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> 2b. If > 67% of the network refuses, transactions can be successfully censored.

Similar with PoW. For both PoW and PoS, the proper response is to socially coordinate forking out the censoring block producer majority (like with the Bitcoin UASF that was threatened over much less egregious miner misbehavior). PoS improves on PoW here in two ways:

1. Non-censoring PoS block producers can have a tiny meatspace presence compared to PoW mining operations, which makes it easier to physically evade pro-censorship forces

2. It's more effective to coordinate a direct confiscation of the censoring PoS block producers' on-chain capital investment, compared to making miners' equipment partially obsolete by coordinating an ad-hoc redesign of the PoW algorithm

https://nitter.net/dystopiabreaker/status/156071598642414796...

With PoW, even if a majority of hashpower refuses to include a particular transaction in their mempool (and hence in blocks they mine), that transaction can be mined by some minority miner.

It's only when the majority is colluding to reorg the chain that the transaction can be censored.

> It's only when the majority is colluding to reorg the chain that the transaction can be censored.

I'm assuming (like in the last tweets of the linked thread) that pro-censorship forces who can arrange for the supermajority in PoS to censor transactions can also arrange for the majority in PoW to not build on any uncensored head of the chain, i.e. they can mandate "always reorg."

This is true also in PoS. If 90% of the validators censor a transaction, i.e. Do not include them in their blocks, the censored transactions would take 10x longer to be included but they would be included eventually.

"Socially coordinating" is how fiat works. It should only be a bootstrapping mechanism towards trustless behaviors, not the mechanism to cancel each other on-chain.

> "Socially coordinating" is how fiat works.

Or how wearing a UASF baseball cap worked as part of a social coordination movement against power-tripping miners.

> It should only be a bootstrapping mechanism towards trustless behaviors, not the mechanism to cancel each other on-chain.

Yes

> This was not an issue with the old proof of work scheme.

Censorship of transactions because of OFAC is already happening in PoW mining.

https://twitter.com/takenstheorem/status/1560690035955011585...

Except in in PoW it only means delayed transactions, because only one miner has to "sign off" the block - everyone else accept it passively. A single miner, even with 0.1% mining power is enough to keep the network censorship resistant.

In PoS majority of validators has to actively approve a block containing "illegal" transactions, leading to permanent censorship.

The exact interpretation of validation vs mining responsibility in face of law and passive vs active is fuzzy , but it leaves miners is better legal position.

Interesting, so this is a problem if 66% or more decide to reject a transaction. How many blocks are currently signed by solo miners in PoW? Almost all blocks are signed by pools which looks like the PoS committees in practice yo my naive eyes. A miner with 0.1% hash power would probably be a very long delay.

I do agree this is probably the most concerning thing that Tornado Cash sanctions have shown us. Still don’t think the energy cost of PoW is worth it, and would rather see PBS and crList solve this problem.

https://notes.ethereum.org/@fradamt/H1ZqdtrBF

The difference is that PoW pools are made up of individual miners who are free to go elsewhere if their pool misbehaves. Pools do not have their own mining hardware, and so they have an economic incentive to be well-behaved. If they misbehave, everybody leaves and they vaporize their business overnight.

PoS is tyranny of the majority: You cannot take your business elsewhere.

It’s the same with staking. If you aren’t solo staking, you are just delegating to a staking pool. And you can withdraw that and deposit it elsewhere if they do not align with your values.

Again, it is not possible for staking pools to differ on "values". If a validator does not vote with the majority, their funds will be slashed by the protocol.

Trying to understand how this differs in practice. Anyone delegating to a staking pool is forced into their values. Ethermine recently started blocking OFAC transactions, so does the majority of miners in that pool agree with this? If so, what is the defence against censorship in this scenario except for some to exit the pool and use another that aligns with their values?

Ethereum is still using PoW as of today, so anything Ethermine did recently isn't really relevant to discussions about PoS. As long as Ethereum is using PoW, pools of any size can pick and choose what transactions to include in a block. Once Ethereum switches to PoS, that will no longer be possible (without further protocol changes)

PoS seems very similar to PoW, and if one is fine (as we seem to think), the other is fine too.

In POW there are only block producers, and producing a block requires actively choosing transactions and transaction ordering.

Ethereum POS includes an additional attestation step where validators confirm that they have seen blocks without exercising any control over the contents of those blocks.

But this is exactly what PoW miners do when they extend the chain: every block is a vote for all previous blocks in the chain.

A better legal position, until that is it's made illegal to accept unapproved blocks. PoW is not immune to the exact same regulatory pressure. The US gov can just force a fork of the chain by requiring US miners to only accept approved blocks.

You are wrong about the majority of validators having to approve a certain transaction for them to be included. Even if 80 % of the network were censoring, those transactions would, on average, make it into every fifth block.

Can you point to any sources? I would like to read about how this will be accepted even if the majority is against inclusion.

Because not attesting is against the network's fork-choice rules. If that censoring majority chooses to avoid said block, because it contains transactions that should be censored, they will perform an illegal re-org around the block. Sure, it won't be "illegal" as a majority of the network follows said re-org.

It's an extremely nuanced topic, and it was extensively discussed in the last core-developer call on Thursday. Every single operator has been warned that going against the fork-choice rules could, and ultimately will, result in social mitigations against spec-deviating behavior.

This could be set of socially executed slashings of validators that don't respect the fork-choice rules, or an honest-minority executed hard-fork that effectively causes misbehaving validators to bleed until they start respecting the protocol's rules.

I could be wrong on multiple counts, especially regarding re-orgs, but this is how I've understood the issue.

That appears to be a single miner, so the transactions will still go through.

so what if more do it? then you got a problem. just 3 miners control >50%

This isn't a bug, it's a feature. It's also something Bitcoin maximalists have been warning about for a long time.

I think you meant to say it is not a feature, it is a bug.

No, I didn't. This is an inherent part of adopting Proof of Stake that anyone paying attention would have been able to predict. The only reasonable possibility is that it's being done intentionally.

Re 2b: While the scenario you're outlining certainly isn't ideal, I don't think it's fair to say that the transactions are "censored". All they can do is not validate blocks with this transactions in them. It's only a matter of time though before a block is validated by someone not under the purview by OFAC.

All blocks are voted on by the validators. If 67% of the network is censoring transactions, someone else could not just pop in and validate a block, because they would not have 67% of the votes.

In the US, it would end up in court. It directly pits fiduciary duty against OFAC.

For example, if a US-based CEX that operates in New York has a slashing event, that brings regulatory consequences from NYDFS, regardless of the reason for the slashing.

Not really. You can’t have a fiduciary duty to break the law. The downside risk is much higher to violate OFAC.

Game theory wise wouldn't it make sense for the 33% to try to get to 34% as that will lower the other players stakes thus increase their profits? So either lose your stake or incur possible legal action?

This is in fact already a problem with PoW and is happening right now. AFAIK ether mine stopped including TC transactions in their blocks.

I guess another potential option is that companies that stake large amounts of ETH don't exist in the US?

Where is the evidence that a validator signing transactions invites the wrath if OFAC?

Do you really think they wouldn’t turn they screw when the time came?

They might, but speculating on what the Gov might do is tough. I was very convinced that Bitcoin and all derivatives would be outright illegal just a few years after they went mainstream, and that has definitely not happened. In a sense every self-hosted bitcoin wallet could be seen as violating payments laws.

Making it illegal to have Bitcoin is not very easy.

What you call a "self-hosted bitcoin wallet" is just knowing some combination of bits that happens to be the private key that gives you the ability to sign transactions for some Bitcoin. How do you make it illegal to know something? What if I tell you my private key, does that mean you are then suddenly violating payments laws? What if you stumble upon it by accident?

Technically any string of 32 bytes is a valid private key that can hold Bitcoin. There just might not be any Bitcoin in the address associated with it at this time. What if I "know" a random string of 32 bytes, am I then suddenly in violation of laws when someone randomly deposits Bitcoin to the corresponding address?

The legal difficulty is that the action of having or holding Bitcoin (or mostly any cryptocurrency) is something that has no physical representation and is purely information based.

Mining or making transactions is a different story altogether. These require, amongst other things, that you send specific digital information across the internet which is certainly something that can be made illegal.

“The idea of apolitical money is a fantasy”

Yannis Varoufakis, London, circa 2017

Either crypto follows the law or it gets banned. IMO this was inevitable.

You present a problem with Proof of Stake as an inevitable run in with the law and/or some folly of the crypto community. That's not very sound logic.

I personally believe in apolitical decentralized money winning against fiat which is governed on the whims of central bankers and crony capitalism. Every system where technology brings fairness, power to all, and hard rules wins. This will not be an exception. It is the separation of money and state, not very dissimilar from church and state, monarchy and nationhood etc.

The power of law comes from the ability, to confiscate things, kick in doors and arrest people. Usually there is some social consensus such that most comply anyway most of the time.

This is true and always and trumps whatever your software says is meaningless if there is any conflict ("you and what army" is a very valid question.

Now, the law (a court) can of course allow your software and might even enforce a contract bases on your software

In good systems the governed people have a say in how those laws are created. In Bad ones it's literally whatever one person mutters with a mouth full of breakfast cereals and headaches.

I don't question the law's ability to do this, but believe that the ideal human societal state is one where money isn't controlled by centralized actors, and that the law would change in time to comply with what's best for society. This will happen sooner in functioning states and later in bad ones.

It's fine to want a different society/policies, but you need to expand on how that new society should look like then: How would sanctions work, for example? Or if there are none, will there be other means of defense/offense? Who would set the rules of the monetary system and what would give legitimacy to those rule setters? How to move from the old system to the new without (too much) disruption? ...

The endings of proper monarchies weren't always simple and nice events - if that is the magnitude of change you have in mind.

Sanctions don't stem from the existence of Fiat currency (at least directly), and may still exist depending on power dynamics. The move is on the way and will continue. It will be disruptive but I'm not sure exactly how it'll go. Regular military offense and defense systems will exist but just not ones where the US say prints infinite money for war and incurs sovereign debt. Wars might be a lot smaller scale then. Old world wars required rulers to raise money, taxation etc. They didn't print out of thin air, or bankrupt entire nations (eg Weimar Germany)

Non Fiat money has been the norm pre unpegged Fiat. It's been around for 2-3k years at least, whereas unpegged Fiat is 50 years old. I'm surprised we find the fall of Fiat as hard to imagine:)

How is crypto not another fiat? It is not backed by convertability into a commodity either. It's (currently typically) not issued by a state actor but otherwise just like a typical fiat currency brought into being by something akin to a (community) decree.

I know from the US perspective often legal tender concepts are brought into the definition of fiat but the legal tender concept doesn't quite exist in the same way in a lot of other countries.

It's true that it's not backed, and that's a pro (we'll get to that), but Bitcoin is better than Fiat for many reasons:

1) impossible to confiscate

2) fixed supply and issuance rate - can't just print it away when the fed wants

3) instant permissionless transfer so the government can't interject. If you think they can be trusted, might want to read about executive order 6102

4) not backed by another asset eg gold (say). This is great because gold is extremely hard to transfer physically and easy to confiscate. Read about how Nixon refused to allow dollar convertibility for gold for foreign nations which was the condition for Bretton woods agreement ie where all nations agreed to use dollar as a global reserve freely exchangeable for gold. Also read about how FDR outlawed private ownership of gold when the US had printed more money than their gold reserves and needed to fix their books.

Decentralized community decree is awesome. You don't have a central actor making rules that support themselves. Christine Lagarde has no way to get the euro out of the deficit hole. See this snippet from an interview: https://youtu.be/p-X-mIuDYFw. In a balanced system, the debt would be loaned from and owed to a market participant who cares about their money being returned, not this bizarre broken system where central banks print and then owe to themselves

We'll find out if these things are seen as advantageous by enough or not. I don't necessarily agree that the points are all just pros, but I am open to democratic changes of monetary systems.

Agreed. The jury isn't out on Austrian v/s Keynesian economics. We've not had the former play out organically in recent history without Govt. intervention transforming it into the latter. I remain hopeful that there is change enough that technology imposes hard rules (fixed supply, fixed issuance, only taxation no printing etc.). Rules that nations earlier used to comply with (~approximately) with the gold peg but no longer do.

What "hard rules" can compete with actually enforced law? Don't you expect more "whims" (and scams) from private adventurers than from governments?

I expect all parties to act in their own best interests. I do in fact expect more scams from private bodies, but the government conducts a much larger scam in printing without accountability a currency unbacked by anything and not bound to any rules, a billion ton gorilla that moves the "free" markets at it's whim.

The people's interest imo is in fairness to all not asset owners who aren't as affected by money printing etc

The law isn't sacrosanct, but of course it needs to be followed. It is malleable and comes from lawmakers who may or may not represent the interest of the people, unwittingly or otherwise

Crypto itself can cross borders as a intangible virtual entity. You cannot. Your physicality means you're bounded by geographical borders to a nation state and thus its laws and regulations.

That assumes that people are the entities that the economy optimizes for, which hasn't been true for 10,000 years or so. People are disposable to capitalism - there are 7.7 billion of us, which makes individual humans about as significant to the economy as individual neurons are to consciousness. As long as there exist some humans that are in a position to do the crypto-economy's bidding, it'll happen, and it doesn't matter if some of them are thrown in prison or executed or die from poor government policies.

From the perspective of world history, this is a BFD. The monetary system of the past 80 years has been controlled by the ruling class of a ~150-300M person nation. The crypto economy imposes uniform rules on ~3B people, which is an order of magnitude greater complexity, and should see further specialization and gains from trade for those that participate in it.