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For anyone curious what the merge means, in my limited understanding: 1. Transactions will get slightly cheaper, but only because they're increasing the block

For anyone curious what the merge means, in my limited understanding: 1. Transactions will get slightly cheaper, but only because they're increasing the block rate from every 13 seconds to every 12 seconds, not anything specific to the other cool stuff in the merge 2. The network will switch from proof-of-work to proof-of-stake, meaning that there will no longer be GPU demand or substantial energy consumption attributable to the Ethereum network. 3. For a cryptocurrency to be secure there has to be some barrier to participating in consensus. Now, instead of having to have a fancy GPU to run an Ethereum validator, the barrier will be that you instead have to "stake" 32 Ethereum (and risk losing it if your validator misbehaves). A staking reward of (I think) 5% a year will be issued for your trouble. 4. The Ethereum network will be more resistant to "short-range" forks, that is, forks that diverged from the proper chain "recently". (More resistant in the sense that it will be more expensive to execute an attack like that.) 5. Once you've staked your 32 Ethereum, you currently can't "unstake" it. The ability to withdraw your stake will be added in a future eth fork. It will have to be gated by some delay (maybe you can only withdraw your stake 6 months after you staked it). Attacking the chain via a "long-range" fork, that is, a fork that diverges from the proper chain longer ago than the withdrawal period, will be much cheaper or possibly even free. 6. Ethereum will still favor liveness over consistency. An attacker can't stop the chain, but they can prevent it from finalizing for a time (at expense to themselves). 7. Token issuance will go down, probably to below the burn rate, so the base Ethereum supply will go down over time 8. The chain will get deterministic finality after some number of blocks (I think something like a day's worth). That means that, once a block is finalized, it will never be rewritten. Network outages or attacks can prevent blocks from finalizing.

tromp 4y ago
> to be secure there has to be some barrier to running a validator There only has to be a barrier for receiving rewards. Bitcoin full nodes validate everything but receive no rewards, and need no barriers.
- ChadNauseam 4y ago
  True, my phrasing was misleading (I used the Ethereum terminology, where a validator is not just any node that validates the chain, but one that participates in consensus). Edited my comment accordingly
- SEJeff 4y ago
  And the barrier of 32 ETH. I run one of the eth validator serious for LIDO. We have 10 validator keys for testnet (prater/goerli now just Goerli) and around 1000 for mainnet ethereum on the beacon chain (which will be the consensus chain post mainnet merge).
  - bongobingo1 4y ago
    For those curious, 32ETH is between $1-3k USD depending on where you're temporarily located within the last 6 months, currently ~1.8k.
    - choilive 4y ago
      ?? no thats closer to $58k USD..
      - nyuszika7h 4y ago
        OP probably made the mistake because if you Google "32 ETH in USD" it shows you how much 1 ETH in USD is.
getcrunk 4y ago
Thanks for this. Can you further explain the part about forking being easier from point 5?
- ChadNauseam 4y ago
  For sure. In this comment I'll be using "validators" to mean "nodes participating in consensus". The "true" chain according to the new protocol is the one that has more signatories. Validators sign blocks as they're produced, and when a block gets more than 2/3rds of the signatures, it's finalized on the chain and won't be rewritten. (Well, it's much more complicated than that, but that's the general intuition.) When you sign a block, you get a reward on that chain, to incentivize people to participate in consensus. So the question is, when there's a fork, what stops people from just signing blocks on both forks so they get the signing reward no matter which fork "wins"? The protocol disincentivizes this by requiring validators to put up a stake of 32 eth, that gets "slashed" if you do that. Put another way, if there's a fork and you sign blocks on both sides of the fork, you lose part of your stake. But that threat only works if you actually have a stake to lose. If it's been ${withdrawal_delay} months and you no longer have any eth staked, you can start signing blocks from a long time ago and the protocol can't slash you as punishment. So a group of 2/3rds of the former-validators could freely start a fork from ${withdrawal_delay} months ago, sign a bunch of blocks on it, and if their fork loses they'd face no penalty. Someone currently participating in consensus can see this is happening and won't be confused, but someone just joining the network will be. The solution is pretty easy, if inelegant. When entering the network for the first time, if there are multiple competing forks, you'll just find someone you trust IRL and ask them which chain is the real one. If you've been offline for less than ${withdrawal_delay} months, you won't have to worry about this, but it is a problem for fresh users. If you set ${withdrawal_delay} to infinity, this isn't a problem, but probably you don't want to do that. Once withdraws are enabled, there'll be some tooling to make it easy to figure out which chain is the real one, but I don't expect there'll be many forks that are remotely convincing.
  - getcrunk 4y ago
    Thanks!
olouv 4y ago
Regarding unstaking it will be capped by a queue of around 900/day similar to what is used for staking. There won’t be an arbitrary delay.
mFixman 4y ago
Is there anywhere I can read a technical version of how proof-of-stake work? I'm still confused at what happens if you create a valid block with the Ethereum you stake and then that block doesn't end up being part of the main branch.
- pa7x1 4y ago
  You get assigned by a random number generator to create the next block. If you fail to create it your only penalty is the opportunity cost (i.e., you miss on the reward that you would have gotten for creating one). So at any given time only one validator is going to create a block. If you create it, it's going to be included in the blockchain. If you don't create it (or you create but due to network problems fail to communicate it), then the blockchain skips a beat and someone else will create the next one. If you want a user friendly introduction I recommend you Ben Edgington's book (WIP): https://eth2book.info/altair/ https://eth2book.info/altair/ Or straight from the source: https://github.com/ethereum/consensus-specs https://github.com/ethereum/consensus-specs
- baby 4y ago
  In proof of work the leader election (the thing that decides who gets to write the next page/block of the ledger) is based on how much money you can put in computing power or how big your mining pool is. The more computing power, the more lottery tickets you get to write the next block. In proof of stake, the more crypto tokens you have, the more lottery tickets you get to win the right to write the next block. In PoW the lottery is solving puzzles, that’s the energy inefficiency, in PoS the lottery is decided like a real lottery: with a random number generator (a distributed one at that, so that people agree that it was generated honestly)
  - dcow 4y ago
    How do you make an honest distributed random number generator, then?
    - yiannisbot 4y ago
      You should check out drand (https://drand.love https://drand.love), which is based on threshold cryptography and the group running the network is composed of 16 independent organisations, none of which can manipulate or predict the next beacon. Beacons can be consumed from the public HTTP APIs (https://drand.love/developer/http-api/ https://drand.love/developer/http-api/). Lots of exciting features to land very soon that include Timelock Encryption, among several others. Technical explainer can be found here: https://research.protocol.ai/tutorials/resnetlab-on-tour/drand/ https://research.protocol.ai/tutorials/resnetlab-on-tour/dra... and documentation here: https://drand.love/docs/ https://drand.love/docs/
lostmsu 4y ago
Is the staking reward locked together with the stake as described in 5.?
tomhallett 4y ago
Honest question - if you get deterministic finality in a day (#8), then how can you attack the chain with a "long-range" fork (#5). Doesn't #8 solve #5?
- ChadNauseam 4y ago
  The answer as I understand it, is that anyone who's continuously running a node won't be confused by such a fork, but someone who just joined the network has no way of telling which fork is the true one. Put another way, if you know the true chain at time T, you also know it at time T+1. But if you're just joining the network, or you went offline for a bit, that means you don't know which chain is the true one and need some outside-of-protocol way of determining which fork to trust.
  - clemensley 4y ago
    What can users do to get certainty over which one is the correct fork? In POW you can check the POW. Is there a trustless solution for this in POS? Or is the only solution essentially to ask around and hope that people aren't lying to you?
    - DennisP 4y ago
      In practice, it's the same as with Bitcoin: you have to get the correct, current software. It's just that the software will include a block hash from a few months back. You might argue that Bitcoin is defined as the chain with the most hashpower, period. That would remove all subjectivity from Bitcoin, but it would mean that a 51% attacker could arbitrarily change the rules and steal people's funds. That's not how it actually works; a 51% attacker still has to follow the rules of the protocol for their blocks to be accepted by the non-mining nodes, and that means there's social consensus on the correct software to run the protocol.
      - Geee 4y ago
        That's not how it works. Hashpower decides the canonical chain, not the rules of the system. Hashpower makes sure that the blockchain can't be rewritten. Hashpower can't change the rules of the system, because those blocks would be invalid and rejected by the network. There's no consensus needed on which rules to use. Everyone can use whichever rules they want, by using different versions of the software. Different rules define a different currency, like euro or dollar. Using the best currency with the best rules is just a game theoretic focal point. Everyone chooses to use the best version of the software, because they assume that everyone else does so too, even in the absence of communication. There is no "correct, current" software in Bitcoin, because it would be a single point of failure. There's no objective protection against long-range attacks in PoS, because there's no hashpower to prove the canonical chain. It requires the provider of the "correct, current" software to decide which chain is the right one.
latchkey 4y ago
1. Transactions won't change noticeably since the gas costs won't change and the network won't have more capacity. 2. The 'demand' from mining for GPUs is over-rated. It was a brief problem years ago. You are correct that energy usage for validation will go down. 3. One difference between bitcoin and eth... ethash is a memory hard algo so it doesn't require the fastest GPU. 4-5 year old GPUs are more ROI efficient. Everything is bound in the speed of the memory controller. 4. To be seen. 5. 'staking' today is just depositing ETH into an ETH1 contract that doesn't have a withdraw function. It will require forks to add that functionality. 6. Correct. 7. Correct. Although this likely won't have an impact on price like people think. 8. A fork could always change things.
- DennisP 4y ago
  5. Staking today also means you're running a validator on the beacon chain, and accumulating a balance that will be respected by the future withdraw function.
  - latchkey 4y ago
    True... although there is no absolute guarantee of that.
- deleted 4y ago
  [deleted]
- MarkPNeyer 4y ago
  How do 7 and 4 work together? If the reward for staking is fixe at 5%, what keeps the issuance rate from being net positive?
  - coolestguy 4y ago
    The staking reward is for collateralized validators only (a small % of the network) Overall issuance can potentially be negative due to the burn effects of eip1559 - where the base transaction fee of an eth transaction is deleted from the network forever (akin to using oil/gas/petrol & then it's gone) If 2>1 then net issuance is negative
XorNot 4y ago
I don't see how this reduces energy consumption. To buy into being a validator node you need Ethereum, to get Ethereum you need to do proof of work, if the number of people doing it falls then mining Eth will get easier, and the most cost-effective investment in Eth would be running a large number of validator nodes to collect the payment (you know, all sitting in the same DC). So of course expanding your mining operation still makes sense since it will fund the increase in your validator node operation. Why would anything change when the economic incentives haven't? Mining isn't getting less lucrative or necessary.
- AlexCoventry 4y ago
  You can buy ethereum on an exchange. Essentially they're changing the economic commitment required to participate in the consensus from demonstration of computational work to a monetary stake.
  - XorNot 4y ago
    The end state of that is that all Ethereum winds up being staked. There's no reason not to stake Ethereum if there's no Ethereum inflation, and so the only new source of Ethereum would be PoW-mining.
    - lokar 4y ago
      Won't it end up being deflationary under pow?
    - ETH_start 4y ago
      PoW-mining is being turned off. The source of new ETH will be ETH holders selling ETH to meet liquidity needs. People cannot save 100% of their income forever.
    - Yizahi 4y ago
      Most of it probably. And the more tokens you have the easier is to put majority of them in the stake, also any fees are irrelevant on the large scale operations, unlike the small transfers. So The biggest holders of tokens become the biggest stakers, and thus become the biggest earners. Since the rate of token accumulation will only increase because the of compounding of the tokens in the stake (new profits will be staked too).
superkuh 4y ago
So, ~$60,000 to participate. That's a bit more than a $200 video card. I guess it's time to price out the poor.
- googlryas 4y ago
  Numerous pools exist where you can combine your eth with others so you can stake .1 eth if you'd like. Also, this is only 5% returns, which might really be negative if crypto crashed relative to USD.
  - katkatkatkatket 4y ago
    That's exactly the problem. As someone who does not have access to 32 Eth, you need to trust a pool operator with your money. This is a direct parallel of issues like home and car ownership. If you're not rich enough, you have to trust a 3rd party, and also get less for your money.
    - googlryas 4y ago
      You don't have to trust a third party. You can run a pool yourself and be the one who needs to be trusted.
      - katkatkatkatket 4y ago
        If you don't have enough eth to stake, how will you persuade anyone to lend you their eth?
        googlryas 4y ago
        Have friends? People who trust you?
        katkatkatkatket 4y ago
        Obviously I need to have friends who already want to invest a significant amount into Eth, otherwise I'm just "that guy" shilling some scheme to their family and friends.
nscalf 4y ago
Most of these are pretty spot on. The one thing I will note is that the staking rewards are not a constant 5%, they are a function of the network demand. Stakers are rewarded a portion of transactions, so the volume of demand per block will increase the gas price, and the validator rewards. If the number of validators on the network increases, each individuals rewards will drop. That being said, the adoption of layer 2 technologies has taken off, and significantly impacted the demand for layer 1 blockspace.
overtonwhy 4y ago
Another stage of the grift where all the scammers get double the coins and cash out even more. The miners aren't going to stop mining. There will be another "classic" fork situation. Maybe we're near the end after all?

tromp 4y ago

> to be secure there has to be some barrier to running a validator There only has to be a barrier for receiving rewards. Bitcoin full nodes validate everything but receive no rewards, and need no barriers.

ChadNauseam 4y ago
True, my phrasing was misleading (I used the Ethereum terminology, where a validator is not just any node that validates the chain, but one that participates in consensus). Edited my comment accordingly
SEJeff 4y ago
And the barrier of 32 ETH. I run one of the eth validator serious for LIDO. We have 10 validator keys for testnet (prater/goerli now just Goerli) and around 1000 for mainnet ethereum on the beacon chain (which will be the consensus chain post mainnet merge).
- bongobingo1 4y ago
  For those curious, 32ETH is between $1-3k USD depending on where you're temporarily located within the last 6 months, currently ~1.8k.
  - choilive 4y ago
    ?? no thats closer to $58k USD..
    - nyuszika7h 4y ago
      OP probably made the mistake because if you Google "32 ETH in USD" it shows you how much 1 ETH in USD is.

getcrunk 4y ago

Thanks for this. Can you further explain the part about forking being easier from point 5?

ChadNauseam 4y ago
For sure. In this comment I'll be using "validators" to mean "nodes participating in consensus". The "true" chain according to the new protocol is the one that has more signatories. Validators sign blocks as they're produced, and when a block gets more than 2/3rds of the signatures, it's finalized on the chain and won't be rewritten. (Well, it's much more complicated than that, but that's the general intuition.) When you sign a block, you get a reward on that chain, to incentivize people to participate in consensus. So the question is, when there's a fork, what stops people from just signing blocks on both forks so they get the signing reward no matter which fork "wins"? The protocol disincentivizes this by requiring validators to put up a stake of 32 eth, that gets "slashed" if you do that. Put another way, if there's a fork and you sign blocks on both sides of the fork, you lose part of your stake. But that threat only works if you actually have a stake to lose. If it's been ${withdrawal_delay} months and you no longer have any eth staked, you can start signing blocks from a long time ago and the protocol can't slash you as punishment. So a group of 2/3rds of the former-validators could freely start a fork from ${withdrawal_delay} months ago, sign a bunch of blocks on it, and if their fork loses they'd face no penalty. Someone currently participating in consensus can see this is happening and won't be confused, but someone just joining the network will be. The solution is pretty easy, if inelegant. When entering the network for the first time, if there are multiple competing forks, you'll just find someone you trust IRL and ask them which chain is the real one. If you've been offline for less than ${withdrawal_delay} months, you won't have to worry about this, but it is a problem for fresh users. If you set ${withdrawal_delay} to infinity, this isn't a problem, but probably you don't want to do that. Once withdraws are enabled, there'll be some tooling to make it easy to figure out which chain is the real one, but I don't expect there'll be many forks that are remotely convincing.
- getcrunk 4y ago
  Thanks!

olouv 4y ago

Regarding unstaking it will be capped by a queue of around 900/day similar to what is used for staking. There won’t be an arbitrary delay.

mFixman 4y ago

Is there anywhere I can read a technical version of how proof-of-stake work? I'm still confused at what happens if you create a valid block with the Ethereum you stake and then that block doesn't end up being part of the main branch.

pa7x1 4y ago
You get assigned by a random number generator to create the next block. If you fail to create it your only penalty is the opportunity cost (i.e., you miss on the reward that you would have gotten for creating one). So at any given time only one validator is going to create a block. If you create it, it's going to be included in the blockchain. If you don't create it (or you create but due to network problems fail to communicate it), then the blockchain skips a beat and someone else will create the next one. If you want a user friendly introduction I recommend you Ben Edgington's book (WIP): https://eth2book.info/altair/ https://eth2book.info/altair/ Or straight from the source: https://github.com/ethereum/consensus-specs https://github.com/ethereum/consensus-specs
baby 4y ago
In proof of work the leader election (the thing that decides who gets to write the next page/block of the ledger) is based on how much money you can put in computing power or how big your mining pool is. The more computing power, the more lottery tickets you get to write the next block. In proof of stake, the more crypto tokens you have, the more lottery tickets you get to win the right to write the next block. In PoW the lottery is solving puzzles, that’s the energy inefficiency, in PoS the lottery is decided like a real lottery: with a random number generator (a distributed one at that, so that people agree that it was generated honestly)
- dcow 4y ago
  How do you make an honest distributed random number generator, then?
  - yiannisbot 4y ago
    You should check out drand (https://drand.love https://drand.love), which is based on threshold cryptography and the group running the network is composed of 16 independent organisations, none of which can manipulate or predict the next beacon. Beacons can be consumed from the public HTTP APIs (https://drand.love/developer/http-api/ https://drand.love/developer/http-api/). Lots of exciting features to land very soon that include Timelock Encryption, among several others. Technical explainer can be found here: https://research.protocol.ai/tutorials/resnetlab-on-tour/drand/ https://research.protocol.ai/tutorials/resnetlab-on-tour/dra... and documentation here: https://drand.love/docs/ https://drand.love/docs/

lostmsu 4y ago

Is the staking reward locked together with the stake as described in 5.?

tomhallett 4y ago

Honest question - if you get deterministic finality in a day (#8), then how can you attack the chain with a "long-range" fork (#5). Doesn't #8 solve #5?

ChadNauseam 4y ago
The answer as I understand it, is that anyone who's continuously running a node won't be confused by such a fork, but someone who just joined the network has no way of telling which fork is the true one. Put another way, if you know the true chain at time T, you also know it at time T+1. But if you're just joining the network, or you went offline for a bit, that means you don't know which chain is the true one and need some outside-of-protocol way of determining which fork to trust.
- clemensley 4y ago
  What can users do to get certainty over which one is the correct fork? In POW you can check the POW. Is there a trustless solution for this in POS? Or is the only solution essentially to ask around and hope that people aren't lying to you?
  - DennisP 4y ago
    In practice, it's the same as with Bitcoin: you have to get the correct, current software. It's just that the software will include a block hash from a few months back. You might argue that Bitcoin is defined as the chain with the most hashpower, period. That would remove all subjectivity from Bitcoin, but it would mean that a 51% attacker could arbitrarily change the rules and steal people's funds. That's not how it actually works; a 51% attacker still has to follow the rules of the protocol for their blocks to be accepted by the non-mining nodes, and that means there's social consensus on the correct software to run the protocol.
    - Geee 4y ago
      That's not how it works. Hashpower decides the canonical chain, not the rules of the system. Hashpower makes sure that the blockchain can't be rewritten. Hashpower can't change the rules of the system, because those blocks would be invalid and rejected by the network. There's no consensus needed on which rules to use. Everyone can use whichever rules they want, by using different versions of the software. Different rules define a different currency, like euro or dollar. Using the best currency with the best rules is just a game theoretic focal point. Everyone chooses to use the best version of the software, because they assume that everyone else does so too, even in the absence of communication. There is no "correct, current" software in Bitcoin, because it would be a single point of failure. There's no objective protection against long-range attacks in PoS, because there's no hashpower to prove the canonical chain. It requires the provider of the "correct, current" software to decide which chain is the right one.

latchkey 4y ago

1. Transactions won't change noticeably since the gas costs won't change and the network won't have more capacity. 2. The 'demand' from mining for GPUs is over-rated. It was a brief problem years ago. You are correct that energy usage for validation will go down. 3. One difference between bitcoin and eth... ethash is a memory hard algo so it doesn't require the fastest GPU. 4-5 year old GPUs are more ROI efficient. Everything is bound in the speed of the memory controller. 4. To be seen. 5. 'staking' today is just depositing ETH into an ETH1 contract that doesn't have a withdraw function. It will require forks to add that functionality. 6. Correct. 7. Correct. Although this likely won't have an impact on price like people think. 8. A fork could always change things.

DennisP 4y ago
5. Staking today also means you're running a validator on the beacon chain, and accumulating a balance that will be respected by the future withdraw function.
- latchkey 4y ago
  True... although there is no absolute guarantee of that.
deleted 4y ago
[deleted]
MarkPNeyer 4y ago
How do 7 and 4 work together? If the reward for staking is fixe at 5%, what keeps the issuance rate from being net positive?
- coolestguy 4y ago
  The staking reward is for collateralized validators only (a small % of the network) Overall issuance can potentially be negative due to the burn effects of eip1559 - where the base transaction fee of an eth transaction is deleted from the network forever (akin to using oil/gas/petrol & then it's gone) If 2>1 then net issuance is negative

XorNot 4y ago

I don't see how this reduces energy consumption. To buy into being a validator node you need Ethereum, to get Ethereum you need to do proof of work, if the number of people doing it falls then mining Eth will get easier, and the most cost-effective investment in Eth would be running a large number of validator nodes to collect the payment (you know, all sitting in the same DC). So of course expanding your mining operation still makes sense since it will fund the increase in your validator node operation. Why would anything change when the economic incentives haven't? Mining isn't getting less lucrative or necessary.

AlexCoventry 4y ago
You can buy ethereum on an exchange. Essentially they're changing the economic commitment required to participate in the consensus from demonstration of computational work to a monetary stake.
- XorNot 4y ago
  The end state of that is that all Ethereum winds up being staked. There's no reason not to stake Ethereum if there's no Ethereum inflation, and so the only new source of Ethereum would be PoW-mining.
  - lokar 4y ago
    Won't it end up being deflationary under pow?
  - ETH_start 4y ago
    PoW-mining is being turned off. The source of new ETH will be ETH holders selling ETH to meet liquidity needs. People cannot save 100% of their income forever.
  - Yizahi 4y ago
    Most of it probably. And the more tokens you have the easier is to put majority of them in the stake, also any fees are irrelevant on the large scale operations, unlike the small transfers. So The biggest holders of tokens become the biggest stakers, and thus become the biggest earners. Since the rate of token accumulation will only increase because the of compounding of the tokens in the stake (new profits will be staked too).

superkuh 4y ago

So, ~$60,000 to participate. That's a bit more than a $200 video card. I guess it's time to price out the poor.

googlryas 4y ago
Numerous pools exist where you can combine your eth with others so you can stake .1 eth if you'd like. Also, this is only 5% returns, which might really be negative if crypto crashed relative to USD.
- katkatkatkatket 4y ago
  That's exactly the problem. As someone who does not have access to 32 Eth, you need to trust a pool operator with your money. This is a direct parallel of issues like home and car ownership. If you're not rich enough, you have to trust a 3rd party, and also get less for your money.
  - googlryas 4y ago
    You don't have to trust a third party. You can run a pool yourself and be the one who needs to be trusted.
    - katkatkatkatket 4y ago
      If you don't have enough eth to stake, how will you persuade anyone to lend you their eth?
      - googlryas 4y ago
        Have friends? People who trust you?
        katkatkatkatket 4y ago
        Obviously I need to have friends who already want to invest a significant amount into Eth, otherwise I'm just "that guy" shilling some scheme to their family and friends.

nscalf 4y ago

Most of these are pretty spot on. The one thing I will note is that the staking rewards are not a constant 5%, they are a function of the network demand. Stakers are rewarded a portion of transactions, so the volume of demand per block will increase the gas price, and the validator rewards. If the number of validators on the network increases, each individuals rewards will drop. That being said, the adoption of layer 2 technologies has taken off, and significantly impacted the demand for layer 1 blockspace.

overtonwhy 4y ago

Another stage of the grift where all the scammers get double the coins and cash out even more. The miners aren't going to stop mining. There will be another "classic" fork situation. Maybe we're near the end after all?