scale. PoS is not proven, and Ethereum does not scale because it optimized for parameters that aren't relevant for a system that is supposed to be online for at least a century, if not longer.
> Then there is the issue of getting to 51% in the first place, and retaining that 51% once it is clear something nefarious is happening.
ETC currently has a 6.5 day deposit confirmation time on Kraken because it has had multiple 51% attacks and that hold is even after ETC implemented mitigations [1]. These are not just hypothetical issues.
The reason this is possible for etc is because it's a small chain nobody uses with blocks that can be mined with hardware from much larger chains. There is no larger compatible proof of work chain than Bitcoin.
Correct. There can only be one top algo/coin per class of hardware.
Once ETH PoS happens, ETC will be the top GPU coin (at least to start) and the deposit times should go back down again.
One thing ETC has going for it is that the algo is the same as ETH. Very large farms will struggle to retune GPUs for different algo workloads. There is also the issue of different power requirements too.
This makes me wonder if I should speculate on the future price of ETC rising right after the merge, because most miners will switch their hashing power to that chain.
I have the opposite attitude. I want to hear the best arguments from PoS people and the best PoW people. I'm not putting money into it until I understand it to the best of my ability, which admittedly may be never because it's so far over my head
There's a famous quote by Uptain Sinclair that is applicable, if indirectly. "It is difficult to get a man to understand something when his salary depends upon his not understanding it." If Vitalik was wrong, do you think he'd be able to see it?
That's a good point if I were forced to make a decision by only listening to Vitalik. But he doesn't strike me as a profiteering salesman trying to get me to sign the dotted line based on just what he says. It's a huge debate that will invent the future so no doubt Bitcoiners will engage in the debate and tell me why Vtalik is wrong about Bitcoin and Proof of Stake. You wouldn't complain to the judge in a courtroom that the lawyer for the other side is biased. That's essentially what some people in this thread are saying. Instead, you'd engage the opposing lawyers arguments and come up with better ones. I'm on the jury, trying to make up my mind.
The court compels the lawyers to tell the truth or face consequences, so at the very least, out right blatent lies will be called as such by the other lawyers or the judge. Certainly things will sneak by so you should be weary of whatever is said in court, too.
I'll be the judge of that. But seriously, this interview is just one piece of evidence I've been collecting in my crypto folder. Like everyone else except for people who get into the team spirit and join one side or the other. I should just invest in both an forget about it, but that's not my nature.
> If Vitalik was wrong, do you think he'd be able to see it?
Vitalik is one of the few people that prioritize the technology over money. He's often been critical of Ethereum, its price, and previous choices he and the rest of the Ethereum development community has made.
Is it wrong, though? I’m constantly surprised how incurious Bitcoiners are about what will happen when the block reward subsidy pool runs out. I still haven’t heard a convincing story about what will happen to the network security a few halvings from now, besides “who cares, I will have sold by then”
Honestly I’d probably learn more from hearing Tim Cook talk about iPhone vs Android, or Elon Musk talk about NASA vs SpaceX, than I would from hearing from almost any impartial observer. I’m by no means a fanboy of either, but I respect the fact that both of them have spent a bunch of their life learning about this stuff and understand it at a level I don’t. Of course I’d treat it as a biased source of information, but I’d still treat it as informative.
How could you, a non-expert, discern what parts were bias or not? You might believe you'd learn more things, but how much of it would be spun? What is left out, glossed over, or exaggerated?
> But would you take Tim Cooks opinion on Android phones? How about Elons on NASA
I sure would. I'm always interested in what people have to say about their competition. When Steve Balmer said iPhones were a losing idea, did I believe him? No, I thought he was making a mistake, to put it politely. But it was instructive to let me know where Microsoft's mindset was at.
It is wrong. It is conflating two things: market cap and total vulnerable funds in a reorg. Doing a 51% attack isn't free range to steal any bitcoin, all you can do is reverse a recent transaction. And in practice it needs to be very recent (like within the last hour) to be pulled off.
Let's work out an actual attack: I send 1000 btc to an exchange, let it confirm, exchange for something else (Ethereum, let's say) and withdraw. Once my ethereum withdraw is seen on that network, I start 51% attacking the bitcoin chain and unwind the dozen or so blocks that have occurred since I sent the deposit. Maybe this attack costs me 500 btc, but in doing so I get my 1000 btc back. So I effectively bought that ethereum at half price by defrauding the exchange. It needs to be a lot of currency because the 500 btc price of the reorg (made up number!) is a fixed cost, independent of the value of the transaction I'm reversing.
The total market cap of bitcoin doesn't enter into this. The most value I can obtain is the lesser of (1) how much bitcoin I have, and (2) what limit the exchange places on deposits. Exchanges (or other trading partners) can put a hold or delay on high-value deposits, which completely mitigates this attack.
Now the expense of the attack is dependent on the mining revenue per block. So if the mining revenue per block is $300k or so, to use a number from the article, then exchanges and other users of bitcoin should require extra confirmations for transactions > $1MM or so.
I don't know about you, but I think it's perfectly acceptable to say that settling a transaction worth $500MM will require waiting for at least a day's worth of confirmations. And that's all that's required to prevent this attack from being profitable at scale.
From what I understand, the primary mode of 51% attack is controlling 51% of hash power, such as renting a lot of GPU for a short term attack. This gives you the ability to censor the network, rendering it near useless and probably crashing the value of BTC. If the attacker has shorted BTC it may be profitable to crash the price.
I agree that a 51% attack just to reverse a transaction is unlikely, but given how disruptive it would be (as a break in an otherwise ~perfect security track record), there could be other motives. For example, someone could take a short position in Bitcoin. Or a government could attack it for any number of reasons.
As long as there is demand for block space, a market will exist. Also, block size can be increased. Bitcoin will need a hard fork anyway to fix the year 2106 problem (https://bitcointalk.org/index.php?topic=760).
That's fairly literal. There are a few ways of fixing the core problem (e.g. continued issuance, increased blocksize, proof of stake) but bitcoin political ossification makes it look more likely the chain will die rather than make the necessary changes.
I would have responded that the security of the original Bitcoin protocol will likely have been rendered void by quantum computers long before the full supply has been minted.
The time when the last satoshi is mined is irrelevant. The security will be in question as soon as the block subsidy drops below the level of tx fees, which will only take a few decades. In the past decade, no progress has been made on the size of numbers that can be factored by a quantum computer. From https://en.wikipedia.org/wiki/Shor%27s_algorithm:
> Also, in 2012, the factorization of 21 was achieved, setting the record for the largest integer factored with Shor's algorithm. In 2019 an attempt was made to factor the number 35 using Shor's algorithm on an IBM Q System One, but the algorithm failed because of accumulating errors.
Young technologies can progress exponentially (Moore's law, Wright's law,...) with the right factors in place, so be careful when extrapolating progress over the next decade using the last decade. How much progress in neural-network-based image recognition has been made in 2002-2012, and how much in 2012-2022?
In the same sense that moving to PoS is 'not a big issue'. The Bitcoin protocol, using PoW and quantum-vulnerable keys, is defined in the Whitepaper and can't move anywhere. People in the Bitcoin community can move to a new protocol and try to create an air of continuity (which will likely happen, multiple times, creating questions about who the 'real' successor is).
As your comment implies, the HN guidelines don't have much to do with being right or being wrong. They're mostly about how to behave when one is right (or feels one is), or someone else is wrong (or one feels they are). Feeling right is what makes people feel like it's ok to be snarky or mean.
Truth is what we're after, so posting right things and correcting wrong things is important. Yet if you think about it, it's neither a sufficient condition for a good HN post, nor a necessary one.
It isn't sufficient because people sometimes express true things in aggressive ways that damage the container and end up discrediting the truth*. That hurts all of us.
It isn't a necessary condition, either, because people are often wrong in good faith, with the intention of finding the truth. There shouldn't be a rule against that. Freedom to make mistakes is essential to curiosity and finding the truth in the end. And such a rule would be impossible to enforce in any case, since we don't have a truth meter.
The only part of the comment that might break the guidelines that I can tell is the "monkeys" bit, but I'm pretty sure that's a reference to the bored apes NFTs.
> Comments should get more thoughtful and substantive, not less, as a topic gets more divisive.
> Please don't post shallow dismissals
> Find something interesting to respond to instead.
I mean this comment breaks basically half the rules. I am seeing these types of comments all over the place lately and it's just such a waste of time. I'd love to see moderation get tighter.
I know I'm making the perennial "HN comments suck" comment, but a couple topics of late that seem to really irk people and I fail to see how auto-deading short snarky stuff like this does anything but good.
> "... Anyway, your argument about the security per dollar afforded by proof-of-stake makes total sense; Bitcoin's high energy costs are actually high security costs."
this interviewer is impressive; that's a complex point with evidence in recent writings by VB. Right there you can see that these questions are well-prepared
> This time, the bull market lasted nearly one and a half years. People seemed to adjust into the mentality that the higher prices are a new normal.
No mention of the Fed balance sheet by Vitalik. How come? He's clearly too smart to be ignorant of the Fed's money printing and its dramatic effect on crypto prices.
How does that statement not make people who bought at or near the high furious? It’d be like a housing developer being caught on tape laughing at the buyers of their properties at their peak (say 2006-2007) on a hot mic in 2009-2010.
For the record, I still don’t have a good explanation for a persons willingness to pay currency for any crypto. The relationship to QE is thus impossible outside of general trends. Raising seas rise all boats stuff.
Why worry about the Fed printing dollars when you can create magically create new cryptos and print those instead. Money supply measures should count crypto too.
If you have anything for which banks will take the value seriously enough to borrow against - stocks, for instance, fit in this category - then the path of going from non-money -> money creation is pretty direct.
I'm not sure if banks would let you point to 100k in bitcoin or such as assets that would help qualify you for a mortgage, but doesn't seem too out there. Or do the 2-step route and sell the crypto and use it as your downpayment to leverage up into that mortage from an initial investment of $100 or so in 2011. Still inflationary - you've turned your initial tiny investment into purchasing power for a house and all it took was someone else deciding to invest in the crypto you were selling instead of more traditional vehicles, so they also feel like they have the same amount of assets/wealth as they would've otherwise.
EDIT: putting it another way. Money is one thing. Consumer behavior is another. People spend not just based on their "money" but based on their total assets and expected income as well, so things that pump up those on-paper asset values will lead to higher spending and inflationary pressure in the same way that "giving them money" would.
Borrowing against a Ferrari 458 doesn't turn Italian supercars into ersatz currencies, in any meaningful sense.
Money isn't just something you exchange for goods and services. It's directly linked to the sovereignty and economic soundness of its issuing authority. Imagine if a country started accepting tax payments denominated in something they have no influence over. Holding Bitcoin reserves necessarily means ceding economic power, and therefore autonomy, to a third party. For failed states without any economic autonomy to begin with, this bargain might be fine. But for everyone else on the international stage, this is a total nonstarter.
Wars have been fought over monetary authority! We've had this discussion as a species already. What we have now isn't some pathological problem that needs to be disrupted. It's actually the outcome of a rational evolutionary process over thousands of years. Does it have problems that can be improved, yes. Should it be thrown away in favor of a new system built from first principles, absolutely not. That would be a new dark age, a dystopia.
I am not pro-crypto, was simply agreeing with the poster two levels up that crypto is inflationary, despite it's proponents claims, because once you open that door you open it to any number of new supplies of "money."
I'd wager the average car and average house both would be cheaper if you couldn't borrow against them. Property might even be a large enough asset class that that would impact other things.
Kind of, if it is widely accepted as a medium of exchange I would count crypto as money. The irony is that the only crypto that is money is stablecoins. There is RAI but the Terra Luna incident made me sceptical of algorithmic stablecoins. If RAI survives the ETH crash, which it so far does, I am looking forward to the next generation of algorithmic stablecoins. Who knows, maybe it is actually possible to do what the central banks of the euro and dollar do in a smart contract and suddenly Milton Friedman's dream of replacing the central bank with a computer comes true. Yet at the same time it crushes the idea that Bitcoin or Ethereum will ever amount to anything more than a digital collectible.
I personally am interested in a currency that does price level targeting but I have my doubts that it would work with a cryptocurrency because the oracle that collects the CPI is going to be centralised.
I will admit getting the CPI right is easier than getting central bank policy right.
Bitcoin has already failed as a currency, and this is why it should be really seen as a digital collectible. Actually, it is worse than that: it can go away if the miners lose interest in keeping the chain around.
ETH is not meant to be a currency. It is meant to be a scarce resource like oil and its value is in its requirement to power the crypto economy that is based on the Ethereum blockchain. With ethereum, there will be plenty of people who might be in accepting payments (with stabletokens or other ERC20), but no interest whatsoever in holding ETH.
I suspect you are making a snide comment, but it is an interesting idea to roll around. The big difference I see is that people aren't forced to measure things in crypto. Your local tax office will get antsy if you don't trade in your local currency. If the local tax office required things to be measured vs "crypto" then the rate of new cryptocurrencies being created would become a very important measure indeed (although they aren't going to do that - they'd pick a specific blockchain to reference).
People already measure the amount of crypto that is registered in a block chain which effectively is counting the money supply. It is an interesting metric.
As an aside, take note that the value of something like Bitcoin is actually proving quite stable so far. This last downward collapse hasn't even been a dire crash by its historic standards. Yet, anyway. We haven't seen any signs of an implosion that would be comparable to the hyperinflation death spirals in fiat.
It was semi-snide in that crypto fans often complain about money printing but pretend crypto doesn't count. Often the biggest money bubbles are when a new type of credit is invented that isn't recognized.
I don't think the Fed dispersing money had anything to do with it. If anything more money with low interest rates would increase the crypto market.
Oppositely I think the global fiat currency inflation and the Fed increasing interest rates sunk the Crypto market. Now you could argue that the Fed keeping interest rate so low for so long created more "money", which it absolutely did, but not directly. Banks created more inflation than the Fed printing money because loans became so lucrative at these interest rates and put more money in everyone's pockets. That allowed the stock and crypto market to grow though not crash. You increase interest rates the first thing to get squeezed is always going to be high yield high volatility investments like crypto followed by the stock market as banks and wealthy people divest to the stable now higher yielding bonds market, which should out pace inflation with a fraction of the risk.
The banking system is a pull based system. You go to a bank, the bank gives you a loan and creates the money as they deposit it on your account, they literally don't care what the fed does rather the fed has no choice but to create more reserves if the commercial bank requests them. The commercial bank does something like "You wouldn't risk the banking system to collapse if you refuse me reserves would you?" The central bank then goes "Eh, I guess I have no choice, we have to do whatever it takes after all".
Meanwhile internet propaganda constantly tells people that it is a push based system, that somehow the Fed is telling the commercial banks to issue more loans and then for every dollar in created reserves the commercial bank calls and naggs you that you should borrow more and somehow the citizens just keep falling for it every single time.
> Meanwhile internet propaganda constantly tells people that it is a push based system, that somehow the Fed is telling the commercial banks to issue more loans and then for every dollar in created reserves the commercial bank calls and naggs you that you should borrow more and somehow the citizens just keep falling for it every single time.
GP is referring to Quantitative Easing which is a push based system, not sure how this is internet propaganda? The Fed actively creates new dollars and uses them to buy assets from the open market.
Funny to see Noah Smith on HN, I had never heard of Noah Smith before, until this week when he clashed with Bret Devereaux on twitter[1][2], then through an exchange of blog posts[3][4]. Typical instance of the Baader–Meinhof phenomenon. I can't say I'm holding him in high esteem after that though.
I am a non-paying subscriber to his Substack; I generally enjoy his writing there. I don't know enough economics to know if I/we/anyone should agree with him, but you might want to read a few of the articles if you're still interested in his viewpoints.
Vitalik recently gave a great talk on "Ideas worth building" in crypto [0]. He's focusing a lot more on non-financial use cases lately and what use cases L2 scaling (10-1000x throughput improvement) unlocks.
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[ 3.2 ms ] story [ 199 ms ] threadI think it’s a scathing indictment of the entire crypto industry that this is how its key figures are introduced.
It’s like introducing a mafia boss and starting off with saying that he hasn’t killed anyone.
After all, the hostility between the Mafia and the Police is mutual.
The bounty hunters, who find misbehaving validators which signed orphaned blocks, will slash the validators stake. But those bounty hunters are programs which are being run in Vitalik‘s basement. Not everyone will be able to run one like a normal validator. They are trusted entities within the network.
Ethereum is already in a battle over what consensus rules actually exist. Large scale staking enterprises such as exchanges are signaling their intent to follow extra-protocol conventions, and if they control a supermajority of staked ETH, they control the right to slash. The only way to have a voice in it is by acquiring $50,000 in ETH.
> There are also people who try to claim that PoS allows big stakeholders to control the protocol, but I think those arguments are just plain wrong. They rest on a misconception that PoW and PoS are governance mechanisms, when in reality they are consensus mechanisms. All they do is help the network agree on the right chain. A block that violates the protocol rules (eg. if it tries to print more coins than the protocol rules allow) will not be accepted by the network, no matter how many miners or stakers support it. Governance is a completely separate process, involving users freely choosing to download software, and BIPs and EIPs and all core devs calls and other bureaucracy to coordinate which changes get proposed. The funny thing is that bitcoiners (who tend to be the most pro-PoW) should understand this well, as the Bitcoin civil wars in 2017 demonstrated really well that miners are quite powerless in the governance process. In PoS, it's exactly the same; stakers don't choose the rules, they just execute the rules and help order transactions
but his argument about “bitcoin civil war”, is disingenuous at best, concluding that miners are “powerless” about governance process is really a strange way to analyze this event (which illustrated that they where not in fact “all powerful” which is quite different from being “powerless” …)
He's also making a common, but misleading claim here:
> A block that violates the protocol rules (eg. if it tries to print more coins than the protocol rules allow) will not be accepted by the network, no matter how many miners or stakers support it
He's separating “miners and stackers” from “the network” which is a common position trope, but in reality a blockchain is a node of validators (miners, or stackers) with optional spectators, most of which don't even have enough data to take positions on whatever the validators are doing. Only the (scarce) full nodes can see that something fishy is happening, but they actually have no control on what happens on chain, all they can do is blow the whistle.
What makes a blockchain work is the game theory incentives alignment which helps making sure miner/stakers don't collude together, not because “the network” (miners/stakers aside) can do anything to prevent malicious actions from a cartel of validators.
The EF has little to no say in the protocol nowadays. One of the reasons that multiple protocol teams exist and all decisions are made in the open is so decision making can be transparent and criticized.
By locking minting behind the gates of riches, you give those same people a perpetual license to govern. They spread their tokens how they wish; they choose which projects live and die by their usage of currency.
Because they are embedded in the minting process perpetually, their stack keeps growing. They can stake earnings and their stack grows at a compounding rate. With exponential growth, they create an accelerating divide between themselves and no stakers.
The limit of this pattern results in a small minority owning a money tree which allows them to feed scraps to the innovators, creators, etc and decide who lives and who dies.
With that money, they also have the influence necessary to dictate what core devs work on.
A lot more to say but the summary is: I am not sure if Vitalik is talking in bad faith (he seems genuine and honest) or he is just naive (he became rich very young and doesn’t seem to be connected with reality). It seems to me he has a surface level understanding of freedom, tyranny, poverty, wealth, etc but a deep technical understanding and he is only focused on achieving the technical goals. This is very dangerous.
It has as many flaws as Proof of Work and is even less decentralized.
Blockchain is a rotten technology anyway so there’s nothing good to see there.
Have you presented what you believe to be the flaws in the system to any Ethereum developers? Do you think you understand PoS generally or specifically their PoS implementation better than they do?
Only time will tell
https://i.redd.it/5lhlmwdg27j91.png
(imgur mirror: https://imgur.com/a/eGNG7r0)
I disagree with both the points made about both Bitcoin, and Ethereum made by Vitalk. Proof of Work (PoW) is more 'decentralized' and censorship resistant than Proof-of-Stake (PoS) at the cost of burning up the planet and PoS is the direct opposite, and Vitalik knows this and has to do everything he can to protect this and his bags / holdings for the Ethereum fans and maximalists.
The problem with Bitcoin is that it cannot realistically be used as a form of payment and it is effectively useless for on-chain payments and unable to scale properly with lots of users just to be better than the current existing payments system as it was meant to be a "decentralized peer-to-peer electronic cash system".
Before someone says Lightning, it isn't Bitcoin and defeats the point of using Bitcoin for on-chain payments as the system tends to centralization. As Ethereum becomes more centralized with the Merge, I would expect it to abandon the claim of it being 'decentralized', so it will be just like any other permissioned validator chain that eventually needs to comply with regulations and validators will begin censoring addresses.
So for them to be regarded as remotely 'useful', they have to abandon their claims of 'decentralization' because without centralization, they are both useless.
"In Defense of Bitcoin Maximalism", Vitalik Buterin
> In the case of Bitcoin, I'm worried for two reasons. First, in the long term, Bitcoin security is going to come entirely from fees, and Bitcoin is just not succeeding at getting the level of fee revenue required to secure what could be a multi-trillion-dollar system. Bitcoin fees are about $300,000 per day and haven't really grown that much over the last five years. Ethereum is much more successful at this, because the Ethereum blockchain is much more designed to support usage and applications. Second, proof of work provides much less security per dollar spent on transaction fees than proof of stake, and Bitcoin migrating away from proof of work seems to be politically infeasible. What would a future look like when there's $5 trillion of Bitcoin, but it only takes $5 billion to attack the chain?
I can't bold here, but if I could I would have bolded "What would a future look like when there's $5 trillion of Bitcoin, but it only takes $5 billion to attack the chain? ".
which I thought was funny because he's tweaking them a little by saying they're eventually going to have to accept PoS anyway
But if the whole system is at risk due to attacks, I expect that you will be a bit lonely on that chain
I love Bitcoin, but you have to be able to consider hypotheticals like this. Similarly... a tail emission should be on the table. Mentioning it used to be totally third rail [0], but these days folks like Peter Todd are speaking up.
[0] - https://twitter.com/mhluongo/status/1092559017178734594?t=i2...
The difference is if you want to terrorize Bitcoin, you need to find energy and compute at relatively low cost compared to everyone still on the network. With Ethereum, you just need to acquire ETH.
When bitcoin was created there weren't hashpower markets where you could attack a chain without ever having invested in it and then move on the next minute, your hardware investment still earning you money. I think satoshi thought there would only be one chain and the game theory with many is different.
The attack surface of Ethereum’s PoS is pretty huge, and derivative staking already has a runaway accumulation problem. Bitcoin’s entire critique of money is based on not being something like Proof of Stake.
Doesn't a PoS attack require 51% of coin ownership? How would an attacker obtain that without being massively rich to begin with?
Overall I’d just argue that because PoS doesn’t involve external resources to create blocks, the cost of producing a block won’t be well understood and thus there will be opportunities for rent extraction - which we’re already seeing with Lido staking.
He never said that. He said there isn't enough fee revenue. Fee revenue can increase as blockchain space becomes less scarce, and more bytes are sold to transaction generators.
>>that depends on something like Bitcoin’s UASF and thus on people running their own nodes, I wouldn’t trust his predictions much
An Ethereum based UASF by no means requires every one running their own nodes. It just requires people recognizing - via either an upgrade to their own node, or choosing a third party node that has upgraded to pull data from - the chain that slashes the coins of those who are executing 51% attacks.
Would it be bothersome? Yes. Would a globally used bitcoin monetary base layer have complete backing of nation-states using it? Yes. Would people be hesitant to transact during the attack? Probably.
None of these things are of immediate consequence, while the attacker spends its funds rewriting history and getting blowback from everyone online.
Then there is the issue of getting to 51% in the first place, and retaining that 51% once it is clear something nefarious is happening. Many miningpools are conglomerates of individual miners, who certainly have the option of switching to other parties at their whim. I think proof of work is the only viable way currently known to man to ensure a fair, even monetary playing field at global scale. PoS is not proven, and Ethereum does not scale because it optimized for parameters that aren't relevant for a system that is supposed to be online for at least a century, if not longer.
ETC currently has a 6.5 day deposit confirmation time on Kraken because it has had multiple 51% attacks and that hold is even after ETC implemented mitigations [1]. These are not just hypothetical issues.
[1] https://coingeek.com/ethereum-classic-implements-51-attack-d...
Once ETH PoS happens, ETC will be the top GPU coin (at least to start) and the deposit times should go back down again.
One thing ETC has going for it is that the algo is the same as ETH. Very large farms will struggle to retune GPUs for different algo workloads. There is also the issue of different power requirements too.
Might be valid but Vitalik has kind of a lot skin in the game so it's hard for me to take it at face value.
However this interview is PR, not a court.
Vitalik is one of the few people that prioritize the technology over money. He's often been critical of Ethereum, its price, and previous choices he and the rest of the Ethereum development community has made.
I sure would. I'm always interested in what people have to say about their competition. When Steve Balmer said iPhones were a losing idea, did I believe him? No, I thought he was making a mistake, to put it politely. But it was instructive to let me know where Microsoft's mindset was at.
Let's work out an actual attack: I send 1000 btc to an exchange, let it confirm, exchange for something else (Ethereum, let's say) and withdraw. Once my ethereum withdraw is seen on that network, I start 51% attacking the bitcoin chain and unwind the dozen or so blocks that have occurred since I sent the deposit. Maybe this attack costs me 500 btc, but in doing so I get my 1000 btc back. So I effectively bought that ethereum at half price by defrauding the exchange. It needs to be a lot of currency because the 500 btc price of the reorg (made up number!) is a fixed cost, independent of the value of the transaction I'm reversing.
The total market cap of bitcoin doesn't enter into this. The most value I can obtain is the lesser of (1) how much bitcoin I have, and (2) what limit the exchange places on deposits. Exchanges (or other trading partners) can put a hold or delay on high-value deposits, which completely mitigates this attack.
Now the expense of the attack is dependent on the mining revenue per block. So if the mining revenue per block is $300k or so, to use a number from the article, then exchanges and other users of bitcoin should require extra confirmations for transactions > $1MM or so.
I don't know about you, but I think it's perfectly acceptable to say that settling a transaction worth $500MM will require waiting for at least a day's worth of confirmations. And that's all that's required to prevent this attack from being profitable at scale.
But the point is the total market cap doesn’t factor into any of those possible attacks, which is what I said was incorrect about Vitalik’s statement.
Are you thinking of Bitcoin Gold?
As long as there is demand for block space, a market will exist. Also, block size can be increased. Bitcoin will need a hard fork anyway to fix the year 2106 problem (https://bitcointalk.org/index.php?topic=760).
They've already chosen, no?
>>As long as there is demand for block space, a market will exist.
Of course a market exists. But the current demand will not be enough to secure the network once the subsidy sees a couple halvings.
>>Also, block size can be increased
Both a block size increase and raising the 21 million coin limit are unacceptable according to Bitcoin's current leadership.
> Also, in 2012, the factorization of 21 was achieved, setting the record for the largest integer factored with Shor's algorithm. In 2019 an attempt was made to factor the number 35 using Shor's algorithm on an IBM Q System One, but the algorithm failed because of accumulating errors.
https://news.ycombinator.com/newsguidelines.html
But it's a shame they were breaking the guidelines.
[0] https://coinculture.com/au/business/the-secret-disclosed-jpm...
People often say "but I'm just pointing out facts", but this is not a good argument - there are infinitely many facts, and they don't select themselves - https://hn.algolia.com/?dateRange=all&page=0&prefix=false&qu....
Truth is what we're after, so posting right things and correcting wrong things is important. Yet if you think about it, it's neither a sufficient condition for a good HN post, nor a necessary one.
It isn't sufficient because people sometimes express true things in aggressive ways that damage the container and end up discrediting the truth*. That hurts all of us.
It isn't a necessary condition, either, because people are often wrong in good faith, with the intention of finding the truth. There shouldn't be a rule against that. Freedom to make mistakes is essential to curiosity and finding the truth in the end. And such a rule would be impossible to enforce in any case, since we don't have a truth meter.
* https://hn.algolia.com/?dateRange=all&page=0&prefix=true&sor...
> Comments should get more thoughtful and substantive, not less, as a topic gets more divisive.
> Please don't post shallow dismissals
> Find something interesting to respond to instead.
I mean this comment breaks basically half the rules. I am seeing these types of comments all over the place lately and it's just such a waste of time. I'd love to see moderation get tighter.
I know I'm making the perennial "HN comments suck" comment, but a couple topics of late that seem to really irk people and I fail to see how auto-deading short snarky stuff like this does anything but good.
Flag more! It makes for tighter moderation and is practically more readily achievable than 'more dang'.
this interviewer is impressive; that's a complex point with evidence in recent writings by VB. Right there you can see that these questions are well-prepared
No mention of the Fed balance sheet by Vitalik. How come? He's clearly too smart to be ignorant of the Fed's money printing and its dramatic effect on crypto prices.
For the record, I still don’t have a good explanation for a persons willingness to pay currency for any crypto. The relationship to QE is thus impossible outside of general trends. Raising seas rise all boats stuff.
How else are Erdogan, Madura, et al going to fund their piggy banks & militaries?
I'm not sure if banks would let you point to 100k in bitcoin or such as assets that would help qualify you for a mortgage, but doesn't seem too out there. Or do the 2-step route and sell the crypto and use it as your downpayment to leverage up into that mortage from an initial investment of $100 or so in 2011. Still inflationary - you've turned your initial tiny investment into purchasing power for a house and all it took was someone else deciding to invest in the crypto you were selling instead of more traditional vehicles, so they also feel like they have the same amount of assets/wealth as they would've otherwise.
EDIT: putting it another way. Money is one thing. Consumer behavior is another. People spend not just based on their "money" but based on their total assets and expected income as well, so things that pump up those on-paper asset values will lead to higher spending and inflationary pressure in the same way that "giving them money" would.
Money isn't just something you exchange for goods and services. It's directly linked to the sovereignty and economic soundness of its issuing authority. Imagine if a country started accepting tax payments denominated in something they have no influence over. Holding Bitcoin reserves necessarily means ceding economic power, and therefore autonomy, to a third party. For failed states without any economic autonomy to begin with, this bargain might be fine. But for everyone else on the international stage, this is a total nonstarter.
Wars have been fought over monetary authority! We've had this discussion as a species already. What we have now isn't some pathological problem that needs to be disrupted. It's actually the outcome of a rational evolutionary process over thousands of years. Does it have problems that can be improved, yes. Should it be thrown away in favor of a new system built from first principles, absolutely not. That would be a new dark age, a dystopia.
I'd wager the average car and average house both would be cheaper if you couldn't borrow against them. Property might even be a large enough asset class that that would impact other things.
I personally am interested in a currency that does price level targeting but I have my doubts that it would work with a cryptocurrency because the oracle that collects the CPI is going to be centralised.
I will admit getting the CPI right is easier than getting central bank policy right.
I know some places accept Bitcoin. Tesla accepts Dogecoin for some products.
What can you buy with stablecoins?
You can pay for work and fund developer grants with DAI via https://gitcoin.co
Aside from that, if you are interested in accepting payments with crypto, checkout https://hub20.io, a self-hosted payment gateway.
ETH is not meant to be a currency. It is meant to be a scarce resource like oil and its value is in its requirement to power the crypto economy that is based on the Ethereum blockchain. With ethereum, there will be plenty of people who might be in accepting payments (with stabletokens or other ERC20), but no interest whatsoever in holding ETH.
People already measure the amount of crypto that is registered in a block chain which effectively is counting the money supply. It is an interesting metric.
As an aside, take note that the value of something like Bitcoin is actually proving quite stable so far. This last downward collapse hasn't even been a dire crash by its historic standards. Yet, anyway. We haven't seen any signs of an implosion that would be comparable to the hyperinflation death spirals in fiat.
Oppositely I think the global fiat currency inflation and the Fed increasing interest rates sunk the Crypto market. Now you could argue that the Fed keeping interest rate so low for so long created more "money", which it absolutely did, but not directly. Banks created more inflation than the Fed printing money because loans became so lucrative at these interest rates and put more money in everyone's pockets. That allowed the stock and crypto market to grow though not crash. You increase interest rates the first thing to get squeezed is always going to be high yield high volatility investments like crypto followed by the stock market as banks and wealthy people divest to the stable now higher yielding bonds market, which should out pace inflation with a fraction of the risk.
Meanwhile internet propaganda constantly tells people that it is a push based system, that somehow the Fed is telling the commercial banks to issue more loans and then for every dollar in created reserves the commercial bank calls and naggs you that you should borrow more and somehow the citizens just keep falling for it every single time.
GP is referring to Quantitative Easing which is a push based system, not sure how this is internet propaganda? The Fed actively creates new dollars and uses them to buy assets from the open market.
[1] https://nitter.42l.fr/Noahpinion/status/1561837736843431936#...
[2] https://nitter.42l.fr/BretDevereaux/status/15621151250662113...
[3] https://noahpinion.substack.com/p/on-the-wisdom-of-the-histo...
[4] https://acoup.blog/2022/08/29/new-acquisitions-on-the-wisdom...
0: https://www.youtube.com/watch?v=rp3cDq2LiBM