The future with Ether maybe.. and many don’t trust the fundamentals under ‘proof of stake’ so if anything it might just be Bitcoin left as the dominant cryptocurrency if the migration fails.
It’s amounted to a lot, actually. One of the stated goals of Bitcoin was to reduce government control. And it has, magnificently: in the drug trade.
Seriously, online drug marketplaces have become massive and highly lucrative. Estimates vary anywhere between $700 million to over $1 billion each year.
Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries. So much so, that an estimated floor of $3-4 bil of cryptocurrency assets during the peak was just that.
I used to joke: if someone says they’re into crypto currencies, they’re either a tool or have good ketamine. Years later, that rule still shakes out.
We're still in the "Internet is a way for university professors to send BBS messages" phase of crypto adoption. Ethereum didn't go live until 2015, 7 years ago. ARPANET went live in 1975. The WWW spec wasn't submitted until 1989, 14 years later!
With all due respect, part of why the Internet took so long to roll out is because we had to find ways to deploy a global network of physical hardware and interconnections. We literally laid wires under the ocean.
Crypto is just software. There's no need to deploy infrastructure. Bitcoin is old enough to be in high school. Soon it'll be old enough to be in college. At some point we have to accept that it's not fit for purpose, do we not? It can't just be BBS-ing forever.
Compare other things that came out in 2007/8. The iPhone and Android, for instance. In spite of actually needing to build and deploy both hardware and software, everyone on earth has one. Billions and billions deployed.
I challenge you to find a way to falsify your thesis.
I agree with you, as you said the only uses are drugs and hiding money from governments. But it's also kind of like saying creative writing (novels, poetry, etc) doesn't have a use beyond entertaining and stimulating mind. Code and concepts in crypto are much like that too, to stimulate and entertain the mind.
> Crypto is just software. There's no need to deploy infrastructure. Bitcoin is old enough to be in high school. Soon it'll be old enough to be in college. At some point we have to accept that it's not fit for purpose, do we not? It can't just be BBS-ing forever.
This argument relies on the assumption that Bitcoin's age is a proper marker for the entire industry, whereas most of its development only finally kicked off during the ICO mania.
It also relies on the assumption that Bitcoin's decisions reflect the entire industry's decisions, which by proof of contradiction (via anti-BCH-BTCers), does not exist: Many parts of the system are off doing their own part of the whole.
> Compare other things that came out in 2007/8. The iPhone and Android, for instance. In spite of actually needing to build and deploy both hardware and software, everyone on earth has one. Billions and billions deployed.
Apple is a centralized company that can dictate what its products will look like & can standardize their product evolutions to take future developments into account via executive/managerial leadership. Even if all of the decisions were made by the designers/devs, no one from outside the company can have a say about the hardware parts of the product, with only a relatively small part of the software side being accessible to 3rd party developers: Said developers can't access the core internals of iOS without working for Apple.
In contrast, BTC started out with relatively little leadership: While Satoshi was part of Bitcoin's early development, his control over the network was still contingent on other participants within the same network agreeing to the changes -- Disagreements are where the Bitcoin block size wars & subsequent forks emerged. At any time, a developer can modify the core parts of the codebase without restrictions, with the main limiting factor being getting other people to use that modified code instead.
IMO, are more apt comparison would be to compare it with other protocols like Bittorrent and IPFS, whose development nature is not fully controlled by a select group of people, and where everyone can modify the internals of the software to their desires. Similar to Bitcoin, however, adoption of the modified software is dependent on the modifier convincing others to use their code instead.
There you go. Hence, the parent comment has falsified their own sentence, by making a false comparison (iPhone, Android) in the first place and by making a sweeping generalization of the whole crypto industry, just because the first one is useless. So the whole argument in their sentence is invalid.
A better comparison would be on the protocol level like Bittorrent, IPFS, etc.
The problem with your theory is that there's actually no argument to it. It's just piggybacking on the utility of the internet to cast crypto in a more favorable light. It might be that crypto will take a long time to become useful, but saying "the internet took a long time to become useful" is not providing ANY evidence that crypto is like the internet.
Lots of things take a long time and never become useful. One thing (the internet) took a longish time to become really useful.
It was quite easy to imagine great uses for the internet, but they sounded pie in the sky - until they weren't. It's a similar issue with crypto. Being able to rapidly send or receive money anywhere in the world to anybody with a computer, independent of any third party, is itself already an absolutely amazing possibility. The only thing missing is largely what was missing from the internet for decades - large scale adoption for utility.
One major difference here is that the grand vision for the internet stood to help governments in many ways, whereas cryptocurrency stands to weaken governments in many ways. Currency controls enables nation to try to tune their own local economies, control international trade rates, go infinitely far into debt, and can also work as a great weapon against enemy nations. Widescale cryptocurrency adoption would stand to shatter all of this, and that's something no major government is going to just idly allow to happen.
I would also add that in the zeitgeist of the world today, the internet would likely have taken far longer to materialize than it did in the past, for reasons analogous to those with crypto. Can you imagine the US's response to digitally interlinking with China or Russia? For that matter China or Russia's view on the same. We live in a brave new world where each nation wants to strictly control their messaging while limiting, or eliminating, outside views. The internet works to undermine all of that.
You do not need a third party - that's one of the many great things about this. You can go download (or compile, or make) software right now to generate a completely functioning Bitcoin wallet that you can then send/receive coins from.
No reason to compare number of years. It is not a good measure or a linear one. Tech space-time is warped. You didn’t have the overnight unicorns in the 70s. It took decades to get really big. With todays network effects, cryptocurrency should have proved itself already.
The killer app of the Internet was email, not the WWW as a whole. ISPs would provide a free inbox, and by 1997 Hotmail made free email available globally.
Email was what got people to sign up for dial-up internet in the first place. Prior to that, you'd have to schlep over to a copy shop to fax things over. Only businesses could afford the cost of a fax line.
The fallacy is in thinking that Web3 needs to achieve a critical mass of users that the WWW did. That's incorrect. Consumers adopted email, not WWW. That was just something that took off after the core adoption already happened. Same way Instagram took off after enough people bought camera-enabled smartphones.
Using Bitcoin for illegal transactions is simply prosecution futures. Governments and LEOs have and continue to develop automatic de-anonymization tooling and let's face it 2-3tps, it doesn't have to be fast lol. You're basically just scribbling down all your crimes under a pseudonym and mailing it to the FBI, CIA and PRC with a note saying 'bet you can't guess who I am.' I bet you they can, guy.
> Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries.
Again certainly not BTC. Any one of those stories over the last few months of people using Bitcoin as a currency of last resort are so sad because they all got rekt. Had they bought USDC or a hypothetical future CBDC or e-cash, they would be so much better off.
There's that story about the Ukrainian refugee who put his last $2000 worth into BTC when he fled the Russians. That's worth like $900 now.
Is this a Bn in drug volume traded or a Bn of revenue that the exchange takes as a % of the drug $ traded? If the latter your estimate prob make sense, although I don’t know what their margin is.
I used to joke: if someone says they’re into crypto currencies, they’re either a tool or have good ketamine. Years later, that rule still shakes out.
And now a third option: a late adopter who is looking at large losses.
Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries. So much so, that an estimated floor of $3-4 bil of cryptocurrency assets during the peak was just that.
Based on what? And this is still tiny relative to $2.5 trillion market size. Billionaires have no use for Bitcoin to hide wealth. Bitcoin does not bypass the financial system since you still have to convert fiat to btc or btc back to fiat.
Could've fooled me. I'm a "power user" of the international financial system and bitcoin has saved my ass multiple times, from debit cards not working internationally to needing to move moderate quantities of money (tens of k$) faster than legacy banks could. Please keep in mind the distinction between "not useful" and "not useful to you personally".
The point of "crypto" was to get nerds rich. (The kinds of nerds who had the knowledge and technology to run financial networks, but not the institutional pull to use them.)
It's not clear to me how this is supposed to help with gas. As I understand it, the reason gas costs so much is there are only so many transactions that can fit in a block, and the price is what you have to pay (competing against other customers) get your transaction through.
It does seem that if the miners just have to prove they have stake and not do any work, it means the rich will get richer.
1) Possibly a little bit since block time is supposed to decrease from ~13 seconds to 12 seconds. But it's not the primary goal. Side note, the network is generally more expensive during high-traffic times (due to the limited number of transactions which can be sent), but during low-traffic times (over the weekend for example) simple transactions could be made for ~$0.14
2) It means that if you want to participate in consensus directly, you need exactly 32 ETH to stake. People with smaller amounts of ETH can stake through staking pools though. Block-producing nodes do get to choose which of the transactions in the mempool get included, so in a sense, they have power (in the same way miners with higher hash-rate do currently). Not all the "richer people" will be running nodes though, as it does lock the ETH for a currently-indetermined amount of time. Unstaking isn't an option (yet), and if your node goes off-line, you'll be penalized by losing some of your stake
so what you are saying is that only very rich people will be able to participate because:
- you need good hardware and access to good networks to meet the up-time guarantee s (can be solved with pooling the money I guess)
- you need to have enough eth to spare locking up portion of it for years (this can only be solved if you find another person to join the pool and take your place by giving eth to you but there is no incentive for pools to offer this)
Actually, the second is definitely possible. There are many liquid staking pools, which tokenize your share of the stake, and allow you to trade it (usually at a modest discount to the current price of Ethereum)
I believe the majority of staked ETH right now is actually pooled
I see, so money is locked up but they'll deploy another smart contract that you have some stake in but you still have to find a buyer otherwise you are out of luck and your money is actually locked up
You don't "have to find a buyer", these are liquid tokens on Ethereum.
So if you have 1 ETH, and you stake it with Lido (I think this is the largest staking pool), you get 1 stETH. Though if you want 1 stETH, you often would be better off buying it on a (decentralized) exchange (you could get a discount of 1% to 10%, though theoretically the discount could go higher in the future).
when you hold your stETH on-chain, your balance rebases at the rate of the staking reward payout (minus, I think, some amount Lido takes out of this). For example, after a year, if the ETH staking reward was 10%, Lido might take 0.5% (which might go to their DAO, not sure). So you might end up with 1.095 stETH after one year. If you want to sell it, you can do it directly (again, likely at a discount to the price of ETH, though this might change depending on how easy it is to move in and out of staking once the details there are finalized)
It's called liquid staking, because the tokenized share of the staking pool are tradable like any other token on Ethereum, meaning you just need a decentralized exchange, or a centralized exchange that supports it (of which I think stETH has a few)
----
edit: to clarify about not having to find a buyer, in case it's not obvious: there are various pools of funds referred to as "liquidity", which users wishing to transact on various markets can make trades from.
These pools exist on both decentralized exchanges (through various types of automated market makers) as well as centralized exchanges (classically through an order book, same as the stock market).
The only time you have to "find a buyer" (in crypto as well as in the stock market) is when you're looking to do what's called an OTC trade, which is typically just for institutional traders, as trading a large amount via an OTC arrangement will prevent a price movement which can otherwise occur (known as "slippage")
1) Effectively no. I don’t think they even care anymore.
2) Rich people had more power under POW—miners aren’t cheap. What matters is the enforcement mechanism. Slashing remains a risk to every validator regardless of stake weight.
They "don't care" because the EF has been saying for at least 5 years that the way to scale transaction throughput will be through the myriad of roll-up systems. The idea is that people could use roll-ups as a "checkings account" and that they would only hold the funds that they don't want/need to move often at the base layer. With roll-ups, the funds are still secured by the base layer, so participants wouldn't need to trust the roll-up operators.
I'm not convinced proof-of-stake means less equity. PoW is very capex intensive between hardware and energy. Especially during a time when energy prices are soaring, the big players have access to extremely cheap electricity that keeps them profitable, while the small players shut down.
I find proof of stake to be ironic. Isn't the entire point of cryptocurrency to remove the centralization of power? Proof of stake is just an admission that those who have more, get more. Power waste aside, I find the purity of PoW and Bitcoin to be superior in fulfilling the nebulous goals of crypto.
Stealing private keys (through whatever means) is considerably easier than stealing a comparable amount of mining hardware then running it. It's not that big of a risk in reality of course, but there is still a considerable amount of security provided by the fact that obtaining enough compute for a 50% attack is harder than obtaining enough eth to do the same.
Opex specifically because we don't have a predicative algorithm for proving capex. The only predicative value-proof algorithm we have is PoW, which works on opex. PoS is completely impredicative.
What centralization? Adherence to protocol rules? How requirement of locking down 32ETH is different from requirement to run ASIC that does two rounds of SHA256?
> The slashing enforcement mechanism introduces centralization; it has to, to work around nothing-at-stake.
It is other way around. Slashing is the solution for nothing-at-stake. By requiring multiple validators to sign each block height you prime them for being slashed if they ever double sign those heights (or sell key to someone who does). Where is centralization here? Are you speaking slashing condition detection? Or maybe about slashing tx inclusion into the chain?
It is as easy as finding a duplicate signature. And while it takes some computational power (pennies comparing to PoW), you need just one watcher to guarantee that chain will remain honest. So, 1 honest person out of n. Almost as good as it gets.
Whole spiel about "only EF will run those, whole thing is centralized" is just noise. You as an attacker can't distinguish between situation when I'm running a slasher from one when I'm not. Now go and risk the attack.
What is really hilarious is that when you point out this to the ETH supporters, they will say that Bitcoin is even more centralized comparatively because the barrier to entry is higher blah blah.
People should've got a clue when Ethereum forked the chain because it turned out the "immutable" smart contract had bugs and it lost the money of important people
I still can't believe anyone uttered the phrase 'code is law' unironically again after the ETH/ETC fork. After all, Vitalik effectively said he didn't care if your grandma's life savings got stolen, that's decentralization - but when it happens to the important people, well, it's time to have a come to Jesus and fork the chain.
Forking requires consensus among the decentralized miners. If the majority of the minors didn't agree to fork, they wouldn't have been able to fork the chain.
Anyone can fork any chain, nothing more than a single miner is required on the new chain. In fact the pre-rollback chain lives on as ETC. A parallel universe where code actually was law.
One entity decided they were sad about code being law and decided to roll back the outcome of a faithfully executed smart contract using their influence. When one person can influence enough miners to make it the principle chain simply to undo what is in their opinion an outcome they disliked, that's centralization. Or at least a plutocracy.
Today that power rests principally with Jeremy Allaire since of course only one chain can represent the real world dollars in his bank account (USDC).
The rules of a blockchain protocol are not immutable, they can and often do change. Users decide to follow the new rules, or they decide not to. The 2016 fork showed that the majority of users and the market chose to follow ETH instead of ETC. In a few days we will probably see another fork, and most likely the majority of users will follow the PoS chain instead of the PoW chain.
If you want to rollback things build that into your smart contract and stop pretending. If you think your code is mature enough to survive attacks then disable the rollback feature forever.
Smart contracts can add rollback and revert functions but it won't save them from an exploited code path. At that point the only way to 'revert' exploited funds is rolling back the entire blockchain by creating a new fork. The market will decide whether to follow the fork. It has happened once, and might happen again one day, but only at the will of the majority of users.
Not the majority of the users, the majority of the miners, influenced by leadership/the wealthy. This is plutocracy. And very much not an improvement over the status quo.
In Ethereum's proof of stake model, validators do not control the rules and cannot force a change in the protocol. People choose to run nodes, these nodes may or may not be validator nodes, and this software is what enforces the protocol rules across the network. A majority of nodes would have to come to consensus on a change for it to be successful - this happened with DAO, EIP-1559, and probably soon the PoS merge.
It is free to run a node, and the market can freely decide to not support a chain. This is how you end up with ETC being relatively worthless even though there was a group of "rich plutocratic elites" that tried to make it succeed.
There are "influencers" like Vitalik, EF, several client teams, and thousands of hobbyists who work on research and development for the protocol, and these people do lead the direction of the technology moreso than the average user. But this is how all open source works: a small number of people make decisions, and a much larger group of people opt-in to those choices, becoming users. This is also how you end up with multiple blockchains: not everybody was happy using Bitcoin, so some people started to develop Ethereum instead.
There is no rollback feature. There is social consensus, which is sort of the whole point. No one can tell you and your friends which fork of the chain to use. Good luck to you. We might call this freedom.
When crypto currency companies started to raise billions from the markets and have Superbowl commercials just like normal banks I knew the anarchist libertarian Cyberpunk experiment was subverted.
The community supported it, what else do you think should have happened? A small minority of people were opposed to it and they made etc and nobody used it. The system worked as intended for an alpha level product. I think you'd have pretty substantial trouble getting the community to agree to it today, which is appropriate for a more mature system.
The federal reserve is an independent unelected agency that’s not accountable to the US public.
I don’t see how people can call our federal system a democracy anymore just become we run elections. You need to judge a system by many other attributes.
I am aware of that. But even that feature is weak. To judge how democratic an institution is you must look at all features or characteristics of an institution. The appointment of its board of governors isn't the only democratic feature we should care about. The federal reserve has weak accountability, lack of citizen participation, lack of transparency, lack of representation, etc.
The people have no direct voice at the federal level, or choosing members of the fed, so now we are talking about representative democracy, as you mentioned.
In a representative democracy the voters are supposed to choose the representatives, but there is a lot of gerrymandering in the U.S. where instead representatives get to chose the voters in their districts. Also those with the most money tend to win elections, like +95% percent of the time, making it look like lobbyist and the rich elect representatives, not voters. Most other western countries countries call that bribery, and make it illegal.
It should be recognized that the current laws around gerrymandering and campaign finance mean that we may not really have democracy or representative democracy in any true sense of the word. Some would go so far as to say we have a two party oligarchy.
Personally I think using gerrymandering to explain the bulk of our political dysfunction is mistaken. If you were to ask me to give you a simple explanation for the dysfunction and corruption at the federal level, it would be that our federal government is not design to be this big and powerful. Just one example... 50~ years ago the federal government contributed nearly nothing to local and state funding. Today, total federal outlays have ballooned to nearly 20% of all local/state funding(depending on how its counted). Everything has trended to be more centralized.
I believe the best solution going forward is to rip power from the federal government and return it to states and local governments, as was intended by the constitution. Resolving gerrymandering and campaign finance laws will not fix the political dysfunction. It's structural. Most federal institutions are not designed to be democratic.
I wholeheartedly agree! The U.S. federal government was first and foremost designed to be responsive to the states, not the people.
I'm a big fan of Leopold Khor and his book Breakdown of Nations. He talks about how national governments that get too powerful become corrupt authoritarian bullies [0].
Ethereum has never reverted the blockchain which is what breaks immutability. In fact, you can go back in history and find the DAO creation, the hack, and even the transaction that reverted the stolen funds.
The point is to make a credibly neutral network, yes. You don't get more for free, you get more by locking up and risking your capital in a validator for defending the network. You risk getting slashed for doing that incorrectly or maliciously. So no, nothing has changed with regards to Proof of Stake except that validators aren't performing throwaway hash calculations at the cost of massive amounts of electricity for rewards.
This makes sense. I have not seen anyone else explain it so succinctly. It seems like then from a logical perspective we are shifting the capital needed to be a validator from investment in GPU/ASIC, computing power, and energy to just actual direct investment of those same types of funds?
Basically instead of using money to buy all of the above you just directly invest the money itself. Which is the Stake?
Taken to its conclusion, PoW and PoS are exactly the same.
In a PoW environment you can take some of your coins, 'stake' them by buying a share in a mining pool, and then 'un-stake' them by selling your share in the mining pool.
The only difference is how much coal is burned and e-waste is generated along the way.
In both cases control and reward go to those with the most resources to deploy within said system.
> Taken to its conclusion, PoW and PoS are exactly the same.
> In a PoW environment you can take some of your coins, 'stake' them by buying a share in a mining pool [...]
Playing devil's advocate: there's a small but important difference in that, for PoW, you can "stake" coins from outside the system (for instance, by buying an ASIC miner with real money), while for PoS, the coins you "stake" must come from within the system itself. That is, PoS is a closed system.
You can buy GPUs/ASICs with $, so can you buy coins with $. PoS is as "open" as PoW, except the means of exchange is different. For PoW, you convert electricity (capital) into coins, whereas PoS you convert money (capital) into coins.
Small quibble but broadly agree. In PoW you convert capital into electricity which then gets converted into coins. In PoS you convert capital into coins which then gets converted into more coins. Same starting material, same ending material, different intermediate steps. That's why my argument is that they're basically the same at the limit.
PoW is an openly leaking system that requires participants to leak system value to external ASIC producers and external electricity producers.
The PoS system keeps value in the system. PoS also has more ability to reduce influence of malicious miners/validators by slashing what is needed for a bad validator to continue to participate.
* There is the power for some central entity to control the levers on the money supply: determine how much money gets printed, what the interest rate is, what sort of inflation rate is acceptable etc.
* There is the oligoplic power of banks which determine who gets to have a bank account, how much and at what rate credit is available to which people, what sort of money transfers are acceptable.
* There is the political power that people with lots of money command. They determine who gets elected, which laws are passed, whether they can be prosecuted or not, whose life they can destroy on whim etc.
I think Satoshi's original conception might have been to democratize the first two kinds of power. Early cryptocurrency idealist probably dreamed of getting rid of all three types of power.
I think right now, only the first one is indeed getting democratized in the sense that people can choose to "support" the cryptocurrency which they like. This is true for both PoS and PoW.
With the rise of regulated cryptoexchanges owned by rich people, the second type of power continues to be centralized in both PoS and PoW. And of course, there was very little threat of the third type of power ever being challenged by cryptocurrency - that's a property of our political systems, not of the type of money we use.
For them to elaborate on their claim of equivalency between PoS and PoW centralisation, given the exchange centralisation isn't actually an issue.
To me, it would seem that the ETH PoS centralisation of power (to the already wealthy) makes it less free than, for example, BTC. But I don't know, and I'd like to hear what they think. You too, if you'd like to offer your thoughts.
> To me, it would seem that the ETH PoS centralisation of power (to the already wealthy) makes it less free than, for example, BTC.
BTC also suffers from centralization of power to the already wealthy so the claim that that there is equivalency between PoS and PoW centralization sound about right.
How so? I legitimately don't understand. With BTC, it's the same for everyone. Everyone can run a node. No ones node is special. Best wealth can do is buy miners to mine more coins. But that doesnt grant you more power, just more wealth. In PoS ETH, you need 32 Eth to participate. Thats 50k USD just to participate in validation.
BTC is free and you don't need any money to run a node. For ETH, you need 50k USD to do the same thing, no?
That's just for mining, though. I can be part of the validation/consensus process for the BTC blockchain by running a node which you can run on anything with a 500gb hard drive. People use Pi's to do it. You need zero bitcoin to run a node. This is the difference.
Yes, but power in ETH PoS comes from the validation/staking. It's value comes from the validators consensus, no? Which you cant do without money. Or am I wrong? I'm trying to decide if I should get on board or not. If this isnt true, what is the point of staking?
You're not understanding how ETH works. You can run a node for free, just like you can in BTC. In either case you aren't contributing to consensus, just the propagation of network information. IF you want to contribute to BTC consensus meaningfully you need some extremely expensive specialized hardware and power to run it. If you want to contribute to ETH you need a big pile of money. It's the same thing, just with extra steps in the case of BTC. Unfortunately in BTC those extra steps also consume enormous amounts of energy, which has a real-world environmental cost. There's basically no reason as far as I can tell to prefer requiring people to buy ASICs over requiring people stake money. In either case the people with the resources control the system, but at least in the case of ETH you can turn your staked ETH into the same amount of ETH you had before. Good luck reselling those ASICs for anything close to what they sell for.
>that's a property of our political systems, not of the type of money we use.
That actually is a property of the money we use because the wealthy can always refuse to spend or invest which forces the government to borrow more money.
> Isn't the entire point of cryptocurrency to remove the centralization of power?
I’ve previously said difference between crypto and traditional rails isn't decentralization. It's eager evaluation. The blockchain is always current everywhere. Bank records are not. The latter is computationally cheaper, but at the cost of more error. Centralized banking would involve everyone having an account at the Fed.
In the Roman Republic, voting power was directly linked to wealth. Keeping tabs on who was how wealthy were the censors [1]. PoW is sort of like that, but eagerly evaluated.
You have to pay many orders of magnitude more than simply using a database. In what way is it cheap? And, to what end? What [legal] problems can you solve with crypto that you cannot with a database?
If they wanted a simple, verifiable database, a public Merkel tree would suffice. A Git Repository with a list of balances would be more than sufficient, and verification of proof would be as simple as "walk the tree backwards" and verifying that they all summed up correctly at each step, plus some signatures required to touch your account negatively.
Bitcoin has never been about proof and verification; it's always been about the decentralized claim, but mostly as an excuse to give it a reason to exist.
> You have to pay many orders of magnitude more than simply using a database
"You" here is essential. For a participant in the blockchain, it's expensive. That's the cost of eager evaluation. For a non-participant just verifying, it's cheap. Cheaper than auditing bank records.
Ninety-nine percent of blockchain and web3 is easy-money folly. But there are technical advantages to the system. Had Hadoop had better marketers...
You both are wrong. From database point of view blockchains are multi-master, AP system with open set of masters (writers). The name of the game is censorship resistance. If some writers censor, I can pay non-censoring writer to include my tx.
Modern society is built upon shared beliefs. Dollar has value because people believe it to be so. People go to work because they believe dollar will have value in part because other people believe the same things. Comparison to circular logic is quite apt, but it applies to most of the modern wold.
bitcoin doesnt suffer this because proof of work provides an independent method for verification. the energy utilization argument that comes up should be evaluated in the context of the comparison of this independent humanless verification vs proof-of-stake or other shared or trusted mechanisms
Well sure but how has even traditional cryptocurrency removed the centralisation of power? It hasn’t, so yes I’m even less optimistic than you are about this.
This is a good objection, and I think of parallel concepts, e.g. email. I think there is at least an argument that you don't need complete decentralization if you have federation. That being said, as we watch email consolidate, it is a thing you have to work to preserve.
If the value of the currency has anything to do with the value of the energy spent, then there may be a significant shift away from a protected base value. And let's be clear, I'm thrilled. Waiting for those eBay GPUs as I write this.
After reading this article I looked into the actual process[0] to run a validator node and in my opinion it's quite an involved process. You need dedicated hardware with a large hard drive (with good durability!) and an unmetered high speed internet connection. You need to run two services at what seems to be near-production quality and you need to use monitoring tools like Grafana to manage them. Oh and if you make a mistake like restoring a backup of the server incorrectly your stake will get slashed and your Eth gets destroyed.
Seems like an epic pain in the ass for a 4.1% yield (not to mention the capital required to stake).
The optimistic view of this is that you can run a node in a distributed payment and compute platform for a few thousands bucks. Consider the alternatives: the infrastructure running PayPal, the massive and archaic automated clearing house systems used by megabanks, whatever it is Western Union does to move money. You can participate in a distributed, open source alternative for what amounts to an affordable price for those in developed countries.
I am not claiming you should do this! What I'm attempting to illustrate is that this momentum towards freer and more open systems is what drives the technical optimism in cryptocurrencies and blockchains. There seems to be a Moore's law effect dropping the price of what is currently gatekept by governments and megacorporations. Hard work is once again creating exciting innovations that at least have the potential to improve the world.
Can you elaborate more on the distributed compute platform part? How will that work and prevent down-time issues and other mistakes that will cause slashing?
That's what I am afraid of the most. Do some devops mistake and get penalized. Are there any protection mechanisms to help you with that or are you totally on your own?
An explicit goal is that running a validator at home for the enthusiast should be feasible. A couple of days total downtime per year for an individual validator should approximately only miss out on the rewards it would have generated by being available for the same period. Penalties increase non-linearly with downtime and number of validators unavailable at the same time (meaning assuming all else equal, being down for 100h at once is worse than being down 1h/d for 100 days, and a whale with 10 validators going down for 10h at the same time will lose more than an individual validator going down 10h at 10 different occasions. This is not contingent on those validators being attributable to the same entity)
If you have monitoring that alerts you for updates and when your node is unresponsive and can respond to downtime requiting intervention within a day or two you should still end up ETH-positive.
The rough breakeven time is 42% of the time. If your validator is online more than that you are making money, less than that you lose it. So the protocol is rather forgiving in uptime. That's why it's much better to not run failover of any kind. You can afford to be offline without problems but if your failover fails and you run two instances you get slashed.
There is also a penalty that kicks in if many validators fail at the same time resulting in over 1/3 of the network not being available. In that case penalties are also increased significantly. So if over 1/3 of the network were to be run in AWS those validators would risk heavy penalties if the region were to suffer some downtime.
>"There are slashing protection features built into all clients, but the general advice is to don't do devops."
I'm curious how the big crypto companies are managing these large fleets of servers without doing some form of Devops? Looking at the docs there's a stack that needs to be deployed and maintained:
They use special signing software (dirk or web3signer) that can have the keys split accross several physical machines. If they have separate access credentials for each system, it makes it difficult for anyone to have access to the complete keys. Then a central validator client can request signatures from each signer to complete attestations and block proposals.
This didn't really answer my question though. There's other software besides key management services that run on those nodes. How is that being managed if these orgs are not doing some form of Devops?
Thank you for leaving an insightful comment on this topic. I find this much more engaging than the typical drive by crypto sucks comment. Running a node comes with an interesting set of problems, there are additional problems when considering staking as well. Something to note is that when staking[0] it is suggested to use 32ETH. At today's market rate[1] that is nearly $50,000
Isn't the yield dynamic? If it is dynamic, then it will simply adjust to whatever price makes staking as painful/lucrative as any other investment. There is no free lunch.
The yield varies with a few factors, chief of which is how much total ETH is staked. More staked ETH means a lower yield. Here's a calculator: https://ethereumprice.org/eth-2-calculator/
The yield a staker receives from the protocol is composed of 2 parts *:
- Issuance
- Tips
The issuance is defined programmatically by the protocol and is dependent on the number of validators (stakers). There is a formula for it that basically scales with the square root of total amount of ETH staked. This is the part that gives ~4% nowadays. Given a number of stakers this part is guaranteed yield as it comes from new issuance. It's still subject to market dynamics in that if there are very few stakers, the yield is more interesting. If there are a lot of stakers the yield is lower.
The tips are completely market dependent and are a function of network activity and the price of ETH. When you pay a transaction you can include a tip for your transaction to be included faster. Low levels of activity lead to lower tips, high levels of activity result in higher tips. Tips are basically denominated in USD but paid in ETH, so high price of ETH leads to lower yield from tips, low price of ETH leads to higher price of ETH from tips. This part of the yield is obviously completely dynamic and subject to market forces.
With current (last 3 months) levels of activity the yield a validator can expect to experience is around ~5.5%. If network activity were to go back to Q4 2021 the yield would raise to ~25% at current prices.
*Technical note: There is a third part which is an effective yield resulting from burnt ETH and even a forth part that is outside of the protocol called MEV.
You are confusing "running a node" with "running a validator." You can run a node for free, without any staked ETH. If you want to participate in the protocol rewards, then yes you will have to do some work to receive them, and place your capital at risk of being slashed if you are not securing the network correctly. If you are a solo validator and make an honest mistake, the amount you will be slashed is probably very low.
If you want to receive slightly less rewards but do less work, you can delegate your stake to a staking pool or service and they will take a fee, see Lido and Rocket Pool.
Aside from protocol rewards, there is also rewards that may come in the form of priority fees or 'tips', and rewards that can come in the form of MEV. See MEV-Boost which validators will be incentivized to run, which can almost double their annual yield.[1]
Same reason people will host and run services around IPFS, BitTorrent, Tor, Matrix, Mastodon, game rooms, and other servers even though they don't get a financial reward, and even though it may even cost them money or their time. They might just want to be part of the network, supporting it in their own way.
The protocol rewards are there to create a stronger incentive, so that it isn't just hobbyists and geeks paying out of pocket each month to secure a multi-billion dollar network.
At the height of the last crypto boom, with elevated GPU prices, you could expect to make back your investment (with electric costs) in about 200 days. Assuming that means a 2.5% per-day return, that could be extrapolated to be ~60% return for the rest of the year, which figures out to about 27% return for the entire year. That's back of the napkin as it assumes you only run the machine for a year (warranty period of the equipment), crypto prices stay the same, and miner competition stays the same. It also doesn't account for facilities costs, salvage value of the equipment, or the (relatively limited) labor costs of setting up and maintaining the computers.
You only have to do the work of setting up the validators once, and then you get the 4.1% yield indefinitely, with only minor maintenance occasionally.
If your node operates on wrong or outdated data, it is very much possible to stake on invalid or wrong blocks, leading to the network acepting your stake, declaring you a bad validator, and witholding your stake (because that is axactly what the stake is for: don't stake on invalid data, or lose the stake)
The price keeps falling. It's like the bubble is already over. The biggest problem with crypto is it does not live of to its promises and does not solve any real world problems. It's a cool application of cryptography, but not something that will compete with the financial system or subvert tyrannical governments. It's sorta like a very expensive hobby that has enthralled the world. Whatever problem it does solve, does this mean it's worth $1 trillion still? Likely not.
When I first discovered Bitcoin it was trading in the double digits. Every time I see a number like $19k it absolutely blows my hair back.
There are a million legitimate criticisms to level against crypto but "the price keeps falling" is way, way too zoomed in. This isn't even the biggest relative drop in the last five years, let alone the entire history of crypto.
To me it seems that as interest rates go up bonds will take the place of riskier investments. Down the road the interest rates will drop again but I don’t think that crypto prices will rise much until that happens. It’s been marketed heavily recently but hasn’t seemed to catch on as much as a marketer would hope.
Bitcoin, Litecoin, Bitcoin SV, Bitcoin Cash, Raven coin, Zcash, Monero, Kadena, Ethereum Classic, Dogecoin, Shiba Inu and Flux. Eth Classic, Flux and Kadena are the only PoW smart contract platforms in the top 100 AFAIK.
I’ve been watching crypto from the sideline for a few years. In the last six months I have realised what it actually is: a big Dutch tulip Ponzi scheme but unlike what we saw in the dot com boom with VCs inverting in speculative start ups because of FOMO. When interest rates go up further and people get incentivised to put their cash in the bank to earn some low risk, yet boring interest rates on term deposits, I hope we will see this giant Ponzi scheme come crashing down like there’s no tomorrow.
Cash is flooding out of Coinbase already. Be interesting to see what happens when they run out and can't raise any more, and people with their crypto on the platform become unsecured creditors in a bankruptcy.
Another way to look at crypto is a banking system with no lender of last resort or controls like FDIC to prevent a systemic bank panic. The only real hope that the crypto system has is that billionaires who are still True Believers will step in to serve as lenders of last resort and buy it all up on a firesale, but if they instead don't choose to catch a falling knife it'll just fall.
The crypto system as a whole has never yet had to survive a high interest rate sustained collapse of the external economic environment yet. The 2020 pandemic wasn't really a test because everything got immediately bailed out. Concretely, if Tesla is pretty screwed because nobody has money to buy cars any more and everyone is out of work, will someone like Musk toss cash at crypto to save it or not?
Yes this is copy and pasted on every crypto thread. Tulip Mania, dot-com bubble, fomo, a Ponzi scheme with no substitute for Charles Ponzi. It's so decentralized it's dangerous AND somehow simply controlled by a single Madoff-like entity.
Do you have any thoughts about the subject of the article? If not please add another hot take like "crypto uses too much energy!"
No! I want to talk about this with people who are actually making things for it, in a detailed way. Including...hold your breath...inviting people to criticize it!
When are we going to admit that blockchain is just a new type of data store, useful for a limited number of use-cases that require certain sorts of irreversible, immutable guarantees across a worldwide network of computational devices? Crypto is cool, in so far as any other new data storage technology is cool. It is not a new world order
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[ 3.3 ms ] story [ 234 ms ] threadSome hashpower has already migrated to ETC, doubling in the past two months:
https://2miners.com/etc-network-hashrate
Seriously, online drug marketplaces have become massive and highly lucrative. Estimates vary anywhere between $700 million to over $1 billion each year.
Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries. So much so, that an estimated floor of $3-4 bil of cryptocurrency assets during the peak was just that.
I used to joke: if someone says they’re into crypto currencies, they’re either a tool or have good ketamine. Years later, that rule still shakes out.
That's my theory, please no bully!
Crypto is just software. There's no need to deploy infrastructure. Bitcoin is old enough to be in high school. Soon it'll be old enough to be in college. At some point we have to accept that it's not fit for purpose, do we not? It can't just be BBS-ing forever.
Compare other things that came out in 2007/8. The iPhone and Android, for instance. In spite of actually needing to build and deploy both hardware and software, everyone on earth has one. Billions and billions deployed.
I challenge you to find a way to falsify your thesis.
This argument relies on the assumption that Bitcoin's age is a proper marker for the entire industry, whereas most of its development only finally kicked off during the ICO mania.
It also relies on the assumption that Bitcoin's decisions reflect the entire industry's decisions, which by proof of contradiction (via anti-BCH-BTCers), does not exist: Many parts of the system are off doing their own part of the whole.
> Compare other things that came out in 2007/8. The iPhone and Android, for instance. In spite of actually needing to build and deploy both hardware and software, everyone on earth has one. Billions and billions deployed.
Apple is a centralized company that can dictate what its products will look like & can standardize their product evolutions to take future developments into account via executive/managerial leadership. Even if all of the decisions were made by the designers/devs, no one from outside the company can have a say about the hardware parts of the product, with only a relatively small part of the software side being accessible to 3rd party developers: Said developers can't access the core internals of iOS without working for Apple.
In contrast, BTC started out with relatively little leadership: While Satoshi was part of Bitcoin's early development, his control over the network was still contingent on other participants within the same network agreeing to the changes -- Disagreements are where the Bitcoin block size wars & subsequent forks emerged. At any time, a developer can modify the core parts of the codebase without restrictions, with the main limiting factor being getting other people to use that modified code instead.
IMO, are more apt comparison would be to compare it with other protocols like Bittorrent and IPFS, whose development nature is not fully controlled by a select group of people, and where everyone can modify the internals of the software to their desires. Similar to Bitcoin, however, adoption of the modified software is dependent on the modifier convincing others to use their code instead.
A better comparison would be on the protocol level like Bittorrent, IPFS, etc.
Ethereum would not take the same time as arpanet because we already have a mature arpanet.
Compare it to companies like PayPal that have really shown viability after only a few years and by 7 years were very mature.
Lots of things take a long time and never become useful. One thing (the internet) took a longish time to become really useful.
One major difference here is that the grand vision for the internet stood to help governments in many ways, whereas cryptocurrency stands to weaken governments in many ways. Currency controls enables nation to try to tune their own local economies, control international trade rates, go infinitely far into debt, and can also work as a great weapon against enemy nations. Widescale cryptocurrency adoption would stand to shatter all of this, and that's something no major government is going to just idly allow to happen.
I would also add that in the zeitgeist of the world today, the internet would likely have taken far longer to materialize than it did in the past, for reasons analogous to those with crypto. Can you imagine the US's response to digitally interlinking with China or Russia? For that matter China or Russia's view on the same. We live in a brave new world where each nation wants to strictly control their messaging while limiting, or eliminating, outside views. The internet works to undermine all of that.
You need third parties to cash in and cash out, so no.
> Can you imagine the US's response to digitally interlinking with China or Russia?
Before the internet we had the phone network, and before that the mail. Both of those are more interlinked and more open than the internet is today.
Email was what got people to sign up for dial-up internet in the first place. Prior to that, you'd have to schlep over to a copy shop to fax things over. Only businesses could afford the cost of a fax line.
The fallacy is in thinking that Web3 needs to achieve a critical mass of users that the WWW did. That's incorrect. Consumers adopted email, not WWW. That was just something that took off after the core adoption already happened. Same way Instagram took off after enough people bought camera-enabled smartphones.
> Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries.
Again certainly not BTC. Any one of those stories over the last few months of people using Bitcoin as a currency of last resort are so sad because they all got rekt. Had they bought USDC or a hypothetical future CBDC or e-cash, they would be so much better off.
There's that story about the Ukrainian refugee who put his last $2000 worth into BTC when he fled the Russians. That's worth like $900 now.
That’s a rounding error to the half a trillion dollar global drug trade [1].
[1] https://en.m.wikipedia.org/wiki/Illegal_drug_trade
It’s still a billion dollars and it has been steadily growing every year.
And now a third option: a late adopter who is looking at large losses.
Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries. So much so, that an estimated floor of $3-4 bil of cryptocurrency assets during the peak was just that.
Based on what? And this is still tiny relative to $2.5 trillion market size. Billionaires have no use for Bitcoin to hide wealth. Bitcoin does not bypass the financial system since you still have to convert fiat to btc or btc back to fiat.
Could've fooled me. I'm a "power user" of the international financial system and bitcoin has saved my ass multiple times, from debit cards not working internationally to needing to move moderate quantities of money (tens of k$) faster than legacy banks could. Please keep in mind the distinction between "not useful" and "not useful to you personally".
In that sense it worked splendidly as designed.
1) Will this decrease gas fees, which make using Ether and its ecosystem completely unusable?
2) Does proof-of-stake mean that the richer people in the ecosystem have more power?
2) yes
It does seem that if the miners just have to prove they have stake and not do any work, it means the rich will get richer.
2) It means that if you want to participate in consensus directly, you need exactly 32 ETH to stake. People with smaller amounts of ETH can stake through staking pools though. Block-producing nodes do get to choose which of the transactions in the mempool get included, so in a sense, they have power (in the same way miners with higher hash-rate do currently). Not all the "richer people" will be running nodes though, as it does lock the ETH for a currently-indetermined amount of time. Unstaking isn't an option (yet), and if your node goes off-line, you'll be penalized by losing some of your stake
- you need good hardware and access to good networks to meet the up-time guarantee s (can be solved with pooling the money I guess)
- you need to have enough eth to spare locking up portion of it for years (this can only be solved if you find another person to join the pool and take your place by giving eth to you but there is no incentive for pools to offer this)
I believe the majority of staked ETH right now is actually pooled
So if you have 1 ETH, and you stake it with Lido (I think this is the largest staking pool), you get 1 stETH. Though if you want 1 stETH, you often would be better off buying it on a (decentralized) exchange (you could get a discount of 1% to 10%, though theoretically the discount could go higher in the future).
when you hold your stETH on-chain, your balance rebases at the rate of the staking reward payout (minus, I think, some amount Lido takes out of this). For example, after a year, if the ETH staking reward was 10%, Lido might take 0.5% (which might go to their DAO, not sure). So you might end up with 1.095 stETH after one year. If you want to sell it, you can do it directly (again, likely at a discount to the price of ETH, though this might change depending on how easy it is to move in and out of staking once the details there are finalized)
It's called liquid staking, because the tokenized share of the staking pool are tradable like any other token on Ethereum, meaning you just need a decentralized exchange, or a centralized exchange that supports it (of which I think stETH has a few)
----
edit: to clarify about not having to find a buyer, in case it's not obvious: there are various pools of funds referred to as "liquidity", which users wishing to transact on various markets can make trades from.
These pools exist on both decentralized exchanges (through various types of automated market makers) as well as centralized exchanges (classically through an order book, same as the stock market).
The only time you have to "find a buyer" (in crypto as well as in the stock market) is when you're looking to do what's called an OTC trade, which is typically just for institutional traders, as trading a large amount via an OTC arrangement will prevent a price movement which can otherwise occur (known as "slippage")
(there is however a special situation where less than 66% of the network is online therefore it halts and will much more quickly slash those offline)
2) Rich people had more power under POW—miners aren’t cheap. What matters is the enforcement mechanism. Slashing remains a risk to every validator regardless of stake weight.
PoS cuts the opex, and makes the capex fungible.
The question was why "opex is the part that tethers on-chain security to reality", and opex specifically.
Please don't throw around buzzwords.
I'm not throwing around buzzwords. Please don't accuse people of that without sufficient understanding to be reasonably confident you're correct.
> locking down 32ETH is different from requirement to run ASIC
This is precisely the opex-vs-capex distinction we are discussing in this thread.
32eth is strict capex. ASIC capex <<< power opex.
It is other way around. Slashing is the solution for nothing-at-stake. By requiring multiple validators to sign each block height you prime them for being slashed if they ever double sign those heights (or sell key to someone who does). Where is centralization here? Are you speaking slashing condition detection? Or maybe about slashing tx inclusion into the chain?
Correct - the decision about when to slash
Whole spiel about "only EF will run those, whole thing is centralized" is just noise. You as an attacker can't distinguish between situation when I'm running a slasher from one when I'm not. Now go and risk the attack.
With POW you need to make a sizeable investment, and hope you'll get a good return eventually.
With POS you can keep your money and do it almost for free (as long as you run a node, not that big of a deal).
So exchanges will completely dominate staking, but they likely not even touch POW mining.
So much for the decentralization idealogy.
People should've got a clue when Ethereum forked the chain because it turned out the "immutable" smart contract had bugs and it lost the money of important people
I still can't believe anyone uttered the phrase 'code is law' unironically again after the ETH/ETC fork. After all, Vitalik effectively said he didn't care if your grandma's life savings got stolen, that's decentralization - but when it happens to the important people, well, it's time to have a come to Jesus and fork the chain.
One entity decided they were sad about code being law and decided to roll back the outcome of a faithfully executed smart contract using their influence. When one person can influence enough miners to make it the principle chain simply to undo what is in their opinion an outcome they disliked, that's centralization. Or at least a plutocracy.
Today that power rests principally with Jeremy Allaire since of course only one chain can represent the real world dollars in his bank account (USDC).
The rules of a blockchain protocol are not immutable, they can and often do change. Users decide to follow the new rules, or they decide not to. The 2016 fork showed that the majority of users and the market chose to follow ETH instead of ETC. In a few days we will probably see another fork, and most likely the majority of users will follow the PoS chain instead of the PoW chain.
It is free to run a node, and the market can freely decide to not support a chain. This is how you end up with ETC being relatively worthless even though there was a group of "rich plutocratic elites" that tried to make it succeed.
There are "influencers" like Vitalik, EF, several client teams, and thousands of hobbyists who work on research and development for the protocol, and these people do lead the direction of the technology moreso than the average user. But this is how all open source works: a small number of people make decisions, and a much larger group of people opt-in to those choices, becoming users. This is also how you end up with multiple blockchains: not everybody was happy using Bitcoin, so some people started to develop Ethereum instead.
Where have you been the last few months?
https://fred.stlouisfed.org/series/CUUR0000SA0R
Again, what recourse do you have with crypto?
I don’t see how people can call our federal system a democracy anymore just become we run elections. You need to judge a system by many other attributes.
In a representative democracy the voters are supposed to choose the representatives, but there is a lot of gerrymandering in the U.S. where instead representatives get to chose the voters in their districts. Also those with the most money tend to win elections, like +95% percent of the time, making it look like lobbyist and the rich elect representatives, not voters. Most other western countries countries call that bribery, and make it illegal.
It should be recognized that the current laws around gerrymandering and campaign finance mean that we may not really have democracy or representative democracy in any true sense of the word. Some would go so far as to say we have a two party oligarchy.
I believe the best solution going forward is to rip power from the federal government and return it to states and local governments, as was intended by the constitution. Resolving gerrymandering and campaign finance laws will not fix the political dysfunction. It's structural. Most federal institutions are not designed to be democratic.
I'm a big fan of Leopold Khor and his book Breakdown of Nations. He talks about how national governments that get too powerful become corrupt authoritarian bullies [0].
[0] https://www.youtube.com/watch?v=gaszpQaNwAU
The rest of community has decided to disassociate themselves from hacker and forked away.
This is, by the way, unlike Bitcoin which did revert the blockchain and break its immutable nature in 2010. https://decrypt.co/39750/184-billion-bitcoin-anonymous-creat...
Not sure that this matters much but as it's a frequent point brought we might as well get the details rights.
Basically instead of using money to buy all of the above you just directly invest the money itself. Which is the Stake?
In a PoW environment you can take some of your coins, 'stake' them by buying a share in a mining pool, and then 'un-stake' them by selling your share in the mining pool.
The only difference is how much coal is burned and e-waste is generated along the way.
In both cases control and reward go to those with the most resources to deploy within said system.
> In a PoW environment you can take some of your coins, 'stake' them by buying a share in a mining pool [...]
Playing devil's advocate: there's a small but important difference in that, for PoW, you can "stake" coins from outside the system (for instance, by buying an ASIC miner with real money), while for PoS, the coins you "stake" must come from within the system itself. That is, PoS is a closed system.
The PoS system keeps value in the system. PoS also has more ability to reduce influence of malicious miners/validators by slashing what is needed for a bad validator to continue to participate.
* There is the power for some central entity to control the levers on the money supply: determine how much money gets printed, what the interest rate is, what sort of inflation rate is acceptable etc.
* There is the oligoplic power of banks which determine who gets to have a bank account, how much and at what rate credit is available to which people, what sort of money transfers are acceptable.
* There is the political power that people with lots of money command. They determine who gets elected, which laws are passed, whether they can be prosecuted or not, whose life they can destroy on whim etc.
I think Satoshi's original conception might have been to democratize the first two kinds of power. Early cryptocurrency idealist probably dreamed of getting rid of all three types of power.
I think right now, only the first one is indeed getting democratized in the sense that people can choose to "support" the cryptocurrency which they like. This is true for both PoS and PoW.
With the rise of regulated cryptoexchanges owned by rich people, the second type of power continues to be centralized in both PoS and PoW. And of course, there was very little threat of the third type of power ever being challenged by cryptocurrency - that's a property of our political systems, not of the type of money we use.
To me, it would seem that the ETH PoS centralisation of power (to the already wealthy) makes it less free than, for example, BTC. But I don't know, and I'd like to hear what they think. You too, if you'd like to offer your thoughts.
BTC also suffers from centralization of power to the already wealthy so the claim that that there is equivalency between PoS and PoW centralization sound about right.
BTC is free and you don't need any money to run a node. For ETH, you need 50k USD to do the same thing, no?
Genuinely curious here.
Cost of an ASIC is around the same ballpark if not more.
That actually is a property of the money we use because the wealthy can always refuse to spend or invest which forces the government to borrow more money.
I’ve previously said difference between crypto and traditional rails isn't decentralization. It's eager evaluation. The blockchain is always current everywhere. Bank records are not. The latter is computationally cheaper, but at the cost of more error. Centralized banking would involve everyone having an account at the Fed.
In the Roman Republic, voting power was directly linked to wealth. Keeping tabs on who was how wealthy were the censors [1]. PoW is sort of like that, but eagerly evaluated.
[1] https://en.m.wikipedia.org/wiki/Roman_censor
Blockchains provide cheaply-verified consistency.
Bitcoin has never been about proof and verification; it's always been about the decentralized claim, but mostly as an excuse to give it a reason to exist.
"You" here is essential. For a participant in the blockchain, it's expensive. That's the cost of eager evaluation. For a non-participant just verifying, it's cheap. Cheaper than auditing bank records.
Ninety-nine percent of blockchain and web3 is easy-money folly. But there are technical advantages to the system. Had Hadoop had better marketers...
The monetary expense is _much_ higher due to the need for redundancy.
Well we know that the Bible is true...because the Bible tells us so"
The circular logic of PoS:
1. The list of valid transactions determines who has coin.
2. People with coin decide which transactions are valid.
3. GOTO 1
https://github.com/stickfigure/blog/wiki/Proof-Of-Stake-Wear...
> Because it's not a circular argument, it's a spiral argument. People with coins at time T secure the transactions at time T+1.
> Spiral arguments and circular arguments sometimes look similar to untrained observers, but they are fundamentally different.
https://arxiv.org/abs/1809.07468
https://www.sciencedirect.com/science/article/abs/pii/S00200...
Seems like an epic pain in the ass for a 4.1% yield (not to mention the capital required to stake).
[0] https://ethereum.org/en/run-a-node/
I am not claiming you should do this! What I'm attempting to illustrate is that this momentum towards freer and more open systems is what drives the technical optimism in cryptocurrencies and blockchains. There seems to be a Moore's law effect dropping the price of what is currently gatekept by governments and megacorporations. Hard work is once again creating exciting innovations that at least have the potential to improve the world.
I, too, consider 50000$ as just a few thousands of my millions in savings. /s
You only get slashed if you run malicious custom code, or if you run the same key on two machines at the same time.
The latter is a mistake that's very easy to make if you try to build auto-failover.
So don't build it. My validators operate with 'screen' and shell scripts. If I need to do anything (3-4 times a year), I do it manually.
- machine dies at 4am, what happens? do you manually restart process when you wake up? does this down time cause slashing?
- what mechanism prevents you from running 2 identical validators by accident?
If you have monitoring that alerts you for updates and when your node is unresponsive and can respond to downtime requiting intervention within a day or two you should still end up ETH-positive.
There is also a penalty that kicks in if many validators fail at the same time resulting in over 1/3 of the network not being available. In that case penalties are also increased significantly. So if over 1/3 of the network were to be run in AWS those validators would risk heavy penalties if the region were to suffer some downtime.
I'm curious how the big crypto companies are managing these large fleets of servers without doing some form of Devops? Looking at the docs there's a stack that needs to be deployed and maintained:
https://ethereum.org/en/developers/docs/nodes-and-clients/ru...
[0] https://ethereum.org/en/staking/#how-to-stake-your-eth [1] https://finance.yahoo.com/quote/ETH-USD/history/
By which process does the market affect the yield on staking ETH?
- Staking base reward, depends on the total amount of ETH staked by all individuals - Priority fees and MEV fees from users
Currently, as blocks are still produced by PoW, user fees go to miners instead of stakers.
- Issuance
- Tips
The issuance is defined programmatically by the protocol and is dependent on the number of validators (stakers). There is a formula for it that basically scales with the square root of total amount of ETH staked. This is the part that gives ~4% nowadays. Given a number of stakers this part is guaranteed yield as it comes from new issuance. It's still subject to market dynamics in that if there are very few stakers, the yield is more interesting. If there are a lot of stakers the yield is lower.
The tips are completely market dependent and are a function of network activity and the price of ETH. When you pay a transaction you can include a tip for your transaction to be included faster. Low levels of activity lead to lower tips, high levels of activity result in higher tips. Tips are basically denominated in USD but paid in ETH, so high price of ETH leads to lower yield from tips, low price of ETH leads to higher price of ETH from tips. This part of the yield is obviously completely dynamic and subject to market forces.
With current (last 3 months) levels of activity the yield a validator can expect to experience is around ~5.5%. If network activity were to go back to Q4 2021 the yield would raise to ~25% at current prices.
*Technical note: There is a third part which is an effective yield resulting from burnt ETH and even a forth part that is outside of the protocol called MEV.
If you want to receive slightly less rewards but do less work, you can delegate your stake to a staking pool or service and they will take a fee, see Lido and Rocket Pool.
Aside from protocol rewards, there is also rewards that may come in the form of priority fees or 'tips', and rewards that can come in the form of MEV. See MEV-Boost which validators will be incentivized to run, which can almost double their annual yield.[1]
[1] https://boost.flashbots.net/
Honest question, not being facetious, I'd like to understand the use case.
The protocol rewards are there to create a stronger incentive, so that it isn't just hobbyists and geeks paying out of pocket each month to secure a multi-billion dollar network.
https://news.bitcoin.com/publicly-listed-miner-hive-plans-to...
When I first discovered Bitcoin it was trading in the double digits. Every time I see a number like $19k it absolutely blows my hair back.
There are a million legitimate criticisms to level against crypto but "the price keeps falling" is way, way too zoomed in. This isn't even the biggest relative drop in the last five years, let alone the entire history of crypto.
Another way to look at crypto is a banking system with no lender of last resort or controls like FDIC to prevent a systemic bank panic. The only real hope that the crypto system has is that billionaires who are still True Believers will step in to serve as lenders of last resort and buy it all up on a firesale, but if they instead don't choose to catch a falling knife it'll just fall.
The crypto system as a whole has never yet had to survive a high interest rate sustained collapse of the external economic environment yet. The 2020 pandemic wasn't really a test because everything got immediately bailed out. Concretely, if Tesla is pretty screwed because nobody has money to buy cars any more and everyone is out of work, will someone like Musk toss cash at crypto to save it or not?
Do you have any thoughts about the subject of the article? If not please add another hot take like "crypto uses too much energy!"
No! I want to talk about this with people who are actually making things for it, in a detailed way. Including...hold your breath...inviting people to criticize it!
https://youtu.be/gyP0uxxB6V8