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Comment by bowsamic | Hacker News Reader

No, it's the opposite. Proof of work is more centralised than proof of stake, because the former has an economy of scale: it's cheaper to add a single miner if you are a big mining operation vs a small mining operation. On the other hand, staking 1 eth is always staking 1 eth.

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Running a small validator is much riskier than being a small miner. If you're running a validator and have network downtime or any operational issues, you risk losing funds (the inactivity leak[1]). If you're mining and you have downtime, your only downside is the opportunity cost of not mining any blocks while you're offline.

[1]: https://eth2book.info/altair/part2/incentives/inactivity

No.

Inactivity leak is an emergency measure to restore liveness when the network stops finalizing blocks. It happens when >33% of validators are offline(WW3 scenario), major bug in widespread implementation, etc.

Your link explains that.

ETH2 is friendly to home stackers - you may lose some profit by being offline sometimes, and in the worst case minor penalties are applied.

EDIT: If you are interested in a much better description of what happens if you are offline, see this:

https://eth2book.info/altair/part2/incentives/penalties

Some points from the link:

- penalties =/= slashing

- If you are online > 42.5% of the sime - you are earning profits

One of the attacks on PBFT protocol is to split network in half, send block to one half, do not send anything to other half and the proposer wents offline and restore connectivity between the rest of the nodes.

In that case, without any stakes, half of nodes will be locked to NIL, half - to a valid block.

In case of stakes, byzantine proposer (it is only one node that is really byzantine, but it can control how network is split) can partition network according to a proportion of stakes, so that neither half gets prevalence.

The algorithm in the link you provided does nothing in that case. The only node that will be punished is a byzantine validator which does not care.

The system will be in no-progress-possible state indefinitely.

Inactivity leak for a solo validator going offline is very cheap, and it is by design. People are expected to run validator nodes on home connections and be profitable.

And the opportunity cost of the funds used to purchase (er, stake?) the expensive ASIC which loses resale value. Acres of silicon boat anchors.

In PoS you still have the staking tokens.

Another article pointed out that the economics of staking are completely different than those of mining. With mining, some of the earned coins need to be sold to pay for electricity. With staking, the biggest holders just sit there and collect coins with few operational costs.

To me it sounds like staking has a much more powerful snowball effect than mining and the gap between the wealthiest ETH participants and everyone else will increase faster under PoS.

> With staking, the biggest holders just sit there and collect coins with few operational costs.

Every holder who is staking is rewarded for staking, in proportion to their stake.

> To me it sounds like staking has a much more powerful snowball effect than mining

No, because issuance under proof of stake is much lower than that under proof of work.

The point of validating is to secure the chain, not to get rich. The more validators that are active, the lower the per-validator rewards, reducing compounding effects.

It is much cheaper to run a staking operation but not 0-cost. You still need an internet connection to pay and a bit of energy to run your validator. You may owe taxes on staking rewards, etc... So there is likely to be some selling by validators. Rewards are also much lower, issuance of ETH is cut by 90%, for example.

Also you lock-up capital which has an opportunity cost and must competes with every other investable asset. As the barriers to entry staking are negligible (just acquiring a liquid staking derivative like rETH, for example) it means that everyone willing to stake will likely do so which drops the returns lower, which may push some stakers out as they see better investing opportunities. So staking is likely going to have thin margins in the future and will give a rate of return that is fairly priced given its risk adjusted returns.

Costs are lower, but the rewards are also lower, at about 10% of Ethereum's mining rewards.

Last I saw, ETH mining was about 33% profitable. With mining rewards ten times higher than staking rewards, that means miners take home about three times more on their investment than stakers.

There is some legitimate concern here. On the other hand, PoS looks to be more accessible to hobby miners/stakers because they don't have to convert their coin into ASICs or GPUs.

You can't stake 1 eth yourself. You need to at least 32 eth. Plus you need to make an investment to run your own a validator.

There are staking pools, just like there were mining pools.

You can mine with one GPU, pool or no.

Stake pooling also eliminates one of the supposed benefits of decentralised cryptocurrency - you have to trust someone else with your currency.

If I understand correctly, you are not trusting "someone", u are trusting the network itself. Imo no different than any other operation on the network. Any operation on the network requires trust that the network will do what it agreed it will do.

Staking pools are not part of the Ethereum network protocol - they are a third party that you need to trust with your Eth. You are lending your Eth to this third party, who will then participate in the Eth network on your behalf, and who is also under no particular requirement to do what they say they will.

If I have to give my currency to a third party who will then invest it for me, then why bother with decentralised cryptos at all?

>any operation on the network requires trust that the network will do what it agreed it will do.

If I were an Eth apologist, I would explain how the code that defines the network operations is fully open and inspectable, so no trust needed.

If you join a staking pool, then by definition you are increasing the centralization of the network.

There are decentralized staking pools. https://rocketpool.net/

32 eth is such a small investment that it isn't that meaningfully different than 1 eth.

Yeah, taking $4k (price it reached in the recent bull market).

$4k vs $128k

Literally the same numbers.

Right, parent is overstating it, and that's fair to call out, but it's still a low barrier to entry (even without the staking pools). At the current price (where anyone can get in), it's ~$1660, so 32 ETH would be ~$53k. How many "paycheck-to-paycheck" households blew that much on a fancy new pickup truck? Or home remodel? Or extra interest charges on the lifetime of a home loan from stretching their budget?

You’re joking right?

Am I joking about the quantities of money that working families will spend on unnecessary stuff instead of investments while complaining about the inability to secure their financial futures? I am not.

For the scales usually considered in the crypto scene these would be considered incidental

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