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Thanks. I had assumed PoS was more like a holy grail for cryptos? But this sounds like it’s entirely possible? Will PoS lead to a run on other resources like

Thanks. I had assumed PoS was more like a holy grail for cryptos? But this sounds like it’s entirely possible? Will PoS lead to a run on other resources like hard drives?

TimJRobinson 5y ago
No. PoS is secured by miners (called validators in PoS) putting up collateral. It takes 32 Ether to run a validator. If they act maliciously that collateral gets burnt.
nostrademons 5y ago
Nah, hard drive usage is about the same with PoS. It could potentially lead to a run on Ethereum. The resource used in PoS is the cryptocurrency being secured itself. Basically, you agree to lock up a certain stake when you run a validator, and forfeit it if it's found that your validator "cheats". By doing this, you make cheating unprofitable - there's a financial incentive to catch cheats, and a financial disincentive to cheat, and the cheaters eventually go bankrupt (or end up on their own isolated chain where nobody transacts with them). The financial effect of this is that a bunch of Ethereum gets locked up and illiquid. Instead of miners receiving Ethereum which they want to sell for dollars to run their hardware, stakers lock up Ethereum and effectively receive interest. This reduces immediate supply within the market. I'm wondering if a lot of the recent price movement is in anticipation of this.
- mrfusion 5y ago
  Why didn’t they create more eth as part of this change to offset that issue? Also does eth supply increase forever or does it have a hard coin limit like btc?
  - somebodythere 5y ago
    ETH stakeholders want ETH to go up so a change that minted a bunch more ETH in relation to PoS would probably be contentious. Currently no hard cap on issuance, 2 ETH are minted every block, but ETH burn rate is expected to outpace issuance post-POS.
  - tromp 5y ago
    Eth keeps getting generated forever but at the same time a portion of transaction fees gets burned, so whether coins in circulation grows depends on transaction volume and fee levels.
  - nostrademons 5y ago
    It's complicated, and basically comes down to Vitalik's observation that "Ethereum is a currency in service of a protocol, while Bitcoin is a protocol in service of a currency." Basically the Ethereum devs set the economics to incentivize the correct behavior from players in the ecosystem, and this can be either inflationary or deflationary depending on gas prices, network usage, amount staked, etc. It's responding to the supply & demand for computation on the network. For most of its history Ethereum was inflationary. It flipped and became deflationary a couple months back, and not coincidentally the price started rising again. It's likely to be significantly deflationary under Eth 2.0 with expected transaction and staking volumes.

Thanks. I had assumed PoS was more like a holy grail for cryptos? But this sounds like it’s entirely possible? Will PoS lead to a run on other resources like hard drives?

TimJRobinson 5y ago

No. PoS is secured by miners (called validators in PoS) putting up collateral. It takes 32 Ether to run a validator. If they act maliciously that collateral gets burnt.

nostrademons 5y ago

Nah, hard drive usage is about the same with PoS. It could potentially lead to a run on Ethereum. The resource used in PoS is the cryptocurrency being secured itself. Basically, you agree to lock up a certain stake when you run a validator, and forfeit it if it's found that your validator "cheats". By doing this, you make cheating unprofitable - there's a financial incentive to catch cheats, and a financial disincentive to cheat, and the cheaters eventually go bankrupt (or end up on their own isolated chain where nobody transacts with them). The financial effect of this is that a bunch of Ethereum gets locked up and illiquid. Instead of miners receiving Ethereum which they want to sell for dollars to run their hardware, stakers lock up Ethereum and effectively receive interest. This reduces immediate supply within the market. I'm wondering if a lot of the recent price movement is in anticipation of this.

mrfusion 5y ago
Why didn’t they create more eth as part of this change to offset that issue? Also does eth supply increase forever or does it have a hard coin limit like btc?
- somebodythere 5y ago
  ETH stakeholders want ETH to go up so a change that minted a bunch more ETH in relation to PoS would probably be contentious. Currently no hard cap on issuance, 2 ETH are minted every block, but ETH burn rate is expected to outpace issuance post-POS.
- tromp 5y ago
  Eth keeps getting generated forever but at the same time a portion of transaction fees gets burned, so whether coins in circulation grows depends on transaction volume and fee levels.
- nostrademons 5y ago
  It's complicated, and basically comes down to Vitalik's observation that "Ethereum is a currency in service of a protocol, while Bitcoin is a protocol in service of a currency." Basically the Ethereum devs set the economics to incentivize the correct behavior from players in the ecosystem, and this can be either inflationary or deflationary depending on gas prices, network usage, amount staked, etc. It's responding to the supply & demand for computation on the network. For most of its history Ethereum was inflationary. It flipped and became deflationary a couple months back, and not coincidentally the price started rising again. It's likely to be significantly deflationary under Eth 2.0 with expected transaction and staking volumes.