Vitalik escalates ETH 2.0 merge as miners plan a 51% attack | Hacker News Reader

Vitalik escalates ETH 2.0 merge as miners plan a 51% attack

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I'm one of the maintainers of one of the implementations of eth2 live today (https://github.com/prysmaticlabs/prysm) and can help offer more context on this. Ethereum proof of stake has been live since December 1st and it currently secures over 6 billion USD worth of value https://beaconcha.in/. Currently, this is a chain that lives in parallel to the proof of work chain we know as Ethereum today. The idea is that over this coming year, the entire state of Ethereum will be "merged" into this new chain that uses proof of stake consensus via a docking process. "Escalating the eth2 merge" means there is more expedited work from researchers and developers when it comes to performing this critical decision. Since eth2 consensus is already live and running correctly with a large set of validators, miners cannot censor this new chain and therefore cannot really stop the merge.

Excellent work on prysmatic! Can you clarify about this "quick merge" proposal? Would the idea be to shift "ETH1" validation to the ETH2 Beacon nodes? At first two chains would be running and be validated by the same nodes but then much later the final merge of Beacon and ETH1 chains would occur? Is that the plan?

Do you think the headline is correct in labeling this as a 51% attack? The other argument would be that developers are trying to push through a contentious fork (mostly but not only contested by miners and mining pools), and mining nodes are planning to not adopt the proposed change?

Afaik there's no plan to attack, they are planning a "show of force", i.e. get more then 51% in a pool for a while without doing anything with the power. This is separate from either adapting or not adapting the fork itself and happens before the fork.

The original chain has to be forked either way, with or without eip 1559 because the "ice age" coded into the current version (it's in there for this exact reason). So if the change goes through and some miners decide to block it, there's not going to be an "original chain" and a "fork", but two forks, one supported by devs and minority of miners, and one supported by miner majority.

"We're not going to 51% attack the network. We're just going to allocate 51% of the hashrate into a single pool to demonstrate that we could 51% attack the network"

Why should this threat of violence be treated differently than the act itself? Miners are threatening to do the one thing their entire existence is supposed to prevent. They're cutting off their noses to spite their faces, instead of enjoying another year or so of profitability

"attack" is a misnomer. 51% is a majority vote.

Doesn't the majority vote mean that they get to control the cryptocurrency?

Sounds like an attack to me.

Yes, but, in fairness, the assumption behind blockchain is that it works as long as 50%+1 of the computation is power is honest, not that any block constituting 50%+1 is necessarily honest/good/correct.

Because whether it’s an attack or not is more to do with the framing than act. If you get all the miners together and can amass 51% of the hash power then you have consensus and have enough control of the network to simply not accept the EIP.

If something like this isn’t possible and you don’t actually need consensus to push through changes then the whole “distributed” part is just a fiction and we’re really talking about a centrally controlled network. Miners are just basically threatening to vote against the EIP if it comes to it.

Threatening to vote against a bill if it reaches the floor in its current form isn’t an attack or violence. It’s just a message that if you want it to pass you should probably change it.

This isn't something new, Bitcoin went through this in 2017 (relevant keywords: UASF, segwit, BCH).

You don't need a miner majority to do fork the chain, both versions (with and without fork) will exist and whichever is most valued by users/the market tends to "win" and bring miners back in because they like money.

Unlike your voting on a bill analogy, the reality of blockchains is that both universes can co-exist.

Calling it a 51% "attack" is like saying Biden "stole" the election by getting at least 51% of the votes. The whole point of a cryptocurrency is that there is no central authority. Vitalik can provide a vision, but he doesn't, and shouldn't want, to control it. If the compute power disagrees with him, then that's just how it's gonna be.

But when we elevate from PoW to PoS the whole point is that compute power won't matter anymore. So a more appropriate analogy would be that if 51% of horse carriage drivers wanted that cars shouldn't be able to drive on roads, then cars shouldn't be able to drive on roads.

> Calling it a 51% "attack" is like saying Biden "stole" the election by getting at least 51% of the votes.

A better comparison would be that a billionaire decided to take over just because he had more cash.

The ice age mechanic remains one of the most significant and overlooked aspects of Ethereum. It's really good.

How does this effect the viability of L2 side chain solutions?

Eth2 and L2 are independent solutions that are both happening. After Eth2, low tx throughput on Ethereum will likely still cause transactions to be expensive enough that users strongly prefer to use L2.

L2 can scale Eth2 as well. In fact Vitalik mentions often that scaling can go 100x with Eth2 and 100x with L2 for 10000x total scaling.

Question: Will there be a chain split - will we end up with 'ETH classic' and 'ETH proof of stake' after the upgrade or how does it work?

I think this is guaranteed.

As long as one person keeps running the old software, the old chain is alive.

Even if nobody does it, somebody could start running it again at any time.

The different chains will have different market caps. And the general public will forget about chains that have sufficiently small market caps.

I wonder what will happen to Ether that is in custody. Like in the Greyscale Ethereum Trust or the 21Shares Ethereum ETP.

Has anybody ever checked the TOS of these companies on what will happen if multiple forks carry significant value?

False, the difficulty bomb will kill off eth1.

> the difficulty bomb will kill off eth1

Wouldn’t it make sense for miners to switch to a new Ethereum chain without the bomb?

Then they will be on a fork of a fork of a fork (ETC -> ETH -> ETH_POW -> ETH_POW minus Difficulty bomb)

who will take this chain seriously

> who will take this chain seriously

If it has 51% of Ethereum’s current hashpower, somebody. (Ethereum Proof of Stake is the same number of forks away from Ethereum Classic.)

Stuff like this is exactly why I have chosen to allocate 0% of my cryptocurrency investments into Ethereum. Such a cluster

How would they be on a fork, if the "original" dies because of the difficulty bomb? Since the fork that wasn't bombed would survive, it would be considered the original, wouldn't it?

How is it defined? Like somebody releases a new version with the bomb removed. Most miners adapt it. Why is it then a fork? Because the bomb is a major feature? Otherwise, wouldn't ever software upgrade be considered a fork?

If I understood the conversation from the last dev call correctly, they're talking about combining EIP-1559 and the difficulty bomb fix into the same fork specifically to avoid this

"original" and "fork" have no meaning inside the ETH universe. These terms are used in the outside social milieu.

The Difficulty Bomb has been delayed at least once, so delaying it once again or defusing it, it not unimaginable.

Yes, miners can turn off the bomb, but that requires that they coordinate and determine a schedule for the hardfork that turns off the bomb (you need a hardfork to turn it off).

This scenario is definitely possible, but it requires a little more work than "one guy keeps running an old eth1 node".

isn't it trivial to patch?

This will not be the first time this has happened to eth.

They manage to avoid it most of the time via time bombs in the code

Yes but there is already an 'ETH classic'. So there will be three, and the names should actually be 'ETH' (proof of stake), 'ETH for Miners' (proof of work), and 'ETH classic' (existing, for another group that didn't like a previous important change).

Reminds me this: https://en.wikipedia.org/wiki/Schism#/media/File:Christianit...

Unlikely as there is an ice age built-in to eth1 which will steadily increase the time between blocks until none are produced. There should also be a hard fork which includes code which just stops the old chain on block x. Anyone that wanted to continue with the old chain would need an additional hard fork.

Nope, wont happen. https://medium.com/dragonfly-research/ethereum-is-now-unfork...

Vitalik and friends can just sell their coins on the proof of work chain and thus make it unattractive.

However you could change the protocol / software and block the addresses of people who don't support the PoW chain.

It would be a bit messy.

However if you are sitting with a massive ETH mining rig, you would like to do something with your hardware.

So one can ask. Who has the biggest say in a cryptocurrency?

The owners of the coins, the developers, the miners?

Actually I would argue it would be the exchanges: What the major exchanges choose to trade as Ethereum is what will continue.

It's a big hodge-podge and that's what makes it great.

Ultimately society/the market decides which version is worth more.

> However if you are sitting with a massive ETH mining rig, you would like to do something with your hardware.

You would like to profit from your hardware*.

That's an important distinction, as what make you profit from your hardware, isn't running it on ETH in particular, it's running it on a cryptocurrency which is used. They could run it on ETC currently if they want to keep mining, but they don't as ETH represents more value. So whether they keep running on the fork is more about whether the cash will be there to mine on it and my impression is that it won't be there.

Currently there's quite a big smear campaign on the environment impact of cryptocurrency on the world. This is important for many people, thus will impact whatever they decide to do.

There was also always a preference toward the forks supported by the official developers. It's normal, as long as we have no reason to doubt their decisions, why change? In this case this is even more true as it's not questioning the decision, the intention is clear that it's about the miner hardware.

Let not forget also that this fork will be supported by peoples that proved that they could orchestrate a 51% attack for their own gains... which is pretty much the fear that was always there on cryptocurrencies...

There's no reason to believe people would go toward a fork, thus there won't be much value in mining on that fork versus any alternative cryptocurrency. If I was a miner, I would start selling my graphic cards... they are still sold for quite a bit of money currently and it's just a matter of time before the price crash and it become easy again to buy a new graphic card.

Do they have enough ETH to run a 51% attack with a PoS system?

It would be more difficult these days to get much marketcap on the minority chain, now that Ethereum hosts tokens representing a variety of off-chain resources like fiat money and bitcoins. Those things will have to pick one chain whose claims will be honored. Same for some NFT projects. Anything involving data feeds won't necessarily support the minority chain either, though in principle they could.

This is weird. So NFTs don't do anything? I mean you can always fork ETH and then transfer ownership of all NFTs to yourself on the fork. So basically the value proposition of NFTs is tied to the chain they exist on. It's not the NFT that gives it value, it's the combination of NFT+ETH that gives it value. That's extremely absurd.

If I understand right the ETH chain will be integrated as a shard. This would mean it would just live on inside the new Ethereum ecosystem until it is ice aged - so one could say it's not a fork but a wrap of some sort.

Unfortunately not a single resource I found actually describes this process in an easy to understand fashion - pretty amazing considering we are talking about $200+ billion dollars....

How did those 6 Billion USD worth of value move to the beacon chain while it is not connected to the old chain?

They were burned on the old chain

Interesting.

I see how that is possible. Anybody can probably burn ETH they own by sending it to an invalid address or something.

And how was it created on the beacon chain? Was it simiply hard programmed into the software "We start with a bunch of ether at the following address: ..."?

There is a well-thought out and well-designed process for all stages of this. You can read up on that on the https://ethereum.org/en/eth2/

Been poking around for a while but did not find the part where it explains how ETH moves from the old chain to the new prior to the merge.

Do you know where it is described?

It involves something called the staking deposit contract:

https://ethereum.org/en/eth2/staking/

https://launchpad.ethereum.org/overview/

Picking any active validator on the Beacon Chain, we can see that there is an Eth1 deposit and a corresponding Eth2 deposit:

https://beaconcha.in/validator/91676#deposits

https://beaconscan.com/validator/91676#deposits

If you're interested in the technical details, see:

https://github.com/ethereum/eth2.0-specs/tree/dev/specs/phas...

You send your ETH to a specific contract, from which it can't be moved (whether you want to call that "burning" is up to you, but it's probably a bit confusing). Each validator must also run an Eth full node, and uses the state of that contract to determine who can act as a validator on the Beacon chain.

Are there any plans to do staking Polkadot/Cardano style? I'd like to stake my ETH but have no interest in running a full validator

Already possible

It's possible. See, for example, Rocket Pool:

https://www.rocketpool.net/

This is the first time I've seen someone praising Cardano without me looking for it.

Could you elaborate?

Not OP, but I can give some elaboration on why Cardano is a really interesting project:

1. Staking in Cardano does not lock up your funds, and is really decentralized, getting more every day. Because of that, more than 70% of all coins are currently staked. This brings less volatility to the price and ensure longevity of the chain. The interest is not too big too, everything seems as sustainable as it can be.

2. Cardano supports assets natively instead of having them just being backed by smart contracts (this is/will be still possible though), which means that there are no extra gas fees to send/receive stablecoins or assets other than Ada.

3. Babel fees are part of 2, it means that the transaction fees can be paid by native tokens, not only ada. This is a huge improvement from the BSC or Eth, where you need BNB/ETH to pay transaction fees even if you're only dealing in stablecoins.

4. Smart contracts are finally coming in Q2, which will bring DeFi to Cardano (this explains the price mooning in late feb, early march, because of the mary hardfork).

5. Forks and updates in the chain are painless, last one I didn't even had to send money to a new wallet or anything like that.

6. New developments and features to the chain and ecosystem are being "baked into the protocol", in a sense. Project Catalyst is the first step for this, financing some projects, but in their roadmap they plan on giving away all control of the direction of the coin, and only work as a service provider to the ecosystem using the same infrastructure as all the other projects.

I'm really bullish on this coin, not only on price but also on the kinds of problems it can solve. Can answer more questions if you have any :)

Is Project Catalyst a Cardano's version of The DAO? I'm newbie in crypto.

you intentionally stake your ETH on the new chain. So 6 billion from individuals and organizations that intentionally "moved" their coins.

What really surprises me is how in bad faith the PoW miners are acting. Ethereum was, from day one, planning to transition to PoS once the research and proof-of-concept was working. If anything the Ethereum PoW miners have been very lucky in that Ethereum is kinda late on its roadmap to switch to PoS (at least compared to when first announced).

You're saying a significant number of people who gathered behind the maxim "code is law" for money may have signed onto what the code was doing and not what the long-term social plan was? Quelle surprise!

Well, the code never guaranteed that people would not merge the PoW chain to the PoS chain :)

At the end of the day, this consensus system will rule by consensus.

Yep, the Ethereum Classic crowd made the same mistake in the context of the DAO "hack".

DAO: Code is law, code is law, trust the code over any natural language document that describes our smartcontracts.

"Hacker": Okay, if the smartcontract says that, then it follows that I'm entitled to these ETH if I do this...

DAO: What? No! That's not fair! That's not what we meant! Oh, come on, do-over!

ETH Classic: No? That defeats the entire purpose of Ethereum, for code to be law.

DAO: Not when it comes at the cost of significant wealth for the core team!

This is the classical distributed consensus fallacy. Law is only law if there's consensus around it. The "original" law still lives on in the form of ETC, but it happens that the other one generates way more consensus around itself, and thus that's the more valuable one. Distributed consensus means no one can change the rules unless there's a "majority" defined by PoW, PoS, PoA, or something else, that chooses to change the rules. And there's nothing preventing anyone from proposing any kind of change and trying to get a majority behind it.

Which means there's as many "legitimate" chains as there are ways to define a majority, and as blockchain entries increasingly denote external assets things are about to get very messy. In the end disagreements will probably be adjudicated by traditional governments based on regular contract law (in the best cases) or individual physical force (in the not-exactly-so-formal ones), and after a few instances of that maybe we can be done with the whole foolishness.

This is mostly true, but I'd argue legitimacy is harder to achieve than it seems, because of network effects.

That said, the current NFT craze is idiotic. As you point out, there's lots of people trying to try external value to a blockchain using what is more or less nothing more than a "super pinky promise". And that's supremely stupid. Today's valuable blockchains have value by themselves. Linking blockchains to external properties, assets, certificates or capabilities is still an ongoing problem. Only after the identity problem is solved and standardized will NFTs linked to external things be worth anything.

So here’s a legitimate question because I haven’t seen it asked before. Whats the value of a paper “certificate of authenticity” at the moment. My understanding is that with art if you can tie it to the original issuer, then it has value. And indeed I know there is some fraud law around forging such things. So NFTs seem fairly well suited to provide hard to forge art provenance with minimal effort.

They also seem well suited for being able to transfer ownership of physical goods and also transfer things like warranties. With an NFT tied to a serial number, you could ensure only one owner with that serial numbers item can claim warranty coverage, ensure resellers don’t try and pass off something used as new, ensure stolen goods can be tracked as such, etc.

With both paper certificates and NFTs, their worth depends on the issuer. The NFT craze is stupid, but as you point out, coupling real art with a NFT certificate is a really neat use case for NFTs. A NFT minted by an author and/or a reputable source such as an auction house can act as a unique, impossible-to-duplicate certificate that helps claim ownership of some real-world possession.

It's a given that at some point this will be tested in a court, with favorable results.

Maybe the litmus test is does the object linked to the NFT have real world value without the NFT. If you wouldn’t pay for the item without an NFT, then perhaps it’s not legit.

But this is an odd conundrum. If Ethereum is decentralized, any such change must be achieved by a vote. Circumventing such a vote is detrimental to the eco-system in the long term, wouldn't you agree?

Sounds like trying to land a helicopter on a boat in rough seas.

First, they need to keep the miners happy until the second before they are turned off.

Second, "escalating" the deployment of code seems like an always bad idea for such a massive system.

Regardless of the current issues with the updates, gas prices, different opinions on the community, devs vs miners vs users...

Am I the only one who thinks people underestimate Ethereum and its EVM invention? In 2013 this guy (who I think is a visionary) wrote a document with a proposal that led to the creation of a world-wide turing-complete distributed computer. And still, people are just starting to realize its potential. This month a layer-2 solution called optimism will launch a virtual machine called OVM (optimism vm) on top of ethereum smart contracts that can solve most of the current scalability issues (and there are other solutions being tested in parallel: zkrollups...). We are also starting to realize the potential of Dex and Defi (distributed exchanges and finance), DAOs (distributed organizations), NFT (non-fungible tokens) and a bunch of things more that 7 years after are appearing out of thin air. So even if Ethereum wasn't updated at all (although, we probably all agree that PoW is not environmental friendly and should be replaced with a better alternative: PoS) it could still thrive in the long term thanks to its most fundamental design choices (turing-complete...). I am truly amazed by this technology and Vitalik. I wish I knew a little bit more of the underlying fundamentals. What do you think?

Never underestimate the efficiency with which money launderers and organized crime are able to innovate and adapt.

It really is amazing when you understand the capabilities and speed of iterations of the growing use cases of this new shared trust machine. DeFi, NFTs, DAOs, so many different ecosystems currently being built cooperatively by hundreds of different companies and project teams. It's almost a force of nature.

Satoshi already envisioned smart contracts that's why he created and designed Bitcoin Script Language "The design supports a tremendous variety of possible transaction types that I designed years ago. Escrow transactions, bonded contracts, third party arbitration, multi-party signature, etc."[1]

[1] https://bitcointalk.org/index.php?topic=195.msg1611#msg1611

One limitation of Bitcoin script is that it's not turing complete. But there are sidechains like rsk with defi apps like sovryn that bring smart contracts and defi to BTC.

I'm not an expert in Computer Theory but other people proved Bitcoin and Bitcoin Script are Turing Complete:

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3160279

[2] https://coingeek.com/bitcoin-script-is-turing-complete-scryp...

[3] https://www.youtube.com/watch?v=M6j-11H2O7c

These are deliberate redefinitions of the term "Turing complete". The reasonable interpretation is that evaluating a single block can involve an arbitrary computation (if given enough gas). Ethereum has this property, Bitcoin doesn't.

These redefinitions say that you can take a few computation steps per Bitcoin block and save their state such that a later block can take a few more steps, so over time, very slowly, spread out over many blocks, Bitcoin can also implement an arbitrary computation. This is theoretically cute but otherwise useless.

Ethereum blocks have a gas limit so it wouldn't be Turing complete under your definition either.

The EVM is TC in that you cannot determine if a snippet of code will halt, given sufficient gas. EVM code is undecidable, whereas Bitcoin script is not.

The universe is finite so no Turing complete computing devices can ever exist.

Ethereum has a Turing complete language that is only limited in practice by external constraints like the gas limit. Bitcoin doesn't have such a language.

Craig Wright is a moron and a fraud.

Bitcoin is deliberately and wisely not Turing complete. That gives a lot of power and mischief-making ability to anonymous entities in an adversarial environment.

It's partly why Bitcoin is 5x Ethereum's market cap, despite technically being less capable. It's less capable of losing money, of DAO attacks, or other serious failures too.

Bitcoin is five times the price of Etherium because it was the first cryptocurrency and everyone knows its name. It has nothing to do with the technical abilities of either.

I generally agree with this. But Ethereum is "less finished" than Bitcoin. I feel like this situation might be different in a year or two once ETH2 is fully rolled out. Right now, ETH is a bit more risky. There's no doubt that more economic activity is happening on the ETH chain, though

It'll take longer than a year or two for something as complex as ETH2 to mature to a point where it can be considered as finished as Bitcoin.

That's not a limitation. There is absolutely no reason to have a Turing-complete language in bitcoin.

This can even be proved from first principles: bitcoin, and blockchains generally exist to validate the execution of contracts which have already occurred in meat-space. Basically you and I agree to conditions under which some money is transferred from me to you and vice-versa, which is the actual contract, then write a program (the "smart" contract) which validates that those rules were faithfully executed. It can be shown though that any Turing-complete contract rules can be validated using a non-Turing-complete language like Bitcoin script (ignoring runtime limits). The block chain doesn't need to run every contract, it just needs to validate that every contract ran correctly. A different problem, for which Turing completeness is not required.

Edit: For the down-voters, show me a Turing-complete contract that can't have its execution trace validated in a non-Turing complete language. In the 10 years I've been in this space I've yet to encounter a single one.

Turing completeness is an anti feature in financial system like bitcoin. And pretty much zero contracts currently deployed to ethereum require Turing completeness. It’s just a buzzword to sell you this gigantic pre-mine scam.

I can't think of a single Ethereum dapp that could be implemented without an expressive scripting language.

Well, you’re misguided. It’s not the language, it’s platform features like kv store attached to blockchain that make these dapps possible to implement. And none of them require Turing completeness.

They may not require turing completeness in the strictest sense, but they do require branching logic and loops.

Branching and looping are constructs that you can have in non-Turing complete language with some limitations that don’t matter in practice for the purpose of ethereum or bitcoin scripts.

a non-turing complete language can still be useful and "expressive" in a loose sense.

SPARK[0] isn't Turing complete but it's still pretty useful, and likely a better language than Solidity.

[0] https://en.wikipedia.org/wiki/SPARK_(programming_language)

I believe that was disabled in the protocol long ago because it was deemed to be a security risk.

Some opcodes were disabled but most of them remain. https://en.bitcoin.it/wiki/Script

Most of the ethereum devs I know were bitcoin people first. Bitcoin is cool but you simply can’t do what you can do on ethereum. Remember Vitalik himself worked for bitcoin magazine and pushed hard for updates that would make his ideas possible on bitcoin, but they were repeatedly rejected. So we had to build ethereum instead. Now with ethereums success we are seeing people go back and say “bitcoin does this too” but it simply doesn’t. And a side chain, that isn’t inheriting security from layer one isn’t good enough.

There is a lot more bitcoin wrapped onto ethereum that there is on lightning. (Now 1% of total supply). Ethereum is eating bitcoin.

The point of Ethereum is not really to be a distributed computer. It also seems misleading to describe it that way, as it doesn't distribute computations. Every node computes the same thing.

It also barely computes anything. It's closer to distributed consensus. (Distributed tricky consensus? - I acknowledge there's a tiny bit of logic)

It can compute anything you want it to compute.

No, it really can’t. Unless you mean it in a sense that Minecraft is a Turing complete machine and can compute anything you want it to compute. Good luck computing anything non trivial.

Yes, Ethereum Mainnet isn’t much of a distributed computer in the Mosix sense (it’s more of a decentralized computer); but a private/protected PoA EVM blockchain very much would work to truly distribute computation.

Or, to put that another way: as long as all nodes can trust each-other (and so run entirely in fast sync, with no redundant verificational executions of the same blocks), then Ethereum does in fact allow N computers to work on pieces of N subproblems in parallel and use the state trie as a blackboard for syncing/linearization between those subproblems. (The actual heavy computation would have to occur outside the chain, in oracle sibling processes, but they could at least load their binaries from the state trie. Think of it like AI bot-clients cooperatively playing a MOO where users can define object code.) Essentially, Ethereum is a distributed database with Turing-complete CRDTs.

Mind you, nobody’s using Ethereum that way, but that doesn’t mean the underlying tech isn’t natively capable of being used that way. (Just like, say, oldschool fixed-function-pipeline GPUs could be used as GPGPUs, if you could translate your linear-algebra problem into an equivalent scene-geometry rendering problem.)

I’ve never understood Oracles as a concept. They seem fundamentally untrustworthy.

ETH seemed to have a higher tolerance for introducing the trade offs of Oracles than Bitcoin.

But without Oracles, the overlay networks you speak of couldn’t compute any meaningful logic without requiring an absurd amount of resources from the main net.

If you’re making a distributed computer, it’s like you’re scaling silicon circuits up to the network level. So any operation using those circuits will of course be more expensive. That means that many computations on the main net are cost prohibitive.

I would like to learn more about the trade-offs and risks of a blockchain relying on Oracles as a source of truth.

Oracles are always going to be less decentralized than a distributed blockchain VM. Chainlink's (oracle platform) approach to this is to have oracle nodes post a bond that can get slashed if the computation is deemed invalid. But most Chainlink oracles have 21 or fewer nodes. This is fine for supplemental data but would be vulnerable to all the same attacks that DPOS chains have suffered if used as base layer consensus.

Like I said, Ethereum can be used as a distributed computer presuming an complete web of 100% trust between nodes. E.g. when the nodes are all run by a single corporation, with the node operators being different employees in different locations. In that case, the oracles (= native processes interacting with the blockchain nodes) would be presumed-trustworthy just as much as the nodes themselves are. The only question would be whether the out-of-chain computations of the oracles are able to move the state forward in a deterministic, linearizable manner as if they were on-chain computations — which is totally possible if you make your blockchain into a collection of arbitrary-CRDT smart-contracts and only interact with shared data through them.

But to directly address your statement, in general, oracles as a concept are “trustworthy” iff 1. they rely solely on public information as input; or 2. are run by a centralized entity, which is the same entity that has sole ownership of the resource being modified by the oracle; or 3. the system is built such that any oracles can submit a cryptographic proof of X, and as soon as any oracle does so, the condition is triggered.

Re: case 1, just as you can re-compute the transactions of a blockchain to arrive at the same consensus state, you should be able to grab a copy of the oracle’s code yourself and run it in a proper “context”, whereupon it will re-assert all the same transactions it ever originally asserted to the chain. This requires that all APIs the oracle deduces its assertions from have historical-data variants.

Re: case 2, the oracle is basically just standing in for a human. If you trust a human to do X, then you trust an oracle to do X.

Re: case 3, this is what on-chain prediction markets do. Rather than the win-condition for a prediction being something a human watches for and then enters, many private individuals (bettors) are incentivized to each have their own oracle running that watches for the win-condition however they like, and then — as soon as that condition attains — proves to the smart contract that the condition attains. The smart contract doesn’t have to care which oracle submitted the proof, only that there is now such a proof.

I don't think it was visionary. Ever since, blockchain has struggled to find a real-world use case. We know how blockchain works, the concept is thousands of years old. This problem existed in the past (coordinating in an environment where no one trusts anyone). However if this was a real problem in the real world, companies would have built blockchains long ago.

This is rather survivor bias. Apparently blockchain found some straws to hold on to. It could have been one of those millions go-nowhere projects just as likely.

I think there are legit use cases for it, but ultimately, we are still far from mass adoption and without the crazy monetary gains, I don't even believe anyone would talk about blockchain these days. Technology wise, it's not a strong value proposition. We can do pretty much everything without blockchain. Yeah there are some cases where trustlessness helps, but once this problem would become serious enough, it's not hard to build blockchain technology. It basically follows directly from basic principles defined by the problem. And the fact that everyone "thinks blockchain is new", already proves that the problem actually doesn't really exist.

I hold, transfer and pay with crypto a lot. To save a lot of fees, have additional security and because it is simply comfortable and fast.

Smart contracts allow that i can swap any currency to any other withoit kyc or even registering. I can move USD from ETH to Tron and so on within seconds for a low fee.

Cashing out to IRL money is simpler and faster than even paypal or paysafe for example.

Even if the crypto market is unstable, the last years it generally went up while holding USD or EUR basically was a loss game valued against ex. CHF.

I personally cant imagine a world without blockchains anymore.

do you mind telling me, how you cash out USD without giving anyone your name :)?

IRS has entered the chat.

Also, transaction fees seem pretty high. Maybe I’ve just been spoiled by cheap insecure transactions.

Transaction fees for sums above lets say $500 are way cheaper than most banking fees especially assuming different currencies. Even more when we compare to western union or even paypal

Let me give you a real world example. You buy something for $10. Then ethereums $5 fee sounds crazy compared to 3% or so for creditcard or paypal. However transfer $1000 and those 5$ suddenly sound a lot better than the 30$ the creditcard or paypal charges.

Ahh what i ment is using tether or usdb instead of usd. Which is instant and decentralized and widely accepted crypto bound to the usd value. It just saves you from up and downs, its still crypto

Well, so you are still trading with people believing in the value of these systems (which are <95% of businesses), which is a very specific distinction to cashing out money with which you can pay e.g. your taxes.

Cashing out is no issue either, just not without a name. However even that exists trough localbitcoins.

The EVM is a natural extension of bitcoin's scripting system. Here's the original Ethereum whitepaper, Vitalik cites all sorts of pre-Ethereum work:

https://github.com/ethereum/wiki/blob/old-before-deleting-al...

There were tokens (Colored Coins) and Dexs (Omni) running on Bitcoin before ETH was launched.

Omni is a completely different blockchain than BTC. That's what powers the Tether network. It's far from decentralized though. It's a cartel of exchanges that operate the network.

Colored coins were a neat idea but completely impractical in practice. Hence, why they never took off. Bitcoin script is far too limiting to build expansive applications on.

>Omni is a completely different blockchain than BTC.

This is plain false. It says so in big letters, right at the top of their website:

https://www.omnilayer.org/

>That's what powers the Tether network.

Tether has issued tokens on the Omni protocol, Ethereum, and other networks. The blockchains and amounts are listed here:

https://wallet.tether.to/transparency

>Bitcoin script is far too limiting to build expansive applications on.

My original point was that weak smart contract features on Bitcoin motivated Ethereum's creation (Vitalik's name is on the Colored Coins whitepaper). This is in contrast to GGP's proposition that Ethereum had underrated novelty.

There are many people who understand Ethereum and the larger blockchain / cryptocurrency ecosystem. I have made my career and wealth in this space. What you won’t find are tons of people like me on Hacker News. This website has a toxic reputation in the crypto world given its intensely negative attitude towards this industry.

I love HN. Probably the website I check most. But I have tried so hard to understand why the community here is so virulently against what I have devoted my life to. It’s very sad. My conclusions are numerous, but I think it’s death by a thousand cuts.

Where do the crypto folks hang out?

Everything is organized around coins and projects. For example if you are into eth core then you are in eth magicians https://ethereum-magicians.org

The most popular crypto mediums are telegram and discord. Twitter is the social media of choice. Reddit has some decent subreddits but it isn’t the primary place.

This community is based on trust. Trust is earned through contributing code, knowledge, effort, etc. If you join in the bull market, stick around through the bear to show you are serious. Etc.

sound a lot like the mob

I'm positive about Bitcoin valuation over the long term.

I'm negative about Bitcoins utility.

I'm very, very positive on the utility of systems like EVM and their valuation over the long term.

I'm still negative about mainstream adoption of direct usage. It's complicated and too easy to make unrecoverable mistakes.

I believe a lot of the criticism on HN is valid and deserved within certain contexts. Some contexts, like block chain VMs, don't come up much here at all.

I hope to understand the ecosystem better ... and imagine that at some point the greener operation and greater utility of Ethereum ETH 2.0 will beat out Bitcoin.

Will this lead to better returns for Ethereum over Bitcoin medium- or long-term, eventually? When will that switchover happen (if not already)?

My take is you have to understand finance, central banking, its abuse by banks and governments, and so on in order to see the utility of the crypto industry.

If you never got lost, you might not see the value of GPS.

Others don't need to get lost, but they are better at seeing the economic implications like increased efficiency when navigating roads, waterways, airspace, ...

Instead, the disbeliefers consider it expensive, unecological, and related company stocks as in a bubble.

Same here. Crypto literally is the best thing that happened carrier wise to my life. From the wild wild west in the early days that allowed anyone to make some beermoney then (and be rich today if they holded) to the immense community we have today that turn simple products/dapps/whatever into millions strong businesses over night.

Crypto is exactly the movement to give power back to the people (for a while at least) its sad to hear such a negative attudide from a otherwise forward thinking community

The issue is that exact story is “get rich quick”. A good predictor on how jaded you are towards your reaction to it is “did you get rich?”

I dont own a ferarri or tesla, but i havent had a regular job in years parts to crypto.

Where would you tell a crypto noob to start today?

This is the go-to guide for anyone new to crypto today. It goes over the why and how and provides links for further reading. https://newsletter.banklesshq.com/p/-guide-1-starting-with-b...

I hadn't seen this, thank you for sharing!

It doesn't help that the shadiest of people use crypto and ICOs to cheat and steal from gullible people. The suspicion and guard is up because the stakes are different. Let's say you write an opensource logging library for your language and promote it on HN - the stakes are low for everyone involved.

Let's say you're trying to launch rabbit token that's going to be the next only-fans replacement. You have a ton of motivation to hard sell your product and for this reason people are going to be equally not so exited and will have their guards up. I think it'd be naive to expect a OpenSource launch like happy reaction...

So it's 1) bad guys in that industry that have the wrong motivation giving the industry a partial deserved bad name.

2) A recognition that people espousing a technology are not purely talking about those technologies but have a vested interest in those assets having a positive view in other people's perception.

Ofcourse it comes with the territory. Like if a lawyer says, wonder "why is my profession, not universally loved?"

"Its just the 80% of the corrupt politicians giving the rest of the 20% a bad name."

Not passing judgement or moral judgement but I don't think crypto is going to shake-off the suspicion for quite a while.

This is because there is a knowledge gap between the masses and the people that know how things work. Till you have that gap there will be opportunists that will want to cash out on the knowledge arbitrage.

Its actually not just with crypto. Look at products that talk about AI enhanced this and AI enhanced that. Those guys are viewed with suspicion as well. Just slap-on an AI label to your PPT and bang your product is now cutting edge. Everyone see through that BS..

It's likely that the shadiest people use cash though.

I hear the most dreaded criminals tend to breath air and a shocking percentage of them are found to be mammals.

Jokes aside, How do you compare an ICO to cash? Its more closer to an IPO process.. if you started allowing listings in the stock market backed solely by 5-6 nice LinkedIn profiles and some 'white-paper' I'm sure the exact same people will list their companies in the stock exchanges as well.. Unlike an IPO, there is no vetting process, there are no mandatory disclosures or oversight.

That is freedom from central control, sure. But, the cost of freedom is the risk that gets loaded on the part of the investors. This gap is wide open for people that are thus inclined to cheat and make a quick buck. I am not berating crypto, but, I have a lot of confidence in criminals going after easy money that doesn't have too many down sides.

> Am I the only one who thinks

No, there are plenty of blockchain snake oil salesmen out there promoting the same misleading talking points while bypasssing legitimate concerns.

First, you have to understand that at least half of the concepts you're talking about have completely not broken through the barrier between the mindshare of the Blockchain community and the rest of the tech industry. Your post was the first I've heard about OVM, Dex, Defi, and DAOs.

That's not the fault of the tech community, that's the fault of the Blockchain community by allowing itself to be overrun with quasi-technical charlatans who promote world-changing revolution while yadda-yaddaing past the technical details.

Every other digital revolution was embraced bottoms-up by geeks - from The PC, to The Web, to Linux, to The Cloud. But Blockchain is primarily embraced by money-hungry Type-A salespeople, and it sets off ALL SORTS of alarm bells for most of us.

I think I fundamentally agree with you - Vitalik IS a Genius. Like Satoshi. But I am extremely concerned with the direction most mainstream adoption of this technology is taken, and the glee with which boosters like you allow it to be.

The one item on your list that has a lot of familiarity for the technical community, and even the rest of the populace today is NFTs.

You listed them in the other list of concepts I had no familiarity with. Yet I do know a thing or two about NFTs from what I researched. And I think it's one of the most apalling ideas to have been invented in this domain yet. Masquerading as a method to liberate artists and promote new opportunities for income, it is so clearly a giant money laundering scheme for the wealthiest of the world. That's before we get into the environmental impact.

So....that's what I think.

> Every other digital revolution was embraced bottoms-up by geeks - from The PC, to The Web, to Linux, to The Cloud. But Blockchain is primarily embraced by money-hungry Type-A salespeople, and it sets off ALL SORTS of alarm bells for most of us.

No, that's not true. It's just those types are the loudest. So that'd be your impression when you haven't spent time looking into it.

But it sounds like you've at least looked at Vitalik's writings. The Eth core has plenty of hard core tech in various corners of crypto. It's just that they're organized by project, and not all in one place.

>No, that's not true. It's just those types are the loudest.

In order to make it in the crypto market this is the way they have to behave, because the measure of success is the coin price, which is directly tied to the number of people buying into their coin (the vast majority know nothing of the underlying technical details and don't care). It's a race to the bottom and a real problem with the industry, reminiscent of the dot-com bubble, but I think far more pervasive in crypto. This is also why crypto will keep experiencing popping bubbles until it finds enough use cases with actual advantageous compared to existing solutions.

While true, that's a separate point about marketing on the internet today. The person I was replying to was saying how traditional tech is allergic to crypto because of the hype machine.

I'm saying, if you dig beyond the hype machine, you'll find plenty of hard core tech and tech adopters that you found in previous platforms, like PC and internet.

OP apparently cares about the underlying technical details. I'm saying if he/she looks deeper, they'll find what they're looking for.

Agree. The blockchain is the tape; amazing! I'm a bit late to the party, but have invested a reasonable amount into it recently. I'm on the side of ETH 2.0 and massive scalability and lower gas prices(even though I currently mine liquidity) so the true potential of smart contracts and DeFi can be realized.

The Ethereum docs are pretty great if you want to learn more: https://ethereum.org/en/developers/docs/ .

I have been keeping up with the developments in the crypto space from the outside for the past few years.

Never really invested in any currency as it always felt too risky / speculative for my taste.

It wasn't until last year with the upcoming of DeFi (Decentralized Finance) that I decided to get involved somehow, instead of just watching innovation happen. I also think this really has a lot of potential.

So I started investing my free time for building an experimental decentralized options exchange [1] in order to develop myself / become qualified in this field.

Worst case scenario I end up with a cool project on GitHub that never took of but provided me an awful lot of knowledge and some new friends.

[1] https://github.com/TCGV/DeFiOptions

Impressive!

Thanks!

Amazing, love this idea!

Thanks man!

> 1] https://github.com/TCGV/DeFiOptions

so you _did_ end up buying a boat load of ethereum i presume?

Not yet. For now the project "alpha" version is only deployed on Kovan testnet, in which ETH is free.

When I started coding this project ETH price was around US$ 500, and gas prices around ~40 Gwei, making it feasible to launch the project on mainnet without much hassle using my own funds.

Since then ETH has gone up to the roof. Now ETH is ~US$ 1900 and gas price ~150 Gewi, making it 14x more expensive to launch.

I'm still evaluating if I should launch on ethereum mainnet or in a different solidity compatible blockchain (ex: Binance Smart Chain, Avalanche) once the project reaches a beta version due to the cost of deployment.

In the project main page I ask for donations for covering deployment costs [1], but so far I was unable to secure any funds.

[1] https://github.com/TCGV/DeFiOptions#support-mainnet

Thanks for sharing! I'm curious what you use to generate the high quality diagrams for the readme and on your blog.

It looks like draw.io - or at least this would be easy to do with that.

You're welcome !

I use draw.io [1] for technical diagrams (ex: flowchart, UML, etc) and Google Drawings [2] for more generic diagrams (ex: system designs).

[1] http://draw.io/

[2] https://docs.google.com/drawings/

If by the document you mean the original Ethereum yellow paper that first formalized it, the main author was actually Gavin Wood, not Vitalik :)

Both were crucial in laying down the technical and theoretical foundation of Ethereum.

Gavin is working on other things now. Vitalik is not the thought-leader he was in the early days (which is a good thing as he’s not a SPoF and decision making is more decentralized)

I largely agree. I think the field is exciting and interesting, and like many crypto fanatics say, there might be parallels with the early days of the internet.

I think part of the reason it takes time for people to see the potential is that a lot of it just isn't ready for mainstream yet. The tooling is not uniform and easy, PoW really does not seem like the way to go, and scalability is largely missing. It seems many of these issues are getting solved now though!

There are other issues that still stop me from investing in this (though I would invest more time if I had). One is that I don't have a model for where this is going - I'm not sure that the most popular systems make most sense from a technical point of view. Bitcoin seems to lose out to Nano, for example, and I'm not sure why Ethereum would be better than Cardano. It could be that these technologies are just paving the way for something much cleaner down the road.

Another thing is that consistently the economics don't make sense to me, and I feel like a lot of the conversation about cryptocurrencies is sort of pseudo-economics. It doesn't make sense to me how highly Ether is valued (IMO its value should be the value of a transaction). And the idea of limited supply doesn't make sense to me in the form it is in now - I think a currency should roughly scale with the productive output that it represents, with at most mild inflation or deflation. Limited supplies of current coins only seem to serve early adopters.

I can totally imagine the existing banking system (which, I think, has a much better understanding of economics than the crypto community) adopting a lot of the tech that was developed here and fiat currencies ending up reformed rather than the world switching to community-run cryptocurrencies to a significant extent. (I would feel much more comfortable moving my money to a central bank blockchain than to Bitcoin or Ethereum.)

The existing banking system? Goliath was better than David at fighting and he was not keen to learn rock-slinging. (I'm not implying David will always win though. It's unlikely.)

Plenty of central banks seem interested in launching digital currencies. For me the main selling points of cryptocurrencies are programmability, easy international transactions, and potentially easy micro-transactions. Personally I don't care much about the fact that they are decentralized, and while I'm happy for my bank to see my transaction history I'm not that keen on having it public.

If I could move my savings into a digital currency provided by a central bank I'd do it today. Bonus points if it can be stored in something like special drawing rights rather than euros.

Sorry, plopping JavaScript on top of blockchain is not something I would call visionary. Smart contracts were there long before eth. Ethereum is a huge pre-mine scam with lots of promises and very little delivery. It’s got nice PR, but it’s really the PHP of cryptocurrencies. But of course almost everything else except bitcoin is much worse.

Turing completeness is literally a bug in such system. It’s an anti-feature. You shouldn’t want it. It’s a model of evaluation where halting problem exists.

But hey, it’s a nice buzzword for script kiddies. Great foundation for financial system, right? :)

Ethereum gets around the halting problem by using a "gas" model, where it halts your execution if you run out of gas before the program returns.

If Ethereum is actually the PHP of cryptocurrencies, that puts it in a great spot for adoption.

In any non-trivial program you will not know how much gas it requires to complete because that’s what it means - to solve the halting problem. What a great basis for your financial system handling all people’s economic interactions. What can possibly go wrong.

I’ll stick with deterministic bitcoin script, thankyouverymuch.

You don't have to know how much gas it requires to /complete/, you can just run the program and check whether it runs out of gas before it exits. You do not need to solve the halting problem. Actually, it's pretty trivial to implement this and this model has scaled quite well considering the size of Ethereum today.

Determining whether a Turing machine halts within k steps is computable: https://math.stackexchange.com/questions/3370296/halting-pro...

If the number of steps is specified in unary, then the problem is NP-complete: https://www.ics.uci.edu/~eppstein/161/960312.html

JavaScript powers much of the Internet today, and PHP too. When evaluating the effect of any given system or protocol - do you only analyze the design of its language - or its outcome?

Cool, I just don’t want it to power any of my financial future.

You don't have to, that's the beauty of having a choice.

Now that HN knows that you're so opinionated about the tech stack of your bank - can you detail down what type of infrastructure your current bank has, and why it's so good? Or is that just something you assume since you basically have zero knowledge about what traditional finance uses as back-ends?

I know a lot about it which is why I trust simple and stable systems like bitcoin. Banks are archaic, ethereum is Wild West with script kiddies “building” the future, bitcoin is just right for me.

>can you detail down what type of infrastructure your current bank has, and why it's so good? Or is that just something you assume since you basically have zero knowledge about what traditional finance uses as back-ends?

It doesn't really matter what backend my bank uses because there's regulatory backstops (eg. FDIC) to protect me if something goes wrong. The same can't be said for crytpo.

> Ethereum is a huge pre-mine scam with lots of promises and very little delivery.

You really should visit https://ethereum.org/

I few years ago i sold all my eth because i did not get the hype. Years later ETH sparked my interest and i agree that the technic is very likely the greatest crypto innovation since bitcoin. And the thing Bitcoin should have been to begin with.

It's not obvious that Turing-complete smart contracts are a good long term decision. I agree that Ethereum is fascinating tech, but with great power comes a great many ways to shoot yourselves in the foot. For financial institutions, being boring is to some degree a feature and not just a bug.

I'm not an expert, but if 51% of the existing hashpower doesn't want a change, it sounds less a 51% attack and more like miners voting against something that isn't in their interest. The whole point of blockchains is that the incentives are supposed to be aligned between miners and users. If that isn't the case here, it sounds like a problem.

Crypto miners and and crypto users are aligned in the same way banks and customers are aligned.

It is a problem. That's a big reason for moving from proof-of-work to proof-of-stake- to more directly make the _holders_ of Ethereum in charge of the chain.

It's a difficult thing to do, though. Hashpower based mining is easier to get going. Proof of stake has issues like the nothing-at-stake problem, where theoretically you could stake-mine on multiple chains: https://ethereum.stackexchange.com/questions/2402/what-exact...

Isn’t half of our current money supply controlled by 1% of people? If the asset holders controlled things, why wouldn’t they just demand everyone else hand over their cash?

https://www.cbsnews.com/news/richest-1-percent-control-more-...

(1) even a 51% attack can't generate fake transactions to transfer that money

(2) social power with blockchains (i.e. having people's ears on the social networks) is far more important than $$ power: If nobody wants to install and use your blockchain, no amount of $$ can fix that.

Re (1): True, in that the committed transactions would not be fake. But calling eth “money” is...not accurate. It has value but lacks moneyness.

Because the 1% isn't homogenous and a lot of them will want to keep the system working instead of killing the goose that lays the golden egg. The 1% is about 1.5 million people. Good luck getting most of them organized for a certain cause that will result in destruction of wealth mid term at the latest.

The 1% Is 1.5 millions iff the 100% is 150 millions, which is what population exactly?

Bangladesh? (160 mln actually)

I think they could mean a total number of crypto users, recently estimated to be over 100 mln.

The people that file tax returns in the US https://www.irs.gov/newsroom/filing-season-statistics-for-we...

I picked that because I didn't think if babies and non-earners were included when calculating the top 1% of highest earners.

That's a good question.

Imagine what would happen if one person held literally all the money. It may be easier to imagine a 100-person community rather than the whole world.

One thing that would have to happen is everyone else would develop their own money/currency, which would turn mean that the one person with all the money is no longer the one person with all the money.

A thing quite likely to happen is that everyone would decide that whatever the money is that the one person has, everybody would decide it is not money.

It isn't entirely dissimilar from me claiming I have all the Jerfoleans on the world, and what the world is really doing about that currency right now. They're worth a zero so zero-y that even an infinite number of them is still worth a flat zero. Someone who has "all the money" might find themselves in a similar boat.

More likely the one person would hire some people to convince the rest that it in their best interests that all money belong to the one person or even more likely to provide to the people some distraction, destroy the notion of the facts, so they wouldn't even know to ask inconvenient questions.

Money used to represent the value backed up by gold in bank storage. Nowadays its just a paper, so indeed its easy to create new money.

Not that gold has a massive magical intrinsic value. That was also arbitrary.

It is hard to mine and hard to find.

If you make a fresh piece of gold and show it to the world, you are proving that you have done some known — or at least bounded — amount of work.

In gold’s case, that work is gas, electricity, and human labor. If someone shows up with gold that cost less to produce, the price goes down.

> proving that you have done some known — or at least bounded — amount of work

Work for the sake of work is not valuable.

You could record video proving that you dug a hole 20 feet deep with your bare hands and then filled it up again.

That's a lot of work, but it wouldn't be valuable to anyone, except maybe as comedy.

The video wouldn't be valuable, because it's trivial to duplicate.

However, should it be impossible to copy videos and the only way to do a video would be to capture the events as they happen, then perhaps your video would have value.

I'm surprised there aren't a ton of NFTs for videos of people digging holes and filling them up, riffing on both "proof of work" and keynesian ideas.

Why do actual work when you can just sell somebody elses as your own?

The reasoning behind keynesian gold digging is that rich people will not accept that the government hands out money to poor people because that would threaten private businesses who are dependent on cheap labor. To make sure that the government money doesn't compete with private money you just force people to do worthless work so that working as a waiter for minimum wage is still more attractive than digging holes in summer heat. The entire point is that digging holes sucks. Meanwhile cryptocurrencies glorify digging holes.

Well cards against humanity did that and the hole was worth over 100k!

https://www.theguardian.com/technology/2016/nov/28/cards-aga...

And exactly that happened to aluminium. After its discovery its cost was bigger than gold. Until more effective ways to ectract it were discovered. That does not mean that aluminium is useless.

> If you make a fresh piece of gold and show it to the world, you are proving that you have done some known — or at least bounded — amount of work

Making origami pirate ships also requires a certain amount of work. That doesn’t give it value.

Much like Ethereum, gold has an actual use post discovery/creation but your origami crane does not (outside of artistic value and testing for replicants) - GP did not go into the details, but they chose an appropriate analogy - origami cranes, not so much. Fun trivia: NASA uses a bunch of gold https://spinoff.nasa.gov/spinoff1997/hm2.html

Value density is the differentiator. The amount of work required to produce a single ounce of gold is many orders of magnitude greater than the ancillary costs of storing or transporting that ounce.

Here's a couple of reasons why it probably wouldn't go this way:

1) Ethereum already has a market cap of $73B [0]. That's a lot of money.

2) Controlling 51% of Ethereum would probably cause the value of it to drop [1].

So you'd spend a lot of money to control Ethereum and then end up with something that's far less valuable than it was before you took control. Not really sure what you'd get out of doing that.

[0] https://en.ethereumworldnews.com/ethereums-market-cap-is-big...

[1] https://ethereum.org/en/developers/docs/consensus-mechanisms...

>2) Controlling 51% of Ethereum would probably cause the value of it to drop [1].

I think you're misinterpreting the paragraph. It's not that controlling 51% will cause the value to drop (it won't, see bitcoin miner control), it's that controlling 51% and trying to pull off an attack will cause it to drop.

> To do so, you'd need to control 51% of the staked ETH. Not only is this a lot of money but it would probably cause ETH's value to drop

To me "it" is pretty clearly referring to controlling 51% of staked ETH.

I don't know about the economics behind whether that would cause the value of ETH to decrease, but Bitcoin seems like a different situation altogether since miners don't control the the cryptocurrency itself.

And how does the ethereum network differentiate two people with different wallets and one person with two wallets? Short of attaching some sort of real world identity to ethereum wallets it's impossible to tell whether someone controls 51% of staked ETH because it's trivial to split that up.

The article is about wealth, not money supply. Those are completely different concept. There could theoretically be a lot of wealth and very little money (if no one wants to trade there isn't much needed) or not so much wealth and a lot of money (a lot of people need loans to trade and build wealth).

It's convenient to measure wealth in dollars in a "how much you could get if you still it" way and it's possible because dollars are very stable but there is very little reason for the amount of dollars circulating to represent existing wealth.

Yeah.

That's what they do. That's what inflation is. We work hard and save up $100,000, they (the 1%) turn that into $25,000 in 25 years.

Nobody forces you to hold cash for 25 years. In fact, you are given many incentives to invest it, inflation being just one.

This is true.

> why wouldn’t they just demand everyone else hand over their cash?

Because it's not in their best interest. If the 1% pulled something like that off, the price would drop a lot and therefore their ETH would be worth less.

It's one of the core pillars of any blockchain, that the incentives are aligned in a way so the best outcome for people is the one where the gain the most, so it forces them to go for that way.

Imagine if you owned a billion dollars, and that allowed you to say if someone spent 10 dollars at the gas station.

Are you suggesting censorship might be an issue?

can you tell us more? what are you refering to?

Nothing-at-stake is a solved problem in Ethereum's PoS.

The basic idea is that stakers' deposits act as security bonds. If a staker commits to two conflicting chains, any other staker can see that they did so, and get rewarded for publishing a proof of that. Then the cheating staker gets their stake destroyed on both chains.

There is a deeper problem with PoS, which is about where the value of the staked token comes from in the first place. PoW ties this to the burning of real-world value, specifically electricity which is about as close to distilled economic value as you can get. Ethereum is trying to bootstrap value with PoW and then switch, but I have strong doubts that this is a sustainable solution.

Coin value is not based on electricity usage in PoW. Due to difficulty adjustment, electricity usage is an effect of coin value, not a cause. If coin value goes up, mining becomes more profitable, more miners jump in, and electricity usage goes up. If coin value drops, the opposite happens.

Coin value is a social phenomenon anyway, so it’s kind of meaningless to assign cause and effect. My point was that electricity usage in PoW provides an external metric for assigning exchange value to the coin which is not self-referential, unlike in PoS.

It's the same when currencies around the world stopped using the gold standard and became floating across each other.

I'd say the value of currencies is that you have to pay your taxes in one that is legal tender. In that case, the value of Eth is that you have to pay transaction fees in Eth. You decided how valuable those transactions are.

Governments have a monopoly on issuing fiat currencies, but for PoS cryptocurrencies there is no enforced scarcity—any DApp that can run on Ethereum can easily run on any of an infinite number of Ethereum clones, so why bother using the expensive congested network?

I think you have the chain of causality wrong.

The Ethereum network is congested because it has users. Ethereum has the critical mass and first mover advantage.

The clones need to be sufficiently attractive (10x ?) to break that hold, it's not a technical problem but an economic, marketing and educational one.

Scarcity is unrelated to network congestion or usage.

When you sell your Bitcoin for Ethereum you have to pay taxes in dollars. The specific value is dependent on the ability to exchange it for goods and services but the fact that it will remain valuable (but not how valuable) in the future is secured by taxation. Who knows what is going to happen with Bitcoin? It may get replaced by Ethereum entirely.

> it sounds less a 51% attack and more like miners voting against something that isn't in their interest

We also used to call this situation a potential "fork" (as in, the thing with two prongs) before the word "fork" was somehow redefined to mean "protocol update everyone agrees on, with a linear history without any prongs".

Ethereum developers are hard forking Ethereum, but 51% of the hashpower disagrees and doesn't want to go with the hard fork.

Yup, it's a combination of new people not understanding it and media slander dirtying the word that has caused it to be avoided because it's gained a bad connotation.

It's still a fork in both cases. One path is taken by almost noone, but it's still an open possibility to keep it alive.

Yup. See: ETH Classic.

Precisely. Vitalik wants to fork ETH (as he's done before when they rolled back the DAO hack) to make a new version of ETH that is proof of stake.

The miners, as I've predicted here before, disagree, because this fork obliterates their entire business model. Shocking.

As an ETH user and holder (and former miner), I want Ethereum 2.0. Describing it as a fork is ridiculous. Proof of stake is the future and miners have known that for years. Proof of work is a dead end that ends with a Dyson sphere harvesting all power from the sun to process a few transactions.

If miners want to make another Ethereum Classic dead chain let them do so. The innovation, the users, and all the developers will be on Ethereum 2.0.

> ends with a Dyson sphere ...

Just because too much of a thing is bad doesn't mean the thing is bad in lower quantities.

Drinking ten liters of water in an hour is bad. That doesn't mean you shouldn't drink any water.

That's the plan for PoS, no? It's not that mining gets eliminated altogether, but doesn't play as much of a central role.

No, mining is gone in a proof of stake chain.

The point is that ever increasing hash power is a consequence of the design of the system.

This isn't strictly true.

The protocol ensures that there is on average a block produced every 10 minutes.

As hash rates increase, and blocks are found slightly faster, the difficulty is adjusted upwards to ensure that the 1 block per 10 minutes is maintained.

We've seen difficulty drop in the past, it doesn't necessarily rise forever. It only makes sense to increase when it's still profitable to mine at the current difficulty.

If the difficulty rises to a certain level and the price falls, and it becomes unprofitable to mine for some miners, they switch off their rigs and the difficulty adjusts downwards after a period of time to compensate.

Over the years we have seen the price rise and hash optimizations made, which have both driven the difficulty upwards.

It's every 15 seconds for Ethereum blocks.

https://ethereum.org/en/developers/docs/blocks/

It's not strictly true in the sense that if the price were to fall over long enough periods of time, you would expect the hash rate to eventually fall, too.

But that's not plausible in the scenario where the world's financial system eventually runs on a proof of work cryptocurrency.

Since all miners compete over the same finite profits, each miner individually has an incentive to increase their hash power and therefore power consumption.

Even if the price was on average constant, the game theory would predict a competition over finding the cheapest way to burn the maximum amount of power.

Empirically, there were some transient drops in hash rate for both bitcoin and ethereum, on top of a constant massive run up.

>Describing it as a fork is ridiculous

Why? It's a fork.

Monero has pre-planned hardforks every 6 months or so, is it ridiculous to describe them as forks?

ETH is a fork, ETC was the original chain. ETH 2.0 is a proposed fork.

Describing things accurately should be the norm.

Did Ethereum never have breaking updates before the ETC split? If no, it’s pretty disingenious to describe ETC as the “original” chain.

What are you talking about?

The fork that left ETC as the original chain was a rollback of the chain that destroyed the concept of its immutability for the purpose of fixing a massive financial mistake.

There were no other chains left as a result of such a fork. It is a fork, and ETC is the original chain. Those are facts.

ETC is not the original chain as the homestead hardfork predates it.

Which chain was left as the result of that fork? If the earlier chain is abandoned, then the new chain by default becomes the valid chain.

ETH2 is the ETH main roadmap, not a fork.

It's a fork. By definition.

It will be interesting to see how the situation develops if they really do attempt to fork and if normal users want to use ETH2. Miners could potentially want to keep the blockchain going and the value could be artificially high, but with transactions falling down and holders migrating, they couldn't keep it up forever... <insert "dis gon' be good" gif>

There will almost certainly be a split chain that continues to run on pow. Eventually it will die off, like Eth classic

The whole point of blockchains is that the incentives are supposed to be aligned between miners and users.

If this were obviously true, there wouldn't be a problem. I think a better formulation talks about distributed ledgers working better when the interests of users and miners are aligned.

And of course they never quite are (miners want profit, users want minimal transaction costs with high security).

You should think of miners as bodyguards. They aren't intended to be active participants on the network, they are intended to provide the service of securing the network and serving the interests of the users of the network.

If a group of bodyguards at a concert vote democratically and 51% of them decide the singer shouldn't be allowed to go on stage and sing (because of a grudge or whatever), is that a problem? Yes absolutely that's a problem, and probably all of them are going to get fired.

Same sort of idea here. If the miners aren't serving the best interests of the network, the network has no obligation to continue paying the miners tens of millions of dollars per day (no joke, that's how much miners on Ethereum make in revenue right now) to continue sticking around.

The difference is that a single bodyguard at a concert can quit or not, and likely won't (to pay rent). The Ethereum miners have unionized, however, so now you are negotiating with the miner unions to pay what they think is their "fair share."

These people are spending millions of dollars in electricity keeping things ticking away. If they stop, Ethereum's vested interest drops significantly. Since it is a fiat currency, less participants make it, unfortunately, less valuable.

Telling 60% of holders their currency (or income toward driving that currency) is not how you keep them on your side, just like old mining town scrip is only worthwhile if the mine works. The second the mine shuts down on a union strike, the scrip becomes paper.

On a personal note, I hope the miners get their due, because it was the initial philosophy of Ethereum. If they don't, I am curious to see how Ethereum moves w/r/t proof of stake vs proof of work guarantees. PoS seems at odds with the initial platform, and possibly long-term problematic for their "contracts-first" architecture.

>>The Ethereum miners have unionized, however, so now you are negotiating with the miner unions to pay what they think is their "fair share."

Unlike with employers and real world unions, the Ethereum network is not bound by labor laws to negotiate exclusively with unionized miners, or refrain from replacing them with non-unionized miners. Without those laws, unions are pretty powerless, which is why the late 19th century had such low unionization rates.

>>I hope the miners get their due, because it was the initial philosophy of Ethereum.

The initial plan of Ethereum was to launch with Proof of Work, and very quickly afterwards switch to Proof of Stake. Miners have already gotten much more time to earn from ETH issuance than was originally planned.

> The initial plan of Ethereum was to launch with Proof of Work, and very quickly afterwards switch to Proof of Stake

And that’s the problem... it’s a bait and switch, because the miners had to bear the capital costs of investing in mining rigs, which would suddenly lose a lot of value in a switch to PoS. I think this is the original sin of Ethereum, and the network will be forever plagued by conflict because of it.

Not really a bait of switch though since Ethereum has always been very clear that this is the plan. Anyone who bought a rig should have known that they had a limited investment horizon.

The miners do not give Ethereum its value; the market does.

It has no value without security and transactibility which is what the miners provide.

Not in proof of stake (which provides it through stakers instead), which is what this whole thing is about.

Well, this is about a 51% attack by the PoW miners and PoW is the law of the land. That’s why I replied in that way.

They are paid fairly in exchange for providing it. If the current set of miners decide that they don't like Ethereum anymore then those profits are sitting on the table for anyone to take.

You think that proof of work mining was the initial philosophy of Ethereum? It’s the exact opposite. Ethereum was always intended to be proof of stake, they just couldn’t get it shipped in time to launch, and then the schedule slipped a bunch more.

If the current group of Ethereum miners decide to stop mining, why wouldn't new parties come in to take the profits they are leaving behind?

It’s not like there’s a giant pool of mining hardware waiting in the wings to take over... I think we can assume that all hardware is always in use mining something as long as marginal revenue exceeds marginal cost.

Ethereum is typically mined on GPUs so I would argue there really is a giant pool of hardware waiting to take over. On Bitcoin where ASIC mining is common that is indeed a concern, but consider even then, each hardware owner has stronger incentives to just lie about participating in such a strike while keeping the increased profits for themselves.

A decentralized network doesn't care for vision, it functions as per what its participants want. What you are describing, is a problem in centralised network, which Ethereum is. So, you are technically right, but let's not confuse the interests of the creator is same as the interests of the users of the network.

Miners are not supposed to serve anyone but themselves. Everyone for themselves. A right system economically incentivize the right action by design, like in Bitcoin. Important to understand the first principles before judging any distributed system.

> A decentralized network doesn't care for vision

I'm not sure how this can be true as long as conditions are met:

1. original creator of decentralized network still exists

2. people still respect and give authority to creator

Bitcoin is visionless because it was theorized anonymously. Not so with Ethereum

No it's very much decentralized as the miners are threatening a fork. This is not unlike what Bitcoin went through in 2017 when it split between BTC and BCH. If it were centralized a fork wouldn't be possible.

The miners are mercenaries. They have no loyalty to the network and the network has no loyalty to them (hence the push for proof of stake).

For what it's worth, EIP-1559 wasn't Vitalik's idea, but the change is almost universally supported by the Ethereum application developers and users.

At any rate the sooner we get off proof of work the better. Users are spending $20M a day on transaction fees. Let's put that money back into the ETH community by switching to proof of stake and burning the transaction fees.

That bodyguard narrative is yours and I think it makes little sense. Hash power is required to form consensus. If anything, non-mining full nodes run by users would be the closest to “body guards”.

Miners would be the ones who settle and publish the lineup.

The point of the analogy is that they are being paid to provide a service, and if they have a disagreement about it, then their only choice is to forefit their profits and let someone else come in to extract them instead.

Tbh, I don't get your analogy, why should the miners be looked at as bodyguards? While I agree the miners are responsible for protecting the network, I don't think you can draw a distinction that easily between an eth holder vs a miner, because anyone can become a miner and anyone can become a holder and an entity can be both a miner and a holder. Everyone who participates in the eth network should have the power to vote in this blockchain, if its actually decentralized.

The problem here is with the design of eth, eth was a rushed blockchain from the start, now vitalik is trying to rush the release all of a sudden because the people managing his network are not happy with the up coming changes?

What the hell kind of decentralization is this if vitalik can escalate major decisions about network? Eth is not a decentralized project if one individual(or a few) can decide to go against 51% of the stakeholders of the network.

Miners don’t dictate protocol rules. Miners do one job - hash blocks. And they get rewarded for it.

Miners are only one participant in the ecosystem, there are also users, merchants and developers. Governance of any cryptocurrency is extremely touchy subject and one thing you don’t want to do is setting a precedent for making a controversial change. If you justify such change by “majority of miners want it” - you’re basically handing over the protocol to their hands. Nothing will prevent miners to adopt changes that eventually centralize currency control, increase rewards(inflation), etc.

>> Miners don’t dictate protocol rules. Miners do one job - hash blocks. And they get rewarded for it.

What? Not really. Miners do indeed dictate the protocol rules, its is the miners agreeing to following a certain version of the consensus algorithm that makes a blockchain do what it does. So they are partly responsible for more than just mining blocks. Like I said initially it is hard to say who the actual decision makers of the chain are because it is not defined properly by eth.

>>Miners are only one participant in the ecosystem, there are also users, merchants and developers.

Like I mentioned in my previous comment, my whole disagreement with the OP of this comment chain is, their analogy calling miners bodyguards only, my argument is that its hard to tell, because anyone can play any role in this network, on eth the incentives are set up in such a way that each actor can be multiple actors, and there isn't any clear distinction as to who gets to decide what on the network.

>>If you justify such change by “majority of miners want it” - you’re basically handing over the protocol to their hands. Nothing will prevent miners to adopt changes that eventually centralize currency control, increase rewards(inflation), etc.

I am not trying to justify it as majority miners want it, my criticism of the eth chain is they have done this sort of nonese in the past (remember the DAO hack where vitalik and co decided to serve their own interests and rolled back a blockchain? )

It clearly shows eth hasn't grown or come up with a solution as to how to govern their blockchain in a decentralized manner. At the moment, a small select group of people, rather than the majority of its stakeholders get to decide what happens to the blockchain, and that to me doesn't look like decentralization.

Whats to stop a powerful government forcing vitalik and co to implement or remove what they want in the future?

> What? Not really. Miners do indeed dictate the protocol rules, its is the miners agreeing to following a certain version of the consensus algorithm that makes a blockchain do what it does. So they are partly responsible for more than just mining blocks. Like I said initially it is hard to say who the actual decision makers of the chain are because it is not defined properly by eth.

Who dictates the rules is who controls the logic of the chain where the value resides. The miners can create their own fork, and Vitalik can create his own fork. I think we know where the value will go.

> Who dictates the rules is who controls the logic of the chain where the value resides. The miners can create their own fork, and Vitalik can create his own fork. I think we know where the value will go.

Vitalik only has this power because he appears to be choosing freely and the public agrees with him. If it appeared he was being forced to do something, or he did something that people didn't like, the value wouldn't follow him.

It is in this economic sense, and only this economic sense, that crypto is democratic. The only votes that matter are the dollars people trade to buy Ethereum.

> its is the miners agreeing to following a certain version of the consensus algorithm that makes a blockchain do what it does

You have cause and effect mixed up.

The miners that follow the same consensus rules that the merchants and exchanges do, get paid. The others do not.

A majority of miners following incompatible consensus would look like a huge drop off in mining capacity from the end users perspective. Similar things have happened multiple times.

There aren’t “merchants” in eth, really, there are dapps. Exchanges don’t care about protocols beyond send and receive. Still, I agree with your larger point: The value goes where the dapps go, and many will go to eth2. (But some will move to more stable and sustainable platforms.)

> But some will move to more stable and sustainable platforms.

This is why I refuse to hold ETH... when the financial big boys finally start moving to blockchain rails, they are going to look at ETH and think “WTF is this?” and pass it up for more principled designs like Cardano.

merchants and exchanges do not exist in blockchain terms, miners come first since they literally make the chain run. Everything flows from here.

> Governance of any cryptocurrency is extremely touchy subject and one thing you don’t want to do is setting a precedent for making a controversial change

This got me thinking. How likely is it that, if and when crypto grows into a significant financial sector, the actual government will take over the governance.

It seems likely that the public (or their representatives) will grow increasingly uneasy with such an important matter being handled by random internet people and foundations. Especially if these institutions are not willing to include themselves into other policy making processes.

I believe that sooner rather than later effective control will be wrestled away from people like Vitalik, through laws and regulations.

If a big government seized control of a coin's development, it would surely lose most of its value and users would likely just create a fork which is not under that government's control.

Miners would try to fork it.

Users would be overjoyed, and the user base would grow dramatically.

People aren't using bitcoin day-to-day because it lacks a government backing.

I will reply to this despite the fact that it's an obvious troll and has nothing to do with the topic at hand (this thread isn't even about Bitcoin).

People are actually using Bitcoin strictly because it lacks a government backing. For those users who want an asset that is government-backed, there are already lots of options and there is little need for cryptocurrency to try and compete in that space.

Venezuela has a government-backed cryptocurrency, the Petro, which failed spectacularly:

- https://en.wikipedia.org/wiki/Petro_(cryptocurrency).

In fact colleagues at Status went to Venezuela to check how payments worked there:

- https://www.figma.com/community/file/780788775246577039?prev...

The switch to PoS was known for years, miners know they’ll be phased out. The chain is decentralized, but that switch is not (it’s part of the initial chain dev/vision).

Decentralized blockchains are entirely opt-in. If you are a participant in a blockchain that isn't serving your needs, you can opt out of that blockchain and into a new blockchain.

A hard fork is essentially a large coordinated migration from one blockchain to a new blockchain, generally with a shared history.

Vitalik does not have the sole power to go against the stakeholders of the network and make massive changes to Ethereum. The power that Vitalik has is one of leadership. If he attempts to coordinate a mass migration from one blockchain (old Eth) to another (new Eth), Vitalik actually needs to convince everyone that this is a good idea. He can't force it to happen if people disagree that it's the right thing to do. If Vitalik launches a hardfork and 80% of the network upgrades, that definitionally means that Vitalik had the support of 80% of the network, otherwise they wouldn't have followed the upgrade.

Blockchains are about consent. If you don't like what's happening on a blockchain, make a change. A single person making a change in isolation isn't interesting, but a large group of people making a change together IS interesting, and can be successful even if that group is just a minority. You end up with two different networks, each capable of thriving on their own.

Miners depend on the users of a blockchain for revenue. If a blockchain has no users, there will be no fees, and no revenue. The reverse is not true. If the users determine that they are better off selecting a different set of miners to build and preserve consensus, they can fork the network in a way that changes who is able to mine effectively, but does not otherwise impact daily use of the blockchain.

My grandpa lived in a building with unnecessarily expensive local coal heating. They never plugged into a heat pipe from a nearby powerplant, because the neighbor, who operated the local boiler always vetoed the decision. Why? Because he was being payed for operating it.

This is pretty similar situation. Incentives of the miners are not aligned with those of the users.

Does something like delegated/nominated proof of stake solve this?

Delegated proof-of-stake is worse than Proof-of-Stake or Proof-of-Work from a decentralization perspective as the "delegators" can bribe their way to stay in power.

Some resources (they link to DPoS alternatives and discuss them):

- https://vitalik.ca/general/2016/12/29/pos_design.html

- https://vitalik.ca/general/2017/12/17/voting.html

- https://vitalik.ca/general/2018/03/28/plutocracy.html

- https://vitalik.ca/general/2019/04/03/collusion.html

The incentives of the miners are aligned with the users: The miners mine and then they get paid.

If the incumbent miners stop mining in protest of their future profits declining, then new miners will just come in to take the profits they are refusing to collect today. There is no incentive for them to conspire and every incentive for them to not conspire.

Everyone acts per their interest. Right and wrong is subjective.

Miners aren't stakeholders, they are hired to do one job and have no right to get any input. They're already coddled in ethereum. Everyone who actually is a stakeholder wants PoS. Ultimately eth buyers decide everything, as all money flows from them. Miners just mine what's profitable at the moment.

The only thing eth buyers (and sellers) are deciding is price. The connections between price and protocol are indirect and often complex, tenuous.

sorry but no one is hired. Mining is voluntary and based on incentives: you remove the incentives, miners stop mining.

it’s that simple.

> Everyone who actually is a stakeholder wants Proof of Stake

And everyone doing work wants Proof of Work

I’m tired of this argument that “this is not decentralized”. It is meaningfully decentralized in multiple ways:

* there is no legal entity representing the Ethereum blockchain because it is decentralized

* the correct chain is not dictated by a single person or group of people

What you are seeing is an implicit form of democracy or people acting in shared interests and in support of Ethereum’s original developer and “leader”. The moment vitalik loses it and the organization loses credibility, alternate plans will be made according to the common interests of the people who have a stake in the system. Perhaps there will be a fork, but in the end the greatest demand will be for the most universally accepted version and the other will whither into insignificance ala Ethereum classic.

51% hashpower != 51% of stakeholders, this is an important distinction that many comments about democracy are missing.

Hence GP talking about bodyguards at a concert-- who would typically be a minority of persons there.

Your analogy breaks down at "because of a grudge or whatever." The reason the miners are pissed is because ethereum is proposing to stop paying them. So what if the bouncers shut down the event because management told them they're not getting paid? Sounds pretty reasonable to me.

That's not true, they can still join a staking pool if they want to continue being "paid", so really it's just the way they're being paid that's changing.

Yes, the plan is to find a solution to make it work without the current bouncers

Not to find a solution, it was already found. The roadmap plan was always to switch to PoS, the miners and PoW were always temporary until it was developed / ready. Now the beacon chain (core of PoS) is live, with around $6 billion staked. Some of the miners (not all of them by far) are complaining they're no longer going to be needed, going so far as to make a show of "force". Others (like f2pool) have calmly been preparing with rest of Ethereum community, and are transitioning to staking themselves.

I believe your analogy is totally ill-structured and it misses the very main idea behind decentralization. There is no security guards, there is no concert-goers and there is no superstar singing at the stage. There is only MH/s and every single MH/s is equal to other one. That's the all idea about the system proposed and has been used.

Miners are wrong not because you believe different people should have different weighted power to change the system, they are wrong because the roadmap for PoS was well-established long long time ago giving them more than enough time to re-structure their revenue channels and invest accordingly. Therefore for them to say "we have been used. we invested a lot and now we are pushed aside" doesn't make any sense because the investment they had made until the roadmap for ETH2.0 was public has a ROI multiples times of what they invested already as of today.

For them to say this there are 2 options.

1) They were living in a cage and missed the plans for ETH2.0 and even after the roadmap is public they kept investing in mining equipment which will be useless soon. 2) They are just greedy and they just want to keep the same earnings although they have not got even a single argument for "why keeping the high fees is good for the ecosystem" apart from it means more money for them.

> more than enough time to re-structure their revenue channels and invest accordingly.

In other words, their business just goes away, but they can always start some other business?

In other words, they have been notified 2+ years ago that, their business -which has been very profitable so far- would go away because there is a better technology which can be used so that the network can still run with less environmental impact on earth. I wish every business was that lucky to be notified that early against the next technological breakthrough which deemed them obsolete.

mmh doesn’t make a lot of sense. Miners do actually provide the infrastructure for the network to function properly: no miners, no coins, no blocks, no transactions, no network.

I know it’s tempting to discard miners’ concerns, but it would be a great mistake. Miners need incentives, without incentives we’ll start allocating capital and resources somewhere else.

We are not greedy, not crazy, not confrontational: we are just rational.

If someone don’t like us, then could do without us.

As of 01 Dec 2020, there is already another Ethereum mainnet chain (Eth2 Phase 0) running in parallel with and dependent upon the Eth1 mainnet chain:

https://beaconcha.in/

https://beaconscan.com/

https://github.com/ethereum/eth2.0-specs/tree/dev/specs/phas...

Vitalik is proposing a role reversal to take place earlier than it was previously planned (not completely accurate in a technical sense re: previous plans, but effectively the same):

Eth1 mainnet will hand-off consensus responsibility to Eth2 mainnet (PoW -> PoS), while Eth1 nodes continue to "run the code" that executes smart contracts / processes transactions.

If the plan is put into motion, and as long as some miners / mining pools don't yank the plug on their mining nodes in the canonical Eth1 mainnet, then the canonical mainnet — per consensus among the Ethereum Foundation and aligned developers, Eth2 validator operators, orgs/companies/exchanges/etc — will transition suddenly from Eth1 (PoW) to Eth2 (PoS). And that will be the end of all mining on the canonical Ethereum mainnet.

Miners/pools who find it impractical or undesirable to reallocate resources from mining to staking may band together to continue running an alternate mainnet chain based on PoW (ETW?); market forces would then decide whether that chain is viable, as well deciding the fate of the evolved (PoS) Ethereum mainnet chain.

thanks for the info, I knew all of that. the problem here is not the expected switch to PoS, the problem is how do we go about reaching consensus about something in Ethereum. Is Vitalik calling the shots? I hope not. So if a small group of people is very determined and excited, doesn't mean shit to the ecosystem at large.

I am not saying this EIP, or PoS, are bad. It's the way you do it that matters.

Bitcoin, Ethereum, and cryptocurrency spawn a generation of people who worship Austrian economics. This ETH upgrade is making ETH even more deflationary. People are obsessed with price and want to pump the numbers. These wars are not doing anything to advance adoption and bring freedom to people. Crypto builders are pumping the coins under the banners of freedom and decentralization.

The problem with crypto is volatility. The whole market moves in one direction or another, usually with Bitcoin. Scarcity is not the only thing that makes up the economy. We need also need inflation. Stop engaging in these ideological wars. Let's fix the problem and drive adoption.

https://bitflate.org/post/2020/04/26/we-need-inflationary-cr...

If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then you should just ditch decentralized currencies altogether because then you also get rid of the meaningless complications around mining, energy efficiency or user-friendliness and go to a digital central-bank currency directly which actually has the proper tools to do monetary policy and all you need is a database.

>If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then [...]

What about as a store of value? Gold is still around despite being heavy and hard to transact with.

Wanna store value? Buy actual value - that is things that make the wealth. Stocks in major companies, real estate, land in places people want to live in. The concept that buying promises is a good way to store value is a bizarre concept to me.

This has always perplexed me too. There's a nice Buffett quote on this (https://www.berkshirehathaway.com/letters/2011ltr.pdf):

"Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A.

Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B?

Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices.

A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond.

Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B."

I have noticed that people who advocate for this "store of value" idea have this tendency to insinuate that cash is the only alternative to gold or bitcoin or whatever it is. There has always been alternatives to letting your savings be eroded by inflation (stocks, bonds, etc) and part of the reason for inflation is to incentivize people to invest their money in these productive things.

Fantastic post.

Gold held it's value before we started counting the years from the death of christ.

It was valuable when britain was pairing criminals and prostitutes in handcuffs and shipping them to the US to populate the damn place.

It is valuable even today when there are people willing to risk death just to reach its shore..

I am willing to bet it will remain being valuable even when America becomes an irrelevant once-was in a few decades..

I want to know which asset class will survive the collapse of the US dollar and the fall of US influence...?

If your answer to that question is, "that's just absurd, never going to happen in my lifetime.." I can just smile and wish you all the best..

> britain was pairing criminals and prostitutes in handcuffs and shipping them to the US to populate the damn place

What can I Google to know more about this? I though it was also the case about Australia

My bad, It was the french, not the british:

http://www.jocelyngreen.com/2017/01/09/louisiana-and-france%...

Farmland has also been valuable that long

Share this quote with someone in Venezuela with a straight face. Or the countless unbanked that have access to a divisible digital gold but not stocks, bonds, gold, or enough to direct invest.

I can definitely agree that Bitcoin is a step in the right direction for expanding access to the financial system and I think the whole DeFi space on Ethereum is pretty incredible too (Uniswap, Curve, etc). It's outrageous that there are hundreds of millions of people who can't even open a bank account because they have no form of ID. I recognize that theoretically everyone can have a Bitcoin address and obviously there is tremendous value in that. But it's unlikely that these people will have real access to Bitcoin either when you consider that most Bitcoin users get it through centralized exchanges like Coinbase who must comply with whatever AMC/KYC garbage FINCEN and the rest of the American regulatory apparatus put out.

I would guess that Venezuelans mostly want a stable currency. There's plenty of reports (https://www.reuters.com/article/us-venezuela-economy/dollars..., https://www.npr.org/2020/02/19/807488229/use-of-u-s-dollar-i..., https://www.bloomberg.com/news/articles/2019-12-03/there-are...) of Venezuelans using USD and there are plenty of other developing countries (Lebanon, Zimbabwe, etc) that have a widespread black market for dollars. From Feb 21 to Feb 27 Bitcoin's dollar value dropped by 25%. From Feb 27 to today Bitcoin's value has increased by almost 30%. Even with all the inflation fear going on now safe-haven currencies like the Swiss Franc do not have this level of volatility. If you just want to avoid hyperinflation there are much safer (and [accessible](https://assets.bwbx.io/images/users/iqjWHBFdfxIU/iaETafdC5WN...)) places to park your savings.

I have read about too many hyperinflation stories that I forgot the specifics of Venezuela but the vast, vast majority of them are caused by food shortages which themselves are caused by government repossession of productive assets. The problem is that the government is stealing your land, your company and your gold. The problem isn't that money is getting less valuable, it's that there is nothing to spend it on.

If you bought Exxon Mobil in 2011, oof. It's down 25% while gold is up 25%. Warren Buffett is irrelevant, literally the old man shouting at sky. His ideas are garbage and lose money, what other proof you need?

Lookup mutual credit cryptocurrencies (eg what Holochain plans to do with the HOT swap).

In that model supply breathes directly instep with underlying demand. The users themselves are the agents that cause the supply to expand or contract.

Tada: maximum velocity with no incentive to hoard.

I do think CBDCs are the digital cash that most people want but a decentralized implementation of Keynesian monetary policy would be interesting to see (for the half-dozen people who care).

I don't think cryptocurrencies will replace fiat completely. They're still crypto. They have fixed rules. We still need currency "bridge" between crypto and the real world. Cryptocurrencies offer decentralized options which can address problems with money distribution.

Why can't they replace fiat? Why can't crypto be minted to represent real world assets (like batches of nuts or nickel, not magic pieces of paper)?

Because real world assets don't get minted like crypto. They are tied to physical world. They are volatile. Bitcoin produces a block every 10 minutes. It's a fairly precise schedule. On the other hand, real world assets grow and contract at unpredictable rates. Even gold mining fluctuates. The real world is volatile. The BTCUSD peg is free floating. It's also volatile.

Crypto is rigid. Real world is volatile. It's hard to create a stable peg between crypto and the real world. So some kinds of bridge currencies are necessary. Fiat or some forms of digital fiat will continue to exist.

Bitcoin is a deflationary (disinflationary) asset. The BTCUSD peg is volatile. We need better money instruments to reduce volatility. I think an inflationary crypto can help.

BTCUSD is a pair, not a "peg"

Sorry, it's not a guaranteed peg. It's more like a conversion.

I'm not saying it will be an exact peg. I am saying that colored coins can represent specific batches of a real world asset. For example gold mined from a specific mine by a specific company from date x to date y. That company would also create the colored coins that represent a claim to the gold mined. They could even mint the coins ahead of time and they would act as futures on the output of the mine during that time.

It's difficult to build layers on top of the Bitcoin blockchain. The base asset, Bitcoin, is volatile. Its volatility affects the assets on 2nd layers. There isn't a one-one peg between the 2nd layer and the base chain. You'd need to trust an oracle. In your gold example, you'd need to trust the miner for authenticity and their books. For use-cases with oracles, it's more efficient to use a database. There's no need to use a blockchain.

Some projects on Ethereum, like DAI, have explored these use-cases. I think they have not been successful. DAI requires high reserve ratio (1-1.5) to manage the volatility of the base chain. You're using 1.5 USD to get 1 USDDAI. It's not very efficient. I'm less excited about assets on blockchain. I think the market is not ready. We need to reduce volatility first.

What does “worship” mean? I am a believer of the Austrian theory of economics. Are Keynesian / Monetarists also “worshippers” of a theory? Modern economics is not that old. I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster, just as it has time and again in the developing world (see Venezuela, Zimbabwe, Argentina, Brazil, etc.).

If anything, Austrian economics is a reversion to the standard theory of economics for thousands of years. The “innovation” of Keynesian economics is one of the greatest evils ever perpetuated on society. But again - what do I know - I don’t have a PhD from an Ivy. I just protect my assets in a zero-interest world by avoiding government threat.

>I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster

You are fundamentally wrong. Austrian has worshippers because it's a cult. It has no basis in reality.

Austrian economics is a reversion to the standard theory of economics for thousands of years.

Thousands of incredibly poor years by today's standards.

The gold standard's deflation was associated with pretty good results:

https://www.nber.org/papers/w10329

In any case, in a multi-currency world with low-friction electronic exchanges available, it stands to reason that deflation is less likely to be damaging, since the switching costs to more inflationary currencies are low.

Keynesians think money grows on tree. It is true in some senses. Apples grow on tree. At the extreme, they think money is imaginary. They can print as much as they want.

Austrians think money grows from hard money. It is also true in some senses. Money is made from money. It's circular and Ponzi-like. It requires you to believe in what hard money is. Austrian thinking leads to some cult-like behaviors. At the extreme, they'd be rent-seeking their precious Store of Value. It's just as evil as the Keynesians.

Money is data (Keynesian) with some kind of illusions (Austrian). The money that we need is between the Keynesians and Austrians.

Keynesians believe that stimulating the right part of the economy will increase the speedup of recovery. When you fail to stimulate the right part of the economy that's not Keynesian economics. Most proponents of Keynesian politics are in favor of fiscal stimulus. Namely infrastructure investments and jobs programs. Where do you see this happening?

Meanwhile Austrian economics is just some meme that is anti Keynesian and doesn't even attempt to solve any problem other than get rid of Keynesian economics. This is especially telling when they are extra loud when no Keynesian economics are being done so they feel justified in their criticism.

What we have right now is closer to trickle down economics. Douse the rich in money with the hope that some drops reach the poor.

>I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster, just as it has time and again in the developing world (see Venezuela, Zimbabwe, Argentina, Brazil, etc.).

When will the US government repossess farms and corporations? Once that happens I can guarantee that hyperinflation is going to happen. Another way is to just bomb the USA's means of production.

Those are the primary ways hyperinflation happens. By destroying the ability to exchange currency for products and services the perceived value of the currency becomes worthless. It doesn't even take an increased money supply for it to happen, it merely accelerates hyperinflation by adding additional money into an economy where the velocity of money is at its peak.

>If anything, Austrian economics is a reversion to the standard theory of economics for thousands of years. The “innovation” of Keynesian economics is one of the greatest evils ever perpetuated on society. But again - what do I know - I don’t have a PhD from an Ivy. I just protect my assets in a zero-interest world by avoiding government threat.

According to Keynesian economics we would have to print significantly less money. Whatever is happening right now is neither Keynesian economics nor MMT. It's a pump and dump for rich people.

> We need also need inflation.

Why?

Because people incur nominal debt contracts which causes wages to be sticky downwards --> they can go up more easily than down. With inflation, if wages are too high, you can let inflation eat away at them. If there were no inflation, the downward stickiness would lead to a lot of market failures (bankruptcies and unemployment) when wages were too high.

But then why do people incur nominal debt contracts? Because production occurs throughout time but must be settled in some medium. The farmer needs to know how much he will get for his wheat, the shipper needs to know, so someone needs to promise to buy wheat next year for $X and for that contract to be useful, everything else needs to be priced in terms of $ as well, so that the farmer can buy fertilizer for $ today, and agree to hire workers to work the field for $ from today to harvest time, etc. In this way, the farmer can estimate what he will get next year, what he will pay throughout the year, and what investments he needs to make right now. It is nothing special about the dollar -- if everyone used bitcoin for real contracts then wages would be downward sticky in terms of bitcoin, too. But as there is no way of expanding the supply of bitcoin, this downward stickiness would lead to a lot more market failures, and thus a lot more unemployment. We would then be effectively back on the gold standard, but at least with the gold standard, you'd occasionally find lots of gold in a mountain and this would stimulate the economy and increase employment. With BTC, you'd have all the financial crises of sticky prices but without the occasional gold discovery.

You don't need inflation with gold but you do need inflation to run the economy.

Because no one sane lends money at 0%. Or at -1%, with deflation.

Lack of lending brings investements down.

Lack of investments brings growth down.

The old companies keep grinding old way. The rich pocket money as a super safe way to get even richer. Stagnation.

See: Keynes

> The problem with crypto is volatility.

https://en.wikipedia.org/wiki/Dai_(cryptocurrency)

Are you unaware of stable coins such as DAI that run on ETH?

I think schisms are healthy, democratic strategies that lead to resiliency over time. It requires interest groups to play their cards, some will succeed independently, some will fail, and often the schism won't last (the groups will reconcile and merge back together). Others see conflict, and label that as "bad," but this just seems like democracy at work. Democracy is messy and looks chaotic to the uninitiated, but all order looks like chaos to the uninitiated.

With that, I don't see blockchain governance as necessarily "decentralized," but anarchistic (non-pejoratively). Anarchistic governance can lead to complex institutions and centralization, the difference between it and traditional central organization is that participation is always completely voluntary. Most people are OK with letting the Ethereum foundation run the show most of the time, and that's totally compatible with decentralization. When people disagree, they typically organize into interest groups to either convince the current guard to consider their interests, or they schism (in this case).

Looking at ETH in terms of wallets interacting with dapps, NFT, uniswap, etc it all honestly feels like magic.

Obviously the high gas makes it feel a lot less like magic when every button click is 30-100$ but really this all gives me so much hope for a better post-mobile app based internet.

I was so cynical for a long time about where tech was heading but this gives me hope that in 10 years we might be in a better place owned by the people and with better monetization outside of megacorps.

It's amazing but yeah, 40 dollars to swap tokens... You could almost imagine it all being kept track of on paper or punch cards with people manually carrying out every transaction for that price LOL.

I'm looking forward to smart contracts costing pennies per transaction. It's going to be a game changer for the utility of it all.

Are the high gas fees something that proof of stake will solve?

The general idea is Layer 2s solve high gas. Most users will be using apps that run on a layer 2 and will make rare trips to the mainnet. The next thing being worked on is onboarding users direct to layer 2, and layer2 interoperability so you can move from one l2 to another

You can already use an L2 DEX to exchange tokens (and have been able to for about a year) https://exchange.loopring.io/

You can send L2 payments with https://zksync.io/

But those are limited to their applications. General purpose L2s arrive this month! with Optimism https://optimismpbc.medium.com/ and to be followed later this year by https://aztec.network/ and others.

With those we can redeploy code from mainnet to layer 2. With the apps on layer 2 the transaction fees will be fractions of cents and almost instant and a lot of the programs we have dreamed about but not been able to make become possible at scale.

Its an exciting time!

I would recommend reading about ETH 2.0. There are a few aspects to it that increase scalability and drive down gas prices. Unless I'm mistaken proof of stake will contribute to this as the "work" is done away with.

Eth 2.0 has been slow and a long time coming, but it's the future and inevitable IMHO.

> There are a wide variety of benefits to this proposal, such as potentially making Ethereum deflationary

Interesting that this is framed as a benefit.

A high price of ETH as an asset creates a higher security level for Ethereum the blockchain. The ecosystem of projects, apps, protocols, organizations, etc on Ethereum is healthier when the blockchain is guaranteed secure and stable for everyone to use. It's a benefit to everyone.

Except people who want to use ETH as a currency, rather than an asset. If we're going to have inflation or deflation, pick inflation; that way, you can actually spend the stuff without FOMO.

ETH is money but it's not currency. It's not meant to be used to buy everyday goods and services.

It is meant to be spent as gas in order to compensate for the energy costs of the computations in its smart-contracts.

Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up?

Additionally, ease of spending drives up adoption which is a clear benefit to any currency.

>Why expend some amount of ETH building and executing products when you can just HODL and wait for the price to go up?

Most people aren't going to have a choice. ETH is required to be spent when making transactions and using dapps, NFTs, etc. Even L2s like Optimism, zkSync, etc will be spending ETH when writing to the L1 even if the end users are shielded from that. There is a built in economy that burns ETH so demand won't be a problem.

Yes, but that's exactly the problem.

With any currency, spending happens when you see something that is worth more to you in sum over the future than the value of the currency. So when the value of the currency gets lower, you are eager to jump on opportunities; conversely, when the value of the currency gets higher, you are reluctant to jump on opportunities. To a first approximation, you spend inflationary money as early as you can, but deflationary money as late as you can. And that's the Ethereum blockchain ecosystem you get with a deflationary ETH - an ecosystem where everybody spends as late as they can. Does that sound like it will lead to a vibrant offering of services to you, cause it doesn't to me.

This is also why I never got into Bitcoin. Why would I ever spend a bitcoin? As a currency it's near worthless, ironically; people who spend it will in the long run always be outcompeted by people who buy and hold. (Before the bubble bursts, anyways.) The medium of transaction should not be an investment vehicle; those purposes are directly opposed.

Because while the fee burn does act as a deflationary force on the eth economy, there is still the inflationary force of the staking rewards. If transaction volume falls too much, then the staking rewards will outpace the fees burned and the eth economy will see overall inflation. At some point (insert hand-waivium here) an equilibrium will be reached between transaction demand, eth asset price, and staking demand (as more eth is staked, individual staking returns will fall, but overall inflation goes up).

I don't think anybody who's informed about crypto economics (especially coin supply) will honestly claim that BTC or ETH should ever be used as a currency rather than a store of value or a utility token.

If one wants higher security, one shouldn't be pissing off the miners who provide that security.

The point of this proposal is that Ethereum no longer needs miners and they know it, so there's kind of a race between the miners trying to take Ethereum hostage and the developers kicking miners off the island before they can do it.

That has been repeated many times but is not true, the price of an arbitrary unit of currency or crypto has no relationship to its security. That price going up or down has no relationship on the "security level" of the blockchain.

Look up Proof of Stake which is what Ethereum is moving to later this year. In Proof of Stake validators put up an ETH bond in order to randomly get picked to help create blocks in the network. The higher the price of ETH the more expensive it becomes to attack the network.

They could just require a higher stake, the price of eth is irrelevant.

Let's say hypothetically one eth was worth about a Satoshi, 0.05 cents or so. So they could just require 1,000,000 eth as a stake. Or ten times that. Or a hundred times that.

It's irrelevant what the price is, the choice of the stake amount is. If eth was inflationary, they could inflate the stake proportionally.

That’s not true, those are two different things. Requiring 100x the total number of possible stakers is 100x lower. Versus if the price increases 100x, that means the same number of possible stakers is possible, but it’s now 100x more expensive to do a 51% (or whatever the PoS % needed is) attack.

The ethereum protocol can choose whatever stake amount (in equivalent USD when they decide the bond to stake) they want. The currency being deflationary or not is irrelevant - the stake could be adjusted. The currency going up in down in value relative to ETH could be adjusted.

They could choose to require one gwei, one ETH, or one million ETH. That's your protection. The exchange rate from USD to ETH is irrelevant.

Would you agree that attacking Eth2's consensus requires a certain percentage [1] of total voting power? If so, then by extension, it requires a certain (somewhat different) percentage of the total Eth supply.

> The exchange rate from USD to ETH is irrelevant.

Unless the attacker already has a large enough portion of the Eth supply to execute an attack, they'll have to pay to acquire it.

[1] 1/3 voting power would theoretically let an attacker double spend by getting two conflicting forks committed; 2/3 would let them commit invalid and/or unavailable state.

No, the exchange rate is extremely relevant. Let’s say we need 2/3 of all ETH in order to launch an attack. If ETH is 1 penny, this is much easier for us to acquire than if ETH is $100.

I think you may be misunderstanding staking. Your vote is proportional to how much ETH you stake, it seems like you are picturing everyone gets 1 vote. The only reason for the minimum stake amount is for performance reasons

But isn’t that “the higher the market cap of ETH, the harder it is to attack”? Does the price of a single unit actually matter here, market cap being held equal?

The thing that matters is how valuable the 32ETH stake the validators put up is as that is the amount of penalty for trying any attack. The theoretical attacks on Proof of Stake are well known and discussed but generally require 33% - 51% of all staked ETH for various annoying attacks on the blockchain but not actually killing it.

3,491,906 ETH is currently staked right now which is actually way lower than will eventually be staked when PoS goes live later this year. 33% of this is 1,152,329 ETH which at current prices of $1,776 puts a minor attack at over $2billion. This is without considering that after the attack the network could easily fork and remove the attacker's ETH from existence so it's hard to see economics working in the attackers favor.

A high price of ETH means it costs an increasingly astronomical amount to attack the network and pretty much no way to do it profitably.

> The thing that matters is how valuable the 32ETH stake the validators put up is as that is the amount of penalty for trying any attack.

Well, there wouldn't be much point in attempting an attack if the attacker didn't have the ~1/3 voting power to successfully execute it, right?

But acquiring ~1/3 voting power is much easier when 32 ETH are worth ~$3.2 vs when they're $60k

Also: People stake ETH under the expectation that the ETH they generate are worth just as much or more as the ETH they staked. If the price would continuously go down, less and less people would stake. The less people stake, the easier it is to buy 1/3 of voting power.

I’m not so sure. Currently each validator has about 60k usd (32 eth) staked. They are disincentivized from misbehaving / attacking the network by the threat of their eth being slashed (and there are clear rules about how this happens).

To me, it seems that as the value of that ether increases, they have more incentive to behave, rather than risk the loss of their investment + large capital gain.

Okay, so imagine a fictional universe in which the exchange rate USD to ETH was 100 times greater. The stake could be... 0.32 eth and it would be equivalent for the purpose of the protocol.

Consider the reverse, the exchange rate for USD to ETH is one one hundredth. So the stake is just 3,200 eth, and again, same thing.

I agree with your math, but that doesn’t address my point. What I’m saying is that the relative value of eth to usd (for example) matters. The validators don’t want to get slashed and the more value eth has, the less likely validators are to misbehave (ie, the network is more secure). I’m not certain that it plays out that way but that’s the theory as I understand it.

Why adjust the stake instead of assume a fixed 32ETH minimum stake? I think we all agree that total_cost_to_attack_usd = stake_amount * usd_per_eth, if stake_amount is fixed, then the total cost increases proportional to usd_per_eth.

This is just not true for a proof of stake blockchain. The higher the price of Ether is, the harder it gets to loan enough ether to stake to attack the network. And attacking the network or misbehaving does cost you a lot more dollar money.

>The higher the price of Ether is, the harder it gets to loan enough ether to stake to attack the network.

On the other hand, the higher the price of Ether is, the higher the incentive to do so. The return on investment of an attack is independent of the price of Ether (assuming one can actually gain something from attacking a POS chain).

A higher market cap can be more secure in a PoS system but burning ETH doesn't increase the market cap. Like stock buybacks, burning coins increases the price without necessarily creating new overall value.

Crypto has been completely captured by get-rich-quick goldbugs.

That was most of the crypto community back in 2012. It's not a recent development.

Yeah, some people were hoping Ethereum would be different. But no, number gotta go up.

Improving the store of value functionality of the Ethereum base currency will drive more demand for it, which increases its market cap and thus improves Ethereum's Proof of Stake security, makes more capital available to the DeFi system, where ETH is the primary form of collateral, and allows more inflationary currency that's backed by ETH, like DAI, to be issued.

Also, most Ethereum based projects depend on ETH reserves to fund their operations, so ETH appreciation provides more resources to develop Ethereum applications.

Surprised that there hasn't been a mention of how the merge to Ethereum 2.0, PoS will reduce energy consumption by 99%.

A great background article going into some of the details here

https://consensys.net/blog/ethereum-2-0/proof-of-stake-is-co...

I suppose the issue in this scenario isn't necessarily energy, but that it's miners are at odds with Ethereum devs to the point where they're willing to attack the network itself. Either way, I'm all for PoS because of the reduced energy consumption, and if it puts a middle finger in the face of the miners, who are partially to blame for shortages of consoles and GPUs, then I'm even more for it.

It's interesting that miners are protesting EIP-1559 proposal, which is burning away transaction fees as opposed to giving them to miners, while for the last years Eth has focused on completely eliminating miners with proof of stake. Why not protest the latter? What am I missing?

Regardless, I sold all my mining equipment 2 years ago when it was clear that Eth was moving to PoS, mining alt-coins wasnt something I was interested in, since except for ETH and BTC, I believe all these chains are inferior.

Oh, there will definitely be an ugly fight once we get close to removing POW altogether. This is part of the reason ethereum has an "ice age" which means the blockchain essentially stops working after a year if the community doesn't approve each new upgrade.

But despite this, there will certainly be an "ethereum classic 2" in the near future.

One theory is that they have planned to fork when POS does arrive but don’t want to have to rollback upgrades like EIP-1559 as it would negatively impact optics vs. keeping alive the “true original” ETH.

> they have even went as far as creating a website

Wow, things are getting serious.

there, fixed it for you

This could get really ugly.

(Not only per se, but, also, as it really shows how "centralized" these suposedly decentralized systems are ...

... and -this- could have consequences.)

They are decentralized. This move is more of a risk mitigation strategy than risk of a 51% attack. There's also certain risks from miners at the transition block because they know the exact block it will happen at.

it's centralized in both directions. Small development team and small group of powerful miners.

What are you talking about, it has the most developers of any project.

Pareto Distribution. Most of the developers did very little.

https://github.com/bitcoin/bitcoin/graphs/contributors

ETH, and any cryptocurrency for that matter, has never been “decentralized” in terms of development. There are always a few guys making all major decisions, and it’s hard to oppose them other than making a forked currency.

This is not true. I am one of the maintainers of https://github.com/prysmaticlabs/prysm, one of the main client implementations of eth2 today. My team is unaffiliated with the Ethereum Foundation. There are also 3 other client implementations of the protocol that are very robust and done by independent teams in different parts of the world. We also can't force users to accept all our changes, and development on ETH's infrastructure has indeed been trending towards more decentralization. There are few blockchains out there today with more than 1, production-quality client implementation.

How many people get to vote on EIPs, out of curiosity?

Why is it a good thing to make ETH deflationary? Don't you want people to spend it?

[removed incorrect post, thanks for the correction]

I think you're confusing deflationary with depreciation.

Deflationary currency means over time, there's less of it, so if the demand stays stable, you'd expect the price to go up.

People are never going to be using ETH as a currency. They would use stablecoins like DAI pegged to USD or a basket of assets.

It's not about making it deflationary, that's just a side effect of needing to burn the fees for the fee stabilization mechanism. I forget the details exactly, but if you don't burn them then miners can still do funny business.

One of the biggest mistakes of cryptocurrency was calling it cryptocurrency.

Distributed Ledgers have multitudes of use cases. One of them is as a currency, but you don't need the base layer to be a currency. ETH doesn't need to be spent as much as its needed to act as a quantitative measure of ownership and buy in. You can build a currency on the second layer, which has been done.

Can you elaborate on this a bit more? Doesn’t ETH on some level have to change hands for work to get done?

Doesn't Vitalik/the dev team own the "Ethereum" name, which means they decide what get called "Ethereum" ?

If there are two versions of the chain, because of a 51% attack or a fork, there always will be only one dev-approved chain called "Ethereum" on the exchanges, and that's what the users will buy.

I think the Ethereum Foundation owns the trademark.

I've been moderately interested in crypto, but, I've held off on touching them in any form until a real ecofriendly alternative is in play - and I emphasize real (not a few obviously paid shills/imbecilles talking about how crypto is actually good for environment because it allocates capitol efficiently/thorium reactors etc etc).

If eth switches to proof of stake in a meaningful way, I'll definitely take a serious look and possibly start investing in that ecosystem.

Beyond naked self interest - it's also completely unclear to me how it's possible to defend mining. It's literally useless work that ruins our beautiful planet to accumulate wealth. How is that in any way defensible? It's far less ethical than investing in weapons manufacturing.

As someone who uses both BTC and ETH and who likes both, this is one of the reason why people prefer Bitcoin over Ethereum.

The reality is that the energy used to secure the Bitcoin blockchain (or the energy "wasted" according to many here) is important and makes a 51% attack prohibitively costly.

While Vitalik coming with this potential solution is great, the reverse of that coin is that the developers have very significant control on the blockchain which is far from ideal.

is this also an issue with Ethereum competitors like Cardano?

Cardano is a whole slew of different issues lol

elaborate?

Not with ADA or Tezos.

Bottom line, ADA is a proof of stake chain. It is upgraded in place based on proposals and consensus of stake pools.

Same thing with Tezos.

ADA hasn't fully rolled out all the features of the ETH blockchain yet -- I believe we're a couple of months away from the smart contract upgrade.

Developers can't do anything the users don't want. They can't make people adopt the new software. The miners are losing here because everybody else in the ecosystem wants proof-of-stake and 1559, including users, ETH holders, and app developers.

Absolutely, all the stuff built on ETH (defi, automated exchanges, nfts) can't truly take off when gas fees can cost 20-80 USD per action. There's already a blockchain that acts as a store of value, the world doesn't need a second bitcoin.

L2 (second layer) solutions like Optimism will fix the scaling issue. It's live with a limited Synthetix release now and will be open to the general public on the 15th. Many large projects including Uniswap, Compound, and Chainlink have said they will be migrating to Optimism L2. It's very simple to do (little to no changes needed) and with big names committing it seems to be the L2 of choice. WalletConnect, Metamask, and Coinbase have also said they'll be supporting it with Metamask and WalletConnect integration complete and WalletConnect in beta testing.

It seems to me that MATIC is making a good play as well.

Matic is not an L2 though, it is a side chain. The reason L2s like optimism are exciting is because they inherit the security of ethereum mainnet. (matic has its own consensus mechanisms).

Matic Polygon is a L2 aggregator. https://www.coindesk.com/matic-network-polygon-targets-ether...

Optimism also isn't rent seeking with their own coin. All gas is still paid in ETH.

I would call L2 coins rent seekers. Reducing gas,increasing thruput among other things

Exactly, it's a money grab. Optimism doesn't have a coin and have no plans to create one. ETH is be the only way to pay for gas on their rollup just as is the case on L1.

sorry, typo. I don't view matic as rent seekers. The opposite of your view.

The 51% attack here is only because PoW hasn't been completely eliminated yet... once ETH is on PoS, this attack won't be possible.

Sure it will. It will just involve 51% of the stake pools instead of 51% of the miners.

It's a little different with proof of stake. If there's a minority group that holds a large stake that "attacks" the blockchain against the majority's wishes, the majority group can decide to roll back and blacklist the minority group. It's much more difficult to blacklist hash power in this same way.

>the majority group can decide to roll back and blacklist the minority group. It's much more difficult to blacklist hash power in this same way.

and that is supposedly advantage of pos over pow?

In philosophical view the pow -> pos means taking power away from the more technical and giving it to the more business oriented group/approach. That has happened to Internet for example, and I just personally dont like such transitions.

That’s not how it works.

The people who hold the majority of the stake are the majority, not the minority.

There is a difference (with the introduction of slashing and user activated soft forks) in 51% attacks that revert finalized blocks. In PoW this type of attack would become cheaper as it persists, in PoS we have some defense that keeps making this attack expensive.

On top of that the costs of attack are much greater in PoS than PoW, making these attacks much harder to begin with.

https://vitalik.ca/general/2020/11/06/pos2020.html

Vitalik and company have zero history in the proof of stake game, and what little security history they do have is pretty much awful. So I'm not too worried about what they have to say about things. If it's not something he copied from Tezos or ADA, I wouldn't consider it relevant to the discussion at all.

> that the developers have very significant control on the blockchain

The case for BTC in this regard is no different from ETH. In both cases developers put together an upgrade, then miners can either upgrade or not.

Except in this case, this is going against presumably 51% of the miners and changes take much longer to implement and activate on Bitcoin (taproot activation for example will be done over a very long period and needs a very high threshold).

Going from PoW to PoS in such a small timeframe is pretty aggressive no matter how you look at it. As a user, I really hope it works out without major issues.

> and changes take much longer to implement and activate on Bitcoin

That's a funny way of saying BTC doesn't innovate.

> Going from PoW to PoS in such a small timeframe is pretty aggressive no matter how you look at it.

It's been the plan for years. I first heard of it in 2017 and if I'm not mistaken I think it was also in the whitepaper. So it's neither coming out of the blue or an aggressive timeframe.

> That's a funny way of saying BTC doesn't innovate.

Or another way of saying you can expect some stability (and majority consensus) when there's more than a trillion dollars worth of value at stake.

It's been discussed for a longtime, yes, but the expectation is that it would roll out in phases over the next year or two, not rushed out because of a potential 51% attack.

You say rushed but it's not rushed at all. It's simply just a priority change.

Bear in mind the PoS network is already running, with 100,000 validators and $6 billion staked, after years of R&D. This last bit is relatively simple.

In Bitcoin decisions are made on the principle of one CPU, one vote. Rules only change with overwhelming hash power. Developers take a back seat.

In Ethereum, developers run the show. They decide what gets pushed to miners via the All Core Devs call.

> In Bitcoin decisions are made on the principle of one CPU, one vote

This is how it works in Ethereum as well

> They decide what gets pushed to miners via the All Core Devs call.

Blockstream does the same, it's literally no different.

> This is how it works in Ethereum as well

So is Ethereum not going to PoS if miners say no?

> Blockstream does the same, it's literally no different.

Every soft fork was voted on by miners. Developers provide the code, but it only activates with miner consent.

You say "miners" like they're a union with a spokesperson. They're not; they're thousands of people spread across the world, with different agendas.

Miners who refuse to adopt the new PoS system have the right to not upgrade to it. At that point, the system "forks" (the article calls it a 51% attack, but I think that's a little inflammatory). This literally already happened with Ethereum and Ethereum Classic; Bitcoin and Bitcoin Cash. It isn't a new situation.

The reason why some miners are dissenting this change is, first and obviously, because they disagree with it. So, why not just fork? Because no one talks about Bitcoin Cash; they talk about Bitcoin. They want to stay on PoW because it will return the best revenue for their mining operation, but if they're busy mining a coin that has little value, that also hurts their revenue. In other words, the only way for them to win is to get the community against the change, which is a losing bet because the change is widely supported.

So I guess Ethereum is, in fact, a developer-run show.

People are free to disagree with and act against the developers. That's more than you can say for, for example, the United States Government; if I disagree with tax policy or federal monetary policy, I (may) have the option to leave, but changing the system would take a lifetime, if its even possible. Creating a new system without moving countries would inevitably end with the police at my doorstep.

Miners want money. Ethereum, like every currency, is worth what it is because of people. The value of Ethereum goes where the money velocity goes; in other words, where the users go. The critical question is not what the developers or miners support; its what the users support. Well, barring any major conflicts of interest, they'll/we'll probably support the developers; their power comes directly and only from the trust that the collective democracy of ethereum's users has in them. If Vitalik demonstrated extreme prejudice against ethereum's users, then the users would (probably) revolt, and new developers would be installed, but critically: Ethereum, like all blockchains, enables that in a way which doesn't involve the war, death, and bloodshed that overthrowing governments typically requires.

Miners want to have their cake and eat it too. They don't give a shit about Ethereum's users. They want a high ETH token price, wholly and totally supported by Ethereum's users, but without this RFC, which both the developers and most users support. They could fork, give the middle finger to the users, and their secondary TRASH-ETH blockchain would be worth nothing, because it doesn't have users, but at least they'd have proof of work. That's why they'll lose; not because the developers are on the other side, but because the users have put their faith in the developers, not the miners. And that's a very healthy position for ethereum to be in right now.

So if developers released a "jubilee" version of the software that took all ETH away from addresses that hadn't spent anything in 5 years, and distributed it evenly across all Ethereum addresses less 2 years old (which one might imagine would be a boon to a large number of users), would that be sufficient to upgrade the network?

Asking because one huge advantage I see in Bitcoin's upgrade procedure is that developers alone can't change the monetary policy -- i.e. developers can't just bribe users to screw over investors. I'm curious why the "All Core Devs call dictates software releases" upgrade process is considered an acceptable alternative?

> So is Ethereum not going to PoS if miners say no?

Correct

> Every soft fork was voted on by miners. Developers provide the code, but it only activates with miner consent.

Again, it's the same process with Ethereum.

Not sure if this is just a misunderstanding or if you're reading something that says this isn't the case, but if it's the latter then I suggest taking a good hard look at continuing to use this source for information.

> Correct

Bear with me here, but I strongly suspect that this is not the case. Because PoS doesn't need miners, it seems the system can transition to PoS at any time and there's nothing miners can do to stop it. So unless the miners also happen to control over 50% of the staked ETH supply, miners don't have a say at all.

EDIT: Don't get me wrong -- I wish Ethereum could only upgrade with overwhelming miner consent. It would check the power of developers to alter the monetary policy as capriciously as they have done so far.

This is actually a current issue that's being discussed because the transition fully relies on the miners to make hand off the transition because of the contention with moving to PoS. One possibility is that miners will fork the chain, although that's not necessarily a huge concern because the community will follow the PoS chain. Another possibility, and I'm a bit fuzzy on the details, but it has to do with them re-mining the same block over and over so the transition block never happens (or something like that).

Miners chase the chain the market decides. They can in theory mine the less profitable chain, but in practise they don't. The markets are the ultimate deciders of the rule changes. This is true of bitcoin and etherium and all other cryptocurrencies alike (anyone can always change the rules and try to get others to use the new rules. Who the market actually pays any attention to is the main question).

Every time I read about anything related to cryptocurrency it reads like a high-school opera. With several orders of magnitude more money involved.

I really don’t like this whole industry, and I cannot see how anyone would. It’s like a cult.

You seem to have described nations and religions as well. It applies to anything with a large number of interest groups involved

To some extend, sure, but it’s much worse in Crypto (in my opinion, of course).

You are absolutely right, Bitcoin is a like religion, you need to let go of rational thought and have faith, HODL!

> I really don’t like this whole industry

Yet, you're here, reading the article and commenting.

Well, I like HN, and I keep hoping that this time, things will be different.

Blockchain is totally trustless. All you have to do is trust the source code maintainers, inventor, anonymous miners and hackers reading your smart contract code all at once. After that it’s 100% trustless.

Not trying to be snarky but Vitalik itself is ETH's 51% attack ...

What's the point of decentralized cryptocurrency when it falls down on the hands of one person.

At this point Vitalik is one researcher among many. He's taken care to remove himself from the "benevolent dictator" role he had at first.

He is very productive though, and the other researchers and devs tend to find his ideas convincing.

"A group of researchers" still doesn't feel like decentralized to me.

miners vs coders is very decentralized to me :) let the miners have their own chain!

You're pulling threads here. There's a lot of people involved. And then they still need to convince wallet developers and miners. And then once there's the move to PoS they'll also need to convince the users and stakers (miners removed from equation).

“A single species” doesn't feel decentralised, either. You're pumping your intuition rather than considering reality directly.

If you look at what Pieter Wuelle is doing, he's also doing amazing work, but when it comes to make decisions, he goes to the background even if he has an opinion.

I don't see the same thing happening to Vitalik. I'm not saying it's a problem, as Ethereum is a different network with different advantages and disadvantages, but he still looks like the final decision maker to me at this point (which is OK for me).

I disagree in factually but I agree in optics and I think him being so active makes it easy to get that impression.

Can you give me an example where he purposefully declined to give his opinion to make sure that people are impartial?

Nope, and simply I don't believe that matters. If you have a meeting with 100 people that doesn't mean you shouldn't talk just because you organized it. Everyone has a voice and an opportunity to state their ideas and concerns.

Does this happen in other open source software projects? My understanding is that Linus Torvalds was pretty opinionated as well. Linux is better off for it.

Yes, but Bitcoin is special in that it aims to be as decentralized as possible. Ethereum aims to move fast, that’s why it needs a leader. Both are great projects, and both approaches have tradeoffs.

Does Bitcoin still have one main implementation, which is considered the standard in place of a spec? Because ETH2 has four production implementations, developed by different teams in different languages. ETH1 has two in common use, one written in Go and one in Rust. All open source of course.

If Bitcoin still runs on a single implementation then I'd argue its development is more centralized.

Great response

From my point of view, burning of transaction fees seems like a good solution and idea. Miners are just being babies. There are risks in all businesses, and miners should be aware and account for such risks. When things don't work out your way, your solution should not be to take down the entire infrastructure that fed you.

Vitalik is very popular because he is heavily respected. Even with that said he cannot get people to make a controversial change as the overall Ethereum community, not just the miners and core devs, decides whether a new proposal is safe enough.

It's not really in the hands of one person, though. If the community diverges, two chains will be created, and the one will the most value will be considered the 'real' chain.

This already happened once, and the less-popular chain became known as 'Ethereum Classic.' It's still around.

Less-popular and original, interestingly in this case.

"original" is a matter of debate. For example, which chain is the original Bitcoin: BTC or BCH? Prior to the fork, they both share the same history. The community aligned more behind BTC but surely there's a fork of the multiverse somewhere in the space-time continuum where the community rallied behind BCH and gave it more hashing power.

For ETC I don't think there is much debate. The original Ethereum paper and protocol still describes ETC whereas if you want to implement an ETH node that verifies the blockchain you need to write special code to introduce the block containing the collection of transactions reverting the hack.

Both have forked numerous times from when the whitepaper was written.

> For example, which chain is the original Bitcoin: BTC or BCH? Prior to the fork, they both share the same history.

That one is easy to answer: if you get a node running code from before the BTC/BCH split, which chain would it follow? AFAIK, that old node would follow the BTC side, since BCH changed the proof-of-work parameters in a way that wouldn't be accepted by older nodes, while BTC only changed some validation parameters in a way that would still be accepted by older nodes (the older nodes might accept some things which newer nodes would reject, but the older nodes would not reject anything newer nodes would accept, so the current BTC chain should still be seen as valid by older nodes).

I am one of the maintainers of one of the main implementations of eth2 https://github.com/prysmaticlabs/prysm, which runs a large portion of the current network. We are not affiliated with the Ethereum Foundation. Any ideas or changes need to be implemented into code and shipped to users. Development is decentralized, as there are 4 client implementations of eth2 today. Vitalik does not control our code, of course.

This is a tired take, Vitaliks position is not any greater than anyone else and there is nothing stopping anyone who has contributions from having the same level of participation. It is much easier to participate than any other open source project i have been involved in.

Vitalik just happens to be very good at his job, consistently insightful, and a wonderful clear communicator. He contributes a lot because he has a lot to contribute.

If the fee are going to be (partially) burned, can the miners just ask that everyone pays the fees by a side channel? Perhaps make a smart contract that holds the same value of the fee until the transaction is included. The miners can just ensure to include both or neither, and get paid.

You can still tip a miner if you want to. Only thing burned is the "base fee".

So it's as easy as adding `if $tip >= $base` somewhere in source code of the program they are running in the nodes. (You can call it a soft fork if you wish.)

The game theory with the EIP1559 changes is that there will be ample space in blocks to put in transactions, and there will (roughly, under normal circumstances) be just enough transactions in the pool to fill each block. So the miner only has the options of either (A) filling the block with transactions to earn tips or (B) chose to be hostile and generate an empty block, just to have the next miner put the most profitable transactions in the followup block.

The blocks will be variable sized and can still fill up.

Point #1 and #10 from the image here:

https://hackmd.io/@timbeiko/1559-updates/https%3A%2F%2Fhackm...

Sure, nothing you said really disagrees with my summary.

Do all replies have to be a disagreement or can they just attempt to be informative?

After a few years, I realize that by default comments are interpreted as disagreement, so for this kind of comments I start my reply with "I agree" or "Just nitpicking".

[It's most tricky when I agree with most of the comment, but the rest is totally nuts, but I don't want to start an argument about that.]

All of these miners are the reason why, if you bought a graphics card 2 years ago, you can sell it for a profit today. So of course, they don't want a system that invalidates their investments in GPUs.

The beauty of this system though is that they don't really get a choice. If Vitalik forks ETH into a PoS system, and enough people get behind it - it doesn't matter what the miners say.

The nature of a fork is that the old system doesn't really go away. It's just that most of the economic activity that made it valuable (presumably) is going to move to the new system; so staying behind is kind of pointless. Of course the assumption here is that its current value had anything to do with economic activity (other than people gambling on the price of eth and other tokens). That's about to be validated in the real world.

I've been more than a bit underwhelmed by ethereum, which if you separate out the speculative transactions actually doesn't have a whole lot going on in terms of people actually using it for real things. There's a little bit of that but mostly it's just people trying to get rich quickly. Lots of smart contracts idling and generally not doing what they were designed to do, games not really getting played, etc.

What? There are political risks with cryptos, and it is not the perfect system? I'm shocked!

A hard fork isn't going to work when all community and devs don't come along...

I actually like all things crypto, but why does this tech have to suck so much

It's getting there, just growing pains as it goes through cycles of innovation and improvements.

Because this tech is not just about tech, but also game theory, consensus and economic incentives to align completely disconnected parties with completely different motives in a trustless manner.

I think economic incentives are misaligned when it comes to providing a valuable open platform. Everything is way too expensive on blockchain.

Once a miner makes a capital investment in a particular PoW, their interests are now more diverse than the general interests of the coin. They're vested in that particular PoW.

I really hope to see some cheap 6800xt's on eBay soon.

Decentralized 51% attack...

Not the first very profound eth conflict.

Anybody remember Eth Classic, etc.?

That "little thing" when they rolled out contracts and pretty much showed how easy it was to manipulate the currency at their whim ...

You know. Just a pesky detail.

(This new) code is (the new) law.

Indeed.

  (You can really tell this is the case the minute "contracts" - IRL backed by "law" and all its affordances - actually became backed by -code- within this new paradigm ...

... wherein, incidentally, the VM running the on-chain contract has become the "judge", come to notice.)

Not quite related. What's the best way to start trading cryptocurrencies for a beginner considering ease of use, security etc?

Still have limited understanding of Cryptocurrency and blockchain in general :(

I need a good book on it all.

Reminds me of the bitcoin cash fork and segwit drama in 2017.

Is anyone using Status? Do they release monthly active user stats?

It sounds like the Ethereum "community" is about decide whether it believes in proof of work or the cult of Vitalik.

The Ethereum community consists of thousands of application developers, tens of thousands of ETH2 proof of stake validators (who have been operational since December), and millions of users. There's no debate in the ETH community about the shift to proof of stake. It's already half done. We just need to finish the job faster since miners have gotten greedy and fat on $20M a day in transaction fees.

The Ethereum dev team has been publicly committed to a PoS transition since the day Ethereum was launched. Anybody not aligned with this switch shouldn't have become a stakeholder in the protocol.

The issue here seems to be that instead of giving miners the fees, they are destroyed, creating a deflationary spiral, which helps speculators' wallets (who want the money supply to shrink), while hurting miners' wallets. It helps ETH holders.

Just read Vitalik's note and - interestingly enough - there isn't a single word about the potential damage to the miners, only how they could attack the proposal.

In other words, he's simply considering them an enemy when they've in fact been investing blood and treasure for the past 8 years supporting his brainchild.

People may call him a genius, but when they do, they're clearly not talking about his empathy abilities and leadership skills.

They've been investing money to make money. They're running a business, not a charity. Changes like these are part of the process of improvement, this is exactly what they signed up for.

You're missing my point: yes, they have benefited from the whole thing, no doubt there.

But a responsible leader at the very least tries to address the fact that his proposal will throw a major chunk of the ecosystem under the bus and what's worse, on a completely unplanned timeline.

And maybe propose mitigating solutions.

Instead he immediately paints them as the enemy.

Some leader you got there.

I don't know much about Vitalik but I saw him supporting a carbon tax. It might be that he sees mining as a necessary evil to transition from.

> they've in fact been investing blood and treasure

They have made a tremendous amount of money by investing in his "brainchild". How are they victims?

Satoshi said "The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime."[1]

Vitalik going from POW to POS is nonsense for any crypto electronic cash currency because people can not trust it if core design changes from time to time. Vitalik will probably come back again to POW after miners calm down.

[1] https://bitcointalk.org/index.php?topic=195.msg1611#msg1611

> Vitalik going from POW to POS is nonsense

Being able to change for the better is not nonsense, it's vital to the survival and stability of a coin. The #1 complaint about Bitcoin (especially on HN) is its excessive use of power. Moving to POS solves this problem. Moving to POS allows ETH to scale transaction processing where BTC cannot.

Miners are obviously angry because they spent millions (probably billions) on GPUs in warehouses to mine ETH, and this is threatening their profits. They're not the significant party when it comes to talking about ETH though. The users and larger ecosystem make up the significant parties.

POS will happen. ETH 2.0 will happen. This is why ETH is better than BTC -- it has a leader like Vitalik who is open to changes and knows how to lead implementation. If miners want to throw a tantrum in the process, so be it. We'll just leave them behind.

>The #1 complaint about Bitcoin (especially on HN) is its excessive use of power.

And how much power does Google or Facebook consume? How much power does each Google and Facebook click take?

There are good power sources like renewables and nuclear. Power is not a problem.

And I'm not sure POS is a good solution because Satoshi would've used it or would've switched to it.

If relativity is such a good theory, why didn't Newton use it?

Is it not plausible that developing the math to get a stable version of PoS, could take longer than Satoshi had before he dropped off the face of the interwebs?

It's not like he's God .

>And how much power does Google or Facebook consume?

In the case of google, almost an order of magnitude less than bitcoin, and it's 100% from buying renewable electricity (though because of the way energy markets work it's not quite like they don't depend on non-renewable sources). Renewable energy is in the minority of bitcoin energy usage (coal makes up a large fraction of this).

> And I'm not sure POS is a good solution because Satoshi would've used it or would've switched to it.

Satoshi is not omniscient. Just because Satoshi didn't come up with it doesn't mean it's a bad idea (in fact many of the ideas now integrated in bitcoin did not come from him).

Then devs should research and develop PoW which is more efficient and takes less energy and come up with solution that does additional useful work on top of verifying transactions.

'PoW which takes less energy' is an oxymoron. The whole point is to demonstrate cryptographically a certain amount of effort (combination of energy and efficiency of hardware implementing a deliberatly inefficient function) has taken place. The network adjusts the difficulty dynamically depending on the amount of effort being put in (basically the rewards are fixed: miners simply compete for a bigger slice of the pie by trying to put in more effort than their competitors). The only limit is when the miners stop making money off of it (and with the price of bitcoin they can buy a lot of energy and still make a profit). This is all by design and the whole point is to make it a lot more profitable to secure the system than to attack it. The only way to really reduce the energy use of coin is to reduce the block rewards or reduce the price. But at a certain point it's more profitable to attack the system than secure it, so it's a difficult balancing act. This one which bitcoin makes no attempt at: the block reward is set to automatically decrease over time at a fixed rate and this hasn't and isn't likely to change. There's no particular reason bitcoin's rewards are either not overkill or sufficient to secure the network against an attacker. Etherium takes a more practical view: because the currency has built-in adjustments which can be made by the foundation, in theory it can adjust the block reward dynamically to the right amount, though there's both political issues in terms of appeasing the miners when you cut their profit and technical issues in actually working out what is good enough.

Likewise 'doing additional useful work' is not something you can actually do in a trustless manner like with proof of work (at least not most useful work: certainly there's no task which you could use for mining which anyone actually needs the kind of energy bitcoin uses throwing at it). You need something which is easily distributable relative the to the amount of computing power needed to do it (and even SETI/Folding @ home are really struggling at this point with modern hardware: computing power has outgrown bandwidth substantially), and easy verifiable that the work has been done. There are cryptocurrencies which try to distribute coins based on contributions to distributed computing, but they rely on a central authority to do so, defeating the whole point of cryptocurrencies.

>The only way to really reduce the energy use of coin is to reduce the block rewards or reduce the price.

You can rewrite difficulty formula and make it easier to mine and therefore decrease energy consumption. Bitcoin's protocol is set in stone but if some dev likes to play with protocol like Vitalik he or she can do it. It would shift market and coin price downwards but if energy consumption is really a problem it is tax you have to pay.

>There's no particular reason bitcoin's rewards are either not overkill or sufficient to secure the network against an attacker.

Satoshi introduced blockchain checkpoint which basically enforces consensus.

"The security safeguard makes it so even if someone does have more than 50% of the network's CPU power, they can't try to go back and redo the block chain" [1]

This is centralized decision but it is better than changing protocol completely like Vitalik did (going from PoW to PoS).

>because the currency has built-in adjustments which can be made by the foundation, in theory it can adjust the block reward dynamically to the right amount, though there's both political issues in terms of appeasing the miners when you cut their profit and technical issues in actually working out what is good enough.

So centralized foundation controls decentralized network? And what is right amount?

>But at a certain point it's more profitable to attack the system than secure it, so it's a difficult balancing act.

How come? When all coins are mined miners will switch to transaction fees and they will compete for transaction fees. If you want faster confirmation time you will pay higher transaction fee for your transaction meaning miners earning more, you can do this now as well.

>Likewise 'doing additional useful work' is not something you can actually do in a trustless manner like with proof of work

It doesn't have to be additional useful work it can be in the core design of the proof of work.

In 2013 there was a coin called Primecoin which "computed chains of prime numbers (Cunningham and bi-twin chains), the results of which were published on its blockchain's public ledger, available for use by scientists, mathematicians, and anyone else."[2]

"Use of a proof-of-work system to calculate chains of prime numbers was an innovation that produced useful results while also meeting the criteria for a proof-of-work system: it involved a calculation that was difficult to perform but easy to verify, and the difficulty was adjustable."

It was first coin which had a proof of work with a practical use.

It is still early days but this is the most recent paper I found about this matter: https://eprint.iacr.org/2017/203.pdf

[1] https://bitcointalk.org/index.php?topic=437.msg3807#msg3807

[2] https://en.wikipedia.org/wiki/Primecoin

> You can rewrite difficulty formula and make it easier to mine and therefore decrease energy consumption. Bitcoin's protocol is set in stone but if some dev likes to play with protocol like Vitalik he or she can do it. It would shift market and coin price downwards but if energy consumption is really a problem it is tax you have to pay.

easy to mine == easy to attack. If you make it easier to do the miners (and attackers) will simply do it more (in fact an important attribute of proof of work is that the difficulty is dynamically adjustable to keep the block rate reasonably steady). Changing your proof of work does nothing but change the hardware miners are using. etherium has a function designed to work best (or at least close to best) on GPUs compared to bitcoin's which is most optimally implemented on an ASIC. You can also try to optimise for general purpose CPUs or FPGAs. But it does not change the amount of energy miners are incentivised to put in. Only changing the block reward does that. The whole deal with proof of work is that the work is what secures the network by incentivising miners to do more work than an attacker is willing or able to put in.

> Satoshi introduced blockchain checkpoint which basically enforces consensus.

This is a nice sanity check but it basically does nothing against 51% attacks. No realistic attack scenario involves a complete rewriting of the chain, nor is that necessary to make money or substantially destroy trust in the system. If you are waiting for your transaction to be in a checkpoint in a version rolled out to almost all bitcoin nodes, I submit that you have a cryptocurrency which is even less convenient for transactions than gold bars. It's also got nothing to do with whether bitcoin's block reward is well chosen or not.

> So centralized foundation controls decentralized network? And what is right amount?

Indeed. it can't rule entirely without the consent of the markets, but in practice it has a fair amount of control. And what is the right amount of proof of work is a very difficult question to answer. My main point is there's no particular reason bitcoin's reward structure (either block rewards or transaction fees) should correlate with it. Etherium at least in principle has more potential to react to changes in the situation, even if 'what the community/foundation thinks is the right amount' is also probably a relatively poor estimator of the correct level.

> computed chains of prime numbers (Cunningham and bi-twin chains), the results of which were published on its blockchain's public ledger, available for use by scientists, mathematicians, and anyone else

I would be interested in whether anyone actually used this information. I have similar reservations about other 'useful' proofs of work. I'll believe it when people are actually bidding to have their problems used in the chain (which is inevitable as soon as such a proof of work is useful).

>Moving to POS allows ETH to scale transaction processing where BTC cannot.

proof of stake vs proof of work is totally orthogonal to transaction processing volume.

Not entirely true. PoW's centralisation risk increases as bigger blocks mean longer network propagation and hence higher orphan rates.

PoS determine the list of proposers in advance, meaning no orphan risks.

Doesn't Vitalik defeat the purpose of Decentralisation? One man trying to push his agenda thru?

The network will probably split, and the best chain will win in the long run. That sounds like decentralization to me.

More transactions are happening on BSC. Most traders only care about low fees.

Yes, and Vitalik announced long before Ethereum 0.1 was released that it would switch to POS in the future.

I didn't read Ethereum whitepaper because I consider it to be a copy of Bitcoin but what was the purpose of POW then? Just to initially mine a distribute coins?

Looking at Ethereum whitepaper[1] I only found one mention of proof of stake:

"an alternative approach has been proposed called proof of stake, calculating the weight of a node as being proportional to its currency holdings and not computational resources; the discussion of the relative merits of the two approaches is beyond the scope of this paper but it should be noted that both approaches can be used to serve as the backbone of a cryptocurrency."

And why Satoshi didn't consider switching Bitcoin to POS if it is so good.

[1] https://ethereum.org/en/whitepaper/

Proof of stake technology wasn't good enough in 2014, so POW was the only option.

Vitalik announced the eventual switch to PoS before he was even finished writing Ethereum, before it was released.

I didn't read Ethereum whitepaper because I consider it to be a copy of Bitcoin but what was the purpose of POW then? Just to initially mine a distribute coins?

Looking at Ethereum whitepaper[1] I only found one mention of proof of stake:

And why Satoshi didn't consider switching Bitcoin to POS if it is so good.

[1] https://ethereum.org/en/whitepaper/

Both didn't start with PoS because it's much more difficult to come up with a practical PoS design than a practical PoW design. I consider Casper CBC to be the first robust PoS design, and it took many years of research for it to developed. Look at peercoin for an example of an early PoS design that was fundamentally flawed.

PoW was ready back then, PoS tech was not there yet.

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