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Comment by rakoo | Hacker News Reader

Thanks for the explanation! I have a few questions:

- how does the punishment work ? Do all nodes see that a malicious actor changed the chain and write the bad ideas in some ledger meaning "these nodes just lost X ETH" ?

- But if the malicious actor owns 2/3 of validators, what does he care what other nodes do ? They effectively control what block is accepted

- is there an advantage to run more than one validator, if you have the money (EDIT: and you don't want to attack the network)? Basically, does having more money gives you more (power, control, anything) ?

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1. Punishment mechanisms here are kind of complicated, but in short, you're punished for mainly 2 reasons: being an offline validator, or for an attestation violating.

Slashers are entities that enforce the two above rules. If a slasher determines that you're node is down, or that you're committing an attestation violation (i.e. that you're signing more than one attestation in a given epoch mainly). The slasher actually does not get rewarded here. The block proposer who takes the broadcasted slashing and and adds a proof of it to their block proposition, and get what's called a whistleblower reward. Slashing is not meant to profitable, and the whistleblower reward is quite small. We don't need a million slashers, in fact, we could operate with just one... expect the Eth Foundation to run them, among other large players who can spare the resources.

2. Owning 2/3 of nodes economically is kind of silly. You essentially just 51% the network, and everyone else leaves. You're then stuck with a worthless personal currency. Have fun!

3. More than one validator means more validator rewards, and a bit more "power" in that you're a larger component of the general validation network.

What are the checking mechanisms that 2/3 of the nodes are not colluding together? In other words how do you prove someone owning 51% or 2/3 of the network?

Here you are asking the most important question.

Exchanges hold the most ETH. They are a central collusion point which could cause undue influence on the network.

At least it seems they do not own a lot of the existing Eth.

https://etherscan.io/accounts

Their actions would most likely be visible on the network because it is transparent. The community can then decide whether to activate a fork and punish the colluding nodes.

Who is the community and how do they decide to fork(eg: is there a vote?)?

Users, developers, other stakers.

Why would users and developers without stake get input? Doesn't that subvert the point of staking?

Users and the market decides on the chain, governance in Ethereum is based on social consensus not “one coin one vote.”

I still don't understand how consensus works off the chain. If 51% of the stackers just decide to run their own software and do their own thing. How does something off chain change that? How does something off chain penalize a majority of staked ETH?

If the 51% is a single staker or small group of colluding stakers attacking the chain, the rest of the users will probably not want to continue using that chain. The users can activate a soft fork, just by changing the rules of the code to burn the attacker’s funds, and running the updated client software. The remaining honest stakers can then continue to follow the head of the non-attacked chain, and the attacker would be the only one left on their chain.

If it's just off-chain social consensus that matters what purpose does the crypto even serve?

Most crypto including Bitcoin is governed off-chain. People come to consensus on a set of rules that allows them to create a public and permissionless BFT ledger. Attacking the ledger then costs millions or billions of dollars. If one dishonest node or a group of colluding actors decide to spend this much to amass majority control of the network, the rest of the network can decide to fork the protocol to burn their staked capital.

The main goal of crypto - the base token and protocol rewards from PoW or PoS - is to secure this network and keep it permissionless and decentralized.

> 1. Punishment mechanisms here are kind of complicated, but in short, you're punished for mainly 2 reasons: being an offline validator, or for an attestation violating.

A malicious actor can cause the network to slash a validator's funds by inhibiting the validator's connection. Slashing funds seems completely disproportionate for a validator being offline.

You actually lose a relatively small part of your stake for being offline, so it happens gradually. I believe the amount lost corresponds roughly to what you would have gained in rewards over the same time period.

Thanks for the reply !

1. So if I get it correctly, there is an actor in charge of surveiling the network. There is no financial incentive to do that which means only a few actors will be running a slasher, and thus completely remove all decentralization. Once a fraud has been detected, the proof of fraud is to be spread by nodes with a financial incentive, meaning they might spread whatever the slasher says like gospel, giving even more power to slashers.

This is a very large step away from decentralization. The network depends not just on a few coders, but also on an institution checking whether nodes behave correctly or not. The whole point of blockchain was that everyone would assume everyone was out to cheat, and came up with a way to make it useful.

2. As I said in another reply, I don't expect the most rationality and long-term thinking from economic actors anymore, especially in the world of cryptocurrencies. I could very well see a single actor owning that many nodes but still being trusted because "they're the good guys" and people remain. You would also have to be sure they are in fact colliding.

3. So, as I feared, this is capitalism in its crudest form. At least PoW made it indirect by putting requirements on the hardware, but here it's just plain naked for all to see.

I know I sound very negative but I was really curious to see how PoS really changed the dynamics compared to PoW, and now I know. Thanks again for your explanations.

> This is a very large step away from decentralization. The network depends not just on a few coders, but also on an institution checking whether nodes behave correctly or not. The whole point of blockchain was that everyone would assume everyone was out to cheat, and came up with a way to make it useful.

Exactly. This is usually the tradeoff glossed over by PoS marketing, that decentralization is essentially lost and it's no different than government controlled currencies. Instead of the "elected officials", it's the crypto messiah's that control this currency. You can pay into it, just as you can try to pay into your local city, county, state, (assuming in the USA) etc...

There is no actor in charge of surveilling the network. Every validator is. And every validator is incentivized to do so because you get a reward coming from the slash penalty. So everyone is checking on everyone else.

Validators only add transactions to the ledger. What I was talking about is the slasher, which makes sure nodes are behaving correctly.

When a validator adds a block to the ledger it can include evidence of slashable offenses. Including evidence of a slashable offense gets rewarded so every validator is incentivized to include them.

Further reading: https://eth2book.info/altair/part2/incentives/slashing#the-v...

There is no separate notion of a slasher, everyone gets to provide slashing evidence when they build a block. I don't understand why you build such a weak straw-man and the push it forward as if it was the truth without even checking how the system operates.

The initial post talks about slashers as some special entities so I was talking about them

An important and often misunderstood point:

Having >2/3rds of validators (or >50% of power in PoW) let's you rewrite the chain back in history, censor txs, etc. You control what transactions go in blocks, and to a certain extent also recent history.

HOWEVER, this does not give you the power to steal or rewrite state as you please. You cannot convince the rest of the network that you now own someone else's ETH just because you have supermajority validator power. To take away ETH or change the cabin state in any other way, you need to include a valid and correctly signed transaction.

If you include an invalid state change (not caused by a successful and correct transaction) then all other nodes will reject that block, no matter how much validator power or hashing work went into it.

Well this is the same as any blockchain: you can't forge a block with a transaction giving yourself money, but you can double spend the same amount to multiple other accounts. Unless something is different with ETH which I don't know enough

Double spends are actually much harder here, after slots are finalized (2 epochs, about 12 minutes) but yes it's the same as other blockchains.

> - But if the malicious actor owns 2/3 of validators, what does he care what other nodes do ? They effectively control what block is accepted

As I understand it, anyone who owns that amount of ETH would probably be interested in contributing to the trust of the Ethereum blockchain.

Sure, but that wasn’t the question. How does the punishment play out, assuming they’re acting in bad faith?

If you have 2/3 of the validators, there is no way that you can be punished. You will effectively be able to produce the blocks and tell the network that they are valid.

If you don't have that, the most that you can do is to attack the network by proposing bad blocks to slow down block production. Anytime that a (selected) validator proposes a bad block, the other validators that catch your mistake will snitch on you (through attestations) and the validator will get their stake funds slashed. The more your funds are slashed, the less of a chance you will have to be proposing new blocks in the future.

What reason would anyone have to believe in their benevolence? It would be safer to believe in and use their greed and self preservation.

No one would use a network with this level of centralization, or at least, it would be unwise to.

like a 51% attack on a PoW through pool conspiracy, it will be impossible to tell if (when?) the network is controlled by a single entity.

By the time the public has figured out the plot, it's too late: the attacker has already run to the exchanges with double-spent coins.

If you own a large amount of a currency, you want to ensure that the currency in question is trusted, or otherwise that currency would end up losing its value. It is your greed that is guiding you, not your benevolence.

Eh, I think it’s naive to believe that greed is sufficient protection. Owning a bunch of ETH so you can set ETH on fire would be a waste of money, only so long as the person setting the fire didn’t value the mischief more than the ETH. I don’t see why nation states wouldn’t attack each other by burning down the crypto assets of citizens, either.

> I think it’s naive to believe that greed is sufficient protection.

I never said that, I actually agree with you. I was just explaining GP's point to parent who in my opinion missed it.

Ah, apologies. I read you as agreeing with and clarifying GP's argument.

One problem with this - speculative assets are at least partially valuable because of their volatility - their ability to appreciate quickly. Even if eth is untrusted for long term value, so long as it has the potential to make money for someone in the short term it's going to continue to get transactions.

And, as always, sometimes folks just want to watch the world burn. It's a relatively low investment (~$50k) to become a validator, and the fine's only about $7k (.5 eth).

Imagine the damage someone with a few million (say, some baby-boomer who just sold their California duplex) could do if they wanted to.

> If you own a large amount of a currency,

you rug pull, divest into hard cash at peak, <any of the dozens of ways people with large amounts of cryptocurrencies get rid of those>

Google short selling.

If you hold eth, you are long eth.

Not really, you can be long in one market, and short in the derivatives market, and your net position be short. You'd be holding eth, but you'd be short.

not really, in that case you have two separate positions, one long and one short.

If you make money when the price goes down then your overall position is short.

The point is that it can be profitable to crash the price even though you're holding the asset at the same time.

> it can be profitable to crash the price even though you're holding the asset at the same time.

in that case, the less you hold the more profitable it is. I'm not sure I get your point...

The point is that your assumption

> If you own a large amount of a currency, you want to ensure that the currency in question is trusted, or otherwise that currency would end up losing its value.

is fundamentally flawed. You can own a large amount of a currency and profit from it losing its value.

OK, now I see what you mean, yes I agree with you then. But I think you are trying to generalise my comment - it wasn't an absolute statement, I was just trying to tell parent that in my opinion they misunderstood the grandparent's point.

thanks, I work at a financial institution, so I "Googled" it a few times, short selling is based on borrowing the underlying securities - not owning them - or alternatively owning a(n often bespoke) derivative, related to those securities, which behaves as a short.

If you own a security you are long, not short.

Why would it need to be a significant amount of ETH? Could someone coordinate an attack on validator nodes, making themselves 67%+ temporarily?

Yes. That’s why diversity of client implementations is important.

Fund can be borrowed. As attested in last the couple months, billions of funds were borrowed to bet on the market one way or the other. Borrowing a billion dollars to subvert the network for a short duration sounds like a feasible strategy.

You can’t borrow enough money and immediately take over the network. Those funds need to be staked first in validators with 32 ETH each and you need to control enough validators to control consensus. It’s more difficult than PoW in a way since you can’t just start validating, there is an entry/exit queue.

This isn't argument against PoS, because mining rigs can also be borrowed. Anything can be borrowed.

Call me a pessimist, but I have stopped assuming rationality of all actors acting to secure a long-term future, especially in the world of cryptocurrencies

PoW is magical in that these actors are strongly incentivized to secure the network. PoS is not the same.

This was the whole point of blockchains. No one trusts anyone, everyone is in it for themselves only. The Adam Smith model. And it works, if you don't loom at the disastrous environmental impact.

You can find more details on slashing and penalties in the Validator FAQ:

https://launchpad.ethereum.org/en/faq

Wow thanks a lot !

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