Merge soon
ultrasound.money
ultrasound.money
But here we are and there is no obvious problem in sight. I'll keep my fingers crossed, and if it goes off without a hitch, I'll have to admit I was too pessimistic and revise my opinion of the Ethereum ecosystem upwards.
Also alarming is the question marks as to when you'll be able to withdraw staked Ethereum, given the security risks from attacks intended to cause slashing and the dependence on total stake for what the staking rewards are.
Ehereum PoS is just a financial asset with a weird governing structure (like a currency future? idk). It's basically standard stock.
PoW and PoS are both financially assets with a weird governing structure, I'd say.
Those exchanges are then a ripe target for existing securities regulation, and they'll also be the biggest validators on the network, so risk for them is risk for the whole network.
This. Of all comments this is the centralization risk on top of proof-of-stake which will have a more involved focus on staking with it being highly likely that it now passes the Howey test that ETH looking more like a security, with the Ethereum Foundation at the center of all of this.
Buying Eth will be the same as before. What you could say, is staking Eth is what makes it an interest-bearing asset, not just buying Eth.
Staking Eth: Investment in common enterprise, expectation of profit and profit derived from others. Looks and quacks like a security.
Buying and holding Eth without staking it shouldn't be considered a security, while staking said Eth should be considered a security. At least if we're still following the "Howey Test".
A different thing is what happens with a liquid staking token like stETH, a much better argument can be made that it quacks and walks like a security.
Besides that important clarification, validators are already receiving income for their efforts. The tips and MEV are already flowing to their wallets as we speak, it's only the issuance that is locked. The particular change required to unlock funds is rather trivial and can be implemented on your own even if you wanted to. But doing so without a large consensus of validators would fork you out of the main chain and those unlocked coins could be rather useless, this should show the delicate balance that decentralized consensus involves.
But if I loan you dollars and you promise to do something profitable and give me more dollars back, that doesn't make the dollar a security.
Now the incentives are perverse. Since prices aren't anchored by real world expenses, the incentives of whale stakers is extreme price volatility, so that they can increase the share of the network they hold. They are free to pump and dump as they please even more than before because there's nothing anchoring them to reality. They get to set the price alone.
Again, naively, people panic and a smaller but substantial move could cascade, but a news article could do that as well. Stakers don't have a monopoly on the ability to cause a stampede.
Last I read on the mechanics of all of this, the emission rate, burn rate, fee burn and staking requirement were designed in such a way as to keep a certain amount of total ether staked. I don't recall what that percentage was, I think around 10% and it's not exact, this is game theoretical after all and incentives are what drives this so it will fluctuate a bit.
There are problems with not having an ongoing cost to validation, and not having assets external to the system at risk, a big one is the so called "nothing at stake" problem which ethereum claims to have solved (and have a compelling case as to why if you read about it) but I don't believe this problem you speak of is one of them. I am somewhat concerned that these metrics to maintain a certain percentage at stake will not shake out the way they planned and have to be adjusted with a hard fork, this happens in ethereum all the time with incentive structures.
Market manipulation is prevalent in all markets all the time. The risk of market manipulation comes from other participants (the bigger a share of the market a whale has, the less risk he has) and from real world anchors (which are what sets the price of stocks in the longer term despite their short term randomness).
ETH whales always had the ability to do price manipulation. And they did it to some extent mostly to the upside. But they risked breaking the market if they manipulated to the downside.
The miners also had real world selling incentives. The game was rigged but at least price incentives aligned.
The problem isn't about whether PoS works. The problem is that the lack of real world anchors means the whales are free to manipulate price as they please. They can agree as a cartel on a price, low or high, beforehand, and keep buying from retail low and sell high and gain higher and higher share, manipulating both to the upside and the downside.
The problem is that PoS has no downside price manipulation disincentives, and it encourages hoarding. You'll end up like diamonds where most of those are hidden outside the market by a huge whale that exploits a monopoly on supply.
> Ultra sound money is an Ethereum meme focusing on the likely decrease of the ETH supply.
> If capped-supply gold is sound, decreasing-supply ether is ultra sound.
I have no idea what this last sentence means.
Capped supply assets are good because that combats inflation, so decreasing supply must be even better (=ultra), right? That's the meme.
The idea of "soundness" is based on this seminal paper: https://courses.engr.illinois.edu/cs421/sp2013/project/milne...
So congrats, that's one major negative externality tackled, assuming that this all works out.
How many Ethereum nodes are there compared to, say, iOS or Android or Windows deployments? What’s their hardware diversity? What’s the complexity of Ethereum compared to the aforementioned operating systems?
Is there any good writeup or video essay about how incentives and control will change? I'm a bit sceptical about this part. Feels like ethereum owners now have a big incentive to make this change benefit them rather than the utility of ethereum. Like I heard this will make it even more deflationary which seems like an odd choice.
The average Fortune 500 internal software upgrade probably has more real revenue on the line than an Ethereum update.
Imagine that this update fails and Ethereum goes down. Who’s going to actually notice? Traders on exchanges like Coinbase or Binance wouldn’t be affected. The price would crash, sure, but their actual trades aren’t on Ethereum. Crypto is all about perception of decentralization. It’s a story, not a product.
But for the record, there's more than $100B in USD-backed (cash and equivalents-backed) assets on the Ethereum blockchain. Plus billions of dollars worth of on-chain organizations and applications that exist (Uniswap, Aave, Compound, GMX, etc). More than $28B moves on chain every day: https://money-movers.info/
This is a common crypto talking point but it makes no sense.
Companies are regularly acquired at a premium to their market cap, often in cash. For instance, Elon Musk signed an agreement to pay $44 billion to take Twitter private. Assuming the deal goes through, every single shareholder of Twitter is going to receive cash in exchange for their shares.
There's no such process for cryptocurrencies. It wouldn't make any sense for someone to acquire every instance of a coin. Coins don't pay dividends. They don't represent any kind of underlying assets. It's just weird to pretend that they have a market cap in the same sense as stocks.
Feel free to come back to these comments in 10-20 years, but one of the moonshot goals is to make blockchain networks base layers for all financial processes in the world and implement all the things you want from any asset class as applications on top of a globally distributed virtual computer.
Additionally, the same arguments can be made of any fiat currency. The US dollar doesn't represent anything except >faith in a system<. The relative value of any blockchain is the >faith in it as a system<.
That's just moving the goalposts because we were talking about market cap of stocks specifically.
I'm happy to check back in 10-20 years. I made an Ethereum wallet in 2017 and still haven't used it for anything meaningful. Anecdotally, the same seems to apply to everyone I know. I honestly don't think that will have changed by 2032. I don't think my stock portfolio will be on Ethereum then.
Companies are also regularly liquidated for next to nothing or go bankrupt and disappear altogether (ie Enron, Lehman, et al).
There is no such process for cryptos because they are decentralized and no one owns 100% of the supply or has the authority to authorize a takeover. They are more akin to commodities in that sense. Could you buy all the world's lumber supply? Of course not, not even if you were Musk.
Ethereum has been a yield producing asset since Beacon chain went live in December of 2020.
Every honest crypto market participant has long admitted that no one currently knows a good model for valuing crypto tokens. Indeed this is widely accepted. As a result, there is such a massive speculative premium placed on them and their prices are extremely volatile.
However, Ethereum will now pay a yield native to the protocol and so discounted [cashflows][1] apply in "Eth" terms. To try to value that ["internet dividend"][0] in USD is, however, still speculation and so ultimately reliant on global [liquidity][2] conditions (how much banks "print").
[0]: https://link.medium.com/HGOCQMUbltb The Web 3.0 Yield Curve
[1]: https://ethereumcashflow.com (pdf)
Would you apply same reasoning to NASDAQ stocks? Or Gold market cap?
The old chain will continue to exist anyways because some people dislike Proof of Stake.
- Operating systems, browsers, etc are not distributed systems. Their deployment procedure has no availability or liveness requirement. And they can be done asynchronously, at the discretion of the user. If you think about it, deployment for this type of software boils down to uploading build artifacts into a public folder.
- Most other massively deployed software is developed by a single organization that completely owns the pipe. Ethereum has multiple client teams that need to coordinate and rigorously test their specs.
- Any failure has potential to severely damage the reputation of Ethereum, and in turn a multi-billion dollar market.
This is a hilarious statement.
> Their deployment procedure has no availability or liveness requirement.
Only to be followed by this.
> How many Ethereum nodes are there compared to, say, iOS or Android or Windows deployments? What’s their hardware diversity? What’s the complexity of Ethereum compared to the aforementioned operating systems?
The code size for the core software of Ethereum isn't huge. It's possible for one person to understand it, and it's much simpler than iOS, Android or Windows. There are many things running on top, but those are supposd to keep running, similar to applications when you upgrade an OS.
But the finance attached to Ethereum is huge. I checked the figures just now.
$194 billion of ETH is being transferred from one blockchain mechanism to a radically different one, in about 40 minutes (estimated). Instantly, in what is effectively a single special transaction.
The consensus algorithm around that transaction is special and complicated, and it will only ever run once. It has been very carefully tested in advance by many teams at different companies, because it coordinates a handover between two robust but very different kinds of consensus protocols that don't normally link up.
It's unusual for another reason: Blockchains rarely merge two existing blockchains into one. Forking is more common, but not merging two different kinds of blockchains.
This is also an open source style software upgrade, because that $194 billion transaction only happens if enough users of the software have chosen to upgrade and run the new software by then instead of the old software (don't worry, it looks like most of them have). The necessary software was only ready to use a couple of weeks ago, and nothing forces people to upgrade, only incentive and getting the news out to them.
Not only is the consensus algorithm different, the p2p networking protocols are also different after the merge. There are many changes, though most of them are running already on one of the two chains being merged together.
Countless third party applications, defi, secondary blockchains and so on running on top are supposed to be able to continue running, seamlessly. There's a lot of those, running from many authors and companies, and some of those have their own financial value that's not even counted in the $194 billion I mentioned above. Their total value is not clear.
Those third party applications have not, in general, been tested on the new system. Nobody can be sure exactly which ones or how many will fall over, because it has not been possible to test them. It's a big like upgrading Windows XP to Windows 10: Applications are not supposed to be affected if the OS authors did it right.
Unlike most software updates rolled out on large networks, which can be done gradually with the old and new running alongside each other for a while, the Ethereum Merge is one single transaction to transfer everything over including protocols, and requires the whole network to do it all at the same virtual time.
Nobody knows in advance which block will contain the transition. Only the statistical conditions for the transition are set, and there is a kind of meta-consensus protocol to ensure the transfer between very different consensus mechanisms is itself going to satisfy special rules of both consensus mechanisms during the handover.
When it's over, the merge code will probably be deleted from client software, because it is only supposed to run once.
There will be future upgrades, as there have been "hard forks" in the past, but they don't appear require such high levels of carefulness and coordination as the merge. That said, maybe things like the planned switch to sharding, state expiry, change of hash tree structure, and zk rollups will be fairly radical too.
"upgrade" is the wrong term. Not 100% of users will accept the new software so after this event called "The Merge" there will be 2 competing Ethereum networks (actually 3 because there's already "ethereum classic" from the last time Ethereum forked). The correct term is "fork." Yes the Vitalik endorsed fork will acquire most of the economic value, but that just highlights the degree to which Ethereum is centralized. There are key figures in ETH that force breaking rules changes on users. Bitcoin is very different.
It's not actually that simple. After the merge, non-upgraded PoW nodes will automatically wind down and self-destruct according to the built-in difficulty bomb curve which is part of PoW.
For PoW Ethereum to continue running in a useful way to whoever wants to use it, a majority of PoW users would need to upgrade to a new PoW fork that changes the difficulty bomb curve. They have to coordinate and agree that fork, as different bomb curves are incompatible.
That would require a majority of PoW users to perform a coordinated softare upgrade, agreed with each other. There's no default PoW Ethereum that can keep working for a long time if people don't deliberately agree on and roll out a new fork.
> Bitcoin is very different.
Bitcoin has a difficulty bomb too (when coin issuing stops), so Bitcoin may eventually self-destruct too, if nobody steps up to coordinate a new fork of Bitcoin and a majority of users accept the new fork.
What bullshit is this? bitcoin doesn't have a difficulty bomb
https://www.cnbctv18.com/cryptocurrency/what-happens-after-a...
Bitcoin has hard guarantees of user rights. Ethereum is a centralized project masquerading as decentralized.
So no, your funds are definitely not lost. You might be the only one connected to the "network" but wasn't this the promise of cryptocurrency decentralization?
Same thing has happened to Bitcoin multiple times. BCH, BTG, etc.
It is the re-centralization of Ethereum and will be made worse with Proof-of-Stake.
There's nothing stopping you from selling your ether to someone who wants it and deploying that capital on something else. Or ignoring it and forking the chain and keeping your fork ether. "But it's valueless" I hear you say, see my above paragraph for the answer to that one.
Also PoS fans watch out and lets talk again in the future, I believe you are loosing some of your desired properties and may be surprised long-term..
If they mess up they can just roll back the immutable blockchain again, same way they did it last time
The charts on this website are great, but people outside of the ecosystem likely won't understand them, which is a real problem if Ethereum wants adoption.
I don't know in which world you live in, but from where I'm sitting, it sure as hell doesn't look like this.
What nobody pays attention to is that the entire thing is a cartel and only incentivizes restricting freedom over time and automating turmoil.
It’s a complete disgrace to what cyberspace represents. It’s an opportunistic, exploitative, incompatible, deprecated, deficient paradigm stuck in a physically-constrained view of the future perpetually hindering progress due to preventing the mind in being able to contemplate non-physical things as infinite.
Pathetic, sad, crappy, leaky.
All driven by greed and ignorance.
People are being played to act as pawns for the same “elite controllers” that they complain about; being led to perpetuate playing the same game. The only thing worse than actual scarcity is completely artificial scarcity and erecting simulacra around that notion as if it were real. Way to go building an actual matrix of ignorance and slavery.
All eyes should now be on Bitcoin to also switch to a non-planet-burning proofing system. Ethereum proved that it can happen and all other blockchains should be held to a similar standard.
EDIT: I'm rate limited/soft banned so I can't reply to most of you/anyone until tomorrow. While I can still edit:
-Cash is the ultimate scammer currency, it would take a ages for crypto to match or replace cash as the best "scam" currency"
-Privacy =/= laundering. Privately transacting is not implicitly a crime.
-Crypto has value as trustless value transfer outside the nation-state system, especially in these uncertain times
-Smart contracts are criminally undervalued. Programmable money is the future.
They will never be silent.
The goalposts will move endlessly.
That said, I fundamentally disagree that crypto is "overall negative", and with the move to PoS the largest negative aspect of crytpo (the environmental cost of PoW) goes away.
It's only been months aways for a few months though. I have endured years of gaslighting comments like this _specifically_ from this asymmetrically moderated community, despite knowing for example in 2017 that PoS was years away. The "maybe this year" started in Jan 2020. COVID happened. They didn't start saying "within a year" again until end of 2021.
Meanwhile the _beacon_ chain launched in 2020, which is what's taking over for the PoW chain in ... 1 hour.
Maybe you're acting in good faith and you misheard that the beacon chain was launching 2 years ago and thought that was this. But how likely is that really?
And I can find talk about it being 'soon' from 2016 - https://stackoverflow.com/questions/33802343/when-will-ether...
So I think it's perfectly good faith to say we've been hearing about the 'imminent' switch to PoS for several years now.
Weird since Vitalik said it will take 'maybe a year' and can be ready 'as early in 2018' in 2017. He has admitted many times he had and promoted much shorter timeframes than reality even calling it his biggest mistake in his Twitter AMA last year.
https://www.trustnodes.com/2017/09/25/ethereum-may-upgrade-p...
They will now just congratulate the re-centralization of Ethereum running on Proof-of-Stake.
The crypto-skeptics will never be silent, but I can assure you that crypto is still here to stay, with some crypto projects surviving and some of them will not survive.
One very popular cryptocurrency is making the switch. That still leaves Bitcoin, with double the trading volume, and most of the other popular cryptocurrencies.
More importantly it doesn't change the fundamental problem with crypto: it's deliberately difficult to regulate, which means that it's still a scammer's paradise.
And Ethereum's price can still fluctuate wildly on any given day, making it unsuitable for most real-world transactions.
Untrue. Check e.g. top 10, 20 or 50 on Coinmarketcap. Most are PoS. Further, with Ethereum being PoS the mining behind everything except Bitcoin is a rounding error.
>And Ethereum's price can still fluctuate wildly on any given day, making it unsuitable for most real-world transactions.
You might want to look into stablecoins or more generally into Ethereum if you think using it for daily transactions is the main usecase.
Proof of work solves issues like: - What to do with electricity before the generating source is connected to the grid
- Reduces carbon emissions by incentivising the burning of methane gas (20x worse than CO2)
- Makes it more viable to research new energy sources by lowering the cost.
- Acts as a load-balancer for the grid and makes it way more stable. This in turn means that we can build out huge amounts of solar and wind that rely on the weather.
Of course there are situations where Bitcoin is mined using non-renewable sources but if you believe that Solar and Wind are so cheap, then that issue will sort itself out, no? And it won't take long.
If you're an environmentalist and you want to solve the global issue of CO2 emissions, Bitcoin (and PoW) is a very very valuable tool. Don't throw it away because of a faulty belief.