How does mining work in proof of stake models?
This isn't intended to be a gotcha, I genuinely don't know. I've mostly just heard the term "proof of stake" without much explanation, and the Wikipedia doesn't mention mining at all.
This isn't intended to be a gotcha, I genuinely don't know. I've mostly just heard the term "proof of stake" without much explanation, and the Wikipedia doesn't mention mining at all.
You mean exchanges. People aren't going to run a node and risk to be punished for bad configuration or a power outage. They are going to deposit to managed staking at Coinbase and Binance which will be the biggest validators.
Congratulations. You've just recreated the current financial system with central banks and whatnot.
And even with centralized exchanges, at least this system gives people a choice. I can choose to run my own Ethereum staking node. I can't choose to operate a bank / participate in the fed's central banking system.
https://consensys.net/blog/codefi/rewards-and-penalties-on-e...
For someone who is staking 32 ETH on a faulty RPi how big the reward would be? I'm too dumb to figure out the reward value.
Tell me how this is not a weird clone of our current financial system.
Proof of Stake starts out with a large amount of coins being generated out of thin air. These are then distributed, and owners add nodes to the network by locking in a portion of their coins as their "stake".
The nodes perform transaction verification, and over time a reward block is built out of the transaction fees involved. This is awarded to a psuedorandomly selected node weighted by stake.
Stakers do definitely take the volatility risk. They're rewarded by getting more coins.
Anyway, what doesn’t work this way? Have you ever heard of stocks, or interest on a loan or bank account?
Both are used to build decentralized networks, since they allow it to pick a random participant to order the previous X transactions (aka block), without being susceptible to sybil attacks. PoS is much less energy-hungry than PoW, but it has a problem: how do you distribute money fairly, to begin with? Which is why Ethereum started with a few years of PoW to only then shift to PoS. Pretty clever IMO.
A validator is required to lock up a certain amount of coin before they can start validating (their stake in the system) and based on the more coin you lock up/the longer you've been locking it up/any other variable depending on the implementation, the greater the chances you'll be selected as a given block's validator, and if consensus is achieved, you get your reward. If your node goes offline or collusion is detected, you get penalized by losing a part/all of your stake, again, depending on the exact implementation.
The one issue is "long range attacks": where someone creates a fake chain and then tries to substitute it for the real-chain. In a PoW model you need more PoW than the real chain to mount your attack: that's how PoW chains are protected. In a PoS model not so much.
But Vitalik Buterin (the Ethereum creator) and a few others are pretty sure they've got a working proof-of-stake system.
Time will tell: expensive experiment ongoing!
In the case of Ethereum for example, a random number generator decides a set of stake that may produce the next block and when it's your turn you make a simple digital signature on place of where BTC miners brute-force a hash collision.
In the case of Avalanche, nodes choose random stakers on their own and perform a repeated subsample across the staker set. Stakers respond with votes signed by a key thay was committed to when the staker first staked their coins.