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Proof of work is the only way to get acceptable security properties for a monetary system. Proof of stake suffers from the "nothing at stake" problem, leading t

by wyager 4y ago

Proof of work is the only way to get acceptable security properties for a monetary system. Proof of stake suffers from the "nothing at stake" problem, leading to grinding attacks etc.

Victerius 4y ago
> Proof of work is the only way to get acceptable security properties for a monetary system. Every country's financial system: ahem. The U.S. dollar doesn't require giant energy-hungry server farms to be secure.
- cowtools 4y ago
  The U.S. dollar is backed by a military many times more energy intensive.
  - Victerius 4y ago
    What?
  - Macha 4y ago
    So if the us replaced the dollar with Bitcoin they could eliminate or downsize their military? Doubtful
    - cowtools 4y ago
      I agree with the point you are making here. I just think that Proof-of-Work is usually a better choice for a cryptocurrency than Proof-of-Stake. Conventional currencies (notably the US Dollar) are also backed by signifigant military (and thus electrical) power. I would posit that Fiat currencies are nessisary in some sense, but not that they are more efficient to maintain than cryptocurrencies. Cryptocurrencies tend to piggyback on the infrastructure and economy that are built on fiat (e.g. The internet).
    - novantadue 4y ago
      We wouldn't have to overthrow mid-east dictators every time they threaten to price oil in Euros -- but obviously this wouldn't help much because we'd still need to maintain superpower status or risk losing the world order.
  - jcranmer 4y ago
    Fiat currency is not backed by military power. Note that there exist several countries without militaries, and none of those countries have worthless currencies. And there have existed countries that put significant investment into their military and still wound up with a worthless currency at the end.
    - cowtools 4y ago
      Those countries exist as client states to countries with militaries. Yes, the militatary spending is nessisary but not sufficient to sustain a currency.
    - smashem 4y ago
      You really believe that the USD, as the world's reserve currency, doesn't require its military to keep it that way.
      - jcranmer 4y ago
        Yes, I do, actually. The US economy is the world's largest economy in gross value, is the largest or one of the largest trade partners of much of the world, and has very limited policies on capital control or other monetary restrictions. This means that there is going to be more depth on trading pairs via USD and even small currencies than you would likely have with other countries, you would have very little counterparty risk holding USD, and much trade will end up being denominated in USD anyways. So you'd be a bloody fool not to hold USD. Magically blinking away the US military would not change any of the above consideration one iota. So let me flip the question around: why do you believe that the US military is essential to its role as a major reserve currency?
        everfree 4y ago
        > why do you believe that the US military is essential to its role as a major reserve currency? Because it's the final backstop that compels people to pay taxes, and taxes are essential to that role. If you refuse to pay taxes, they send a policeman to arrest you. If you evade the policeman's arrest, they send more policemen. If you somehow evade all the policemen, they send the military. If the US had no armed federal agents, then people wouldn't pay taxes and the government would shrivel up and die, because governments can't survive on zero revenue. In this way, the US dollar's value is reliant on the threat of physical force - or in a broad sense, a military.
- _Algernon_ 4y ago
  Granted, it is not a server farm, but the US military isn't exactly carbon neutral.
  - smashem 4y ago
    There are server farms within the military, so by proxy, the USD does require server farms. Then the private financial institutions have server farms.
- hapticmonkey 4y ago
  Does the army and law enforcement not use energy? Do banks not have server farms?
  - Victerius 4y ago
    Okay, back up a little. Crypto miners mine crypto in order to become rich. With national currencies, this is impossible. Citizens cannot create their own currency, and that's a good thing. If money could be easily forged, it would either be worthless, or a speculative instrument, like every crypto in existence. National governments are the source and the only legal creators of money. Crypto mining also makes the blockchain secure. What this means is that a malicious individual cannot, say, transfer crypto from another person's wallet to his own, or alter the software algorithm that controls the creation of the cryptocurrency. Proof of work cryptocurrencies require miners to expend an enormous quantity of energy in order to prevent problems that national currencies don't have in the first place. Cryptocurrencies have no advantage over national currencies except for anonymous online transactions.
    - smashem 4y ago
      > National governments are the source and the only legal creators of money. And those closest to the money printer benefit. And hint, the average joe is furthest from the printer. The future of the average joe is stolen via currency debasement and inflation, but those closest to the printer get richer.
      - pessimizer 4y ago
        It's people who hold debt who are robbed by inflation, not people who are in debt. The entire political program of the people closest to the money printer is to reduce inflation (and to lower government debt without changing the balance of payments, which by necessity shifts that same debt to individuals.)
        nervlord 4y ago
- smashem 4y ago
  True, the USD just requires violence and cohersion.
- Loveaway 4y ago
  Fiat currencies are backed by huge financial sectors. If all you need are numbers in a database, what are all those towers in NY for?
  - pessimizer 4y ago
    There's nothing about crypto that shows it wouldn't have exactly the same size of a financial sector in addition to proof of work, so the two aren't doing the same things. Forget fiat. When money was gold in a vault, that's proof of stake, not proof of work. For proof of work, you'd have to disintegrate the gold. I wouldn't put my trust in a dollar backed by the absence of gold. edit: I think maybe bitcoin enthusiasts think that value is a sort of spirit, and that if you kill something valuable, then through a huge mass ritual you can direct that spirit into another vessel. Proof that you once had money, and further proof that no one else has that money, should be enough for people to treat you as if you currently have money.
    - betwixthewires 4y ago
      Your gold analogy makes no sense to me, so either I'm misunderstanding it or you don't understand what you're trying to explain. > I think maybe bitcoin enthusiasts think that value is a sort of spirit... Interestingly, that is actually kind of how it works. The money you use itself has no value, it's value is in the things you use it to trade. So if you start trading in other currencies, those currencies receive that value, which gets reflected in the purchasing power metric.
    - deleted 4y ago
      [deleted]
  - deleted 4y ago
    [deleted]
- wyager 4y ago
  Are you familiar with petrodollar warfare? It consumes a lot more energy and resources than bitcoin.
osigurdson 4y ago
Good discussion on the topic below (~10 minutes). https://www.youtube.com/watch?v=8-_CuPtzoDU https://www.youtube.com/watch?v=8-_CuPtzoDU
everfree 4y ago
Slashing fixes the "nothing at stake" problem, and the RANDAO fixes the stake grinding attack. Both of those were open questions in 2015, but they are solved problems now.
- wyager 4y ago
  PoS people always add more epicycles and claim it solves the problem. On closer inspection, it never has. At this point, I'm tired of wasting my time by humoring them. Once again, this seems to be the case. I can see at least one trivial attack against RANDAO, as is often the case with many-party interactive RNG: you just have to be willing to lose your pledge.
  - everfree 4y ago
    > I can see at least one trivial attack against RANDAO, as is often the case with many-party interactive RNG: you just have to be willing to lose your pledge. What is the trivial attack, and why does it involve losing your pledge? To the best of my knowledge none of Ethereum's slashing conditions involve the RANDAO, so you've piqued my interest. Unless by "losing pledge", you mean extra-protocol slashing by social consensus? You would be doing me a big favor by explaining the vulnerability in this system that I generally consider to be secure.
    - wyager 4y ago
      Let's say you're gambling 10k ETH on the last bit of RANDAO output being 1. You pay 5k to enter, and get either 0 or 10k back. Become a contributor to RANDAO. Put up your pledge (say 1k ETH). Set up the bet. Wait to be the last person to submit their pre-image to RANDAO. Calculate what the post-image will be. If it has a 1 at the end (and you would win 10k), continue as normal. If it would have a 0 (and you would win nothing), refuse to disclose your pre-image and lose your pledge. Now it's 50/50 you win. 50% win and keep pledge. 25% win and lose pledge. 25% lose and lose pledge. EV (0.510k + 0.259k + 0.25*-1k)-5k = 2k. You can submit more than 1 pledge to get your odds arbitrarily close to 100%.

by wyager 4y ago

Proof of work is the only way to get acceptable security properties for a monetary system. Proof of stake suffers from the "nothing at stake" problem, leading to grinding attacks etc.

Victerius 4y ago

> Proof of work is the only way to get acceptable security properties for a monetary system. Every country's financial system: ahem. The U.S. dollar doesn't require giant energy-hungry server farms to be secure.

cowtools 4y ago
The U.S. dollar is backed by a military many times more energy intensive.
- Victerius 4y ago
  What?
- Macha 4y ago
  So if the us replaced the dollar with Bitcoin they could eliminate or downsize their military? Doubtful
  - cowtools 4y ago
    I agree with the point you are making here. I just think that Proof-of-Work is usually a better choice for a cryptocurrency than Proof-of-Stake. Conventional currencies (notably the US Dollar) are also backed by signifigant military (and thus electrical) power. I would posit that Fiat currencies are nessisary in some sense, but not that they are more efficient to maintain than cryptocurrencies. Cryptocurrencies tend to piggyback on the infrastructure and economy that are built on fiat (e.g. The internet).
  - novantadue 4y ago
    We wouldn't have to overthrow mid-east dictators every time they threaten to price oil in Euros -- but obviously this wouldn't help much because we'd still need to maintain superpower status or risk losing the world order.
- jcranmer 4y ago
  Fiat currency is not backed by military power. Note that there exist several countries without militaries, and none of those countries have worthless currencies. And there have existed countries that put significant investment into their military and still wound up with a worthless currency at the end.
  - cowtools 4y ago
    Those countries exist as client states to countries with militaries. Yes, the militatary spending is nessisary but not sufficient to sustain a currency.
  - smashem 4y ago
    You really believe that the USD, as the world's reserve currency, doesn't require its military to keep it that way.
    - jcranmer 4y ago
      Yes, I do, actually. The US economy is the world's largest economy in gross value, is the largest or one of the largest trade partners of much of the world, and has very limited policies on capital control or other monetary restrictions. This means that there is going to be more depth on trading pairs via USD and even small currencies than you would likely have with other countries, you would have very little counterparty risk holding USD, and much trade will end up being denominated in USD anyways. So you'd be a bloody fool not to hold USD. Magically blinking away the US military would not change any of the above consideration one iota. So let me flip the question around: why do you believe that the US military is essential to its role as a major reserve currency?
      - everfree 4y ago
        > why do you believe that the US military is essential to its role as a major reserve currency? Because it's the final backstop that compels people to pay taxes, and taxes are essential to that role. If you refuse to pay taxes, they send a policeman to arrest you. If you evade the policeman's arrest, they send more policemen. If you somehow evade all the policemen, they send the military. If the US had no armed federal agents, then people wouldn't pay taxes and the government would shrivel up and die, because governments can't survive on zero revenue. In this way, the US dollar's value is reliant on the threat of physical force - or in a broad sense, a military.
_Algernon_ 4y ago
Granted, it is not a server farm, but the US military isn't exactly carbon neutral.
- smashem 4y ago
  There are server farms within the military, so by proxy, the USD does require server farms. Then the private financial institutions have server farms.
hapticmonkey 4y ago
Does the army and law enforcement not use energy? Do banks not have server farms?
- Victerius 4y ago
  Okay, back up a little. Crypto miners mine crypto in order to become rich. With national currencies, this is impossible. Citizens cannot create their own currency, and that's a good thing. If money could be easily forged, it would either be worthless, or a speculative instrument, like every crypto in existence. National governments are the source and the only legal creators of money. Crypto mining also makes the blockchain secure. What this means is that a malicious individual cannot, say, transfer crypto from another person's wallet to his own, or alter the software algorithm that controls the creation of the cryptocurrency. Proof of work cryptocurrencies require miners to expend an enormous quantity of energy in order to prevent problems that national currencies don't have in the first place. Cryptocurrencies have no advantage over national currencies except for anonymous online transactions.
  - smashem 4y ago
    > National governments are the source and the only legal creators of money. And those closest to the money printer benefit. And hint, the average joe is furthest from the printer. The future of the average joe is stolen via currency debasement and inflation, but those closest to the printer get richer.
    - pessimizer 4y ago
      It's people who hold debt who are robbed by inflation, not people who are in debt. The entire political program of the people closest to the money printer is to reduce inflation (and to lower government debt without changing the balance of payments, which by necessity shifts that same debt to individuals.)
      - nervlord 4y ago
smashem 4y ago
True, the USD just requires violence and cohersion.
Loveaway 4y ago
Fiat currencies are backed by huge financial sectors. If all you need are numbers in a database, what are all those towers in NY for?
- pessimizer 4y ago
  There's nothing about crypto that shows it wouldn't have exactly the same size of a financial sector in addition to proof of work, so the two aren't doing the same things. Forget fiat. When money was gold in a vault, that's proof of stake, not proof of work. For proof of work, you'd have to disintegrate the gold. I wouldn't put my trust in a dollar backed by the absence of gold. edit: I think maybe bitcoin enthusiasts think that value is a sort of spirit, and that if you kill something valuable, then through a huge mass ritual you can direct that spirit into another vessel. Proof that you once had money, and further proof that no one else has that money, should be enough for people to treat you as if you currently have money.
  - betwixthewires 4y ago
    Your gold analogy makes no sense to me, so either I'm misunderstanding it or you don't understand what you're trying to explain. > I think maybe bitcoin enthusiasts think that value is a sort of spirit... Interestingly, that is actually kind of how it works. The money you use itself has no value, it's value is in the things you use it to trade. So if you start trading in other currencies, those currencies receive that value, which gets reflected in the purchasing power metric.
  - deleted 4y ago
    [deleted]
- deleted 4y ago
  [deleted]
wyager 4y ago
Are you familiar with petrodollar warfare? It consumes a lot more energy and resources than bitcoin.

osigurdson 4y ago

Good discussion on the topic below (~10 minutes). https://www.youtube.com/watch?v=8-_CuPtzoDU https://www.youtube.com/watch?v=8-_CuPtzoDU

everfree 4y ago

Slashing fixes the "nothing at stake" problem, and the RANDAO fixes the stake grinding attack. Both of those were open questions in 2015, but they are solved problems now.

wyager 4y ago
PoS people always add more epicycles and claim it solves the problem. On closer inspection, it never has. At this point, I'm tired of wasting my time by humoring them. Once again, this seems to be the case. I can see at least one trivial attack against RANDAO, as is often the case with many-party interactive RNG: you just have to be willing to lose your pledge.
- everfree 4y ago
  > I can see at least one trivial attack against RANDAO, as is often the case with many-party interactive RNG: you just have to be willing to lose your pledge. What is the trivial attack, and why does it involve losing your pledge? To the best of my knowledge none of Ethereum's slashing conditions involve the RANDAO, so you've piqued my interest. Unless by "losing pledge", you mean extra-protocol slashing by social consensus? You would be doing me a big favor by explaining the vulnerability in this system that I generally consider to be secure.
  - wyager 4y ago
    Let's say you're gambling 10k ETH on the last bit of RANDAO output being 1. You pay 5k to enter, and get either 0 or 10k back. Become a contributor to RANDAO. Put up your pledge (say 1k ETH). Set up the bet. Wait to be the last person to submit their pre-image to RANDAO. Calculate what the post-image will be. If it has a 1 at the end (and you would win 10k), continue as normal. If it would have a 0 (and you would win nothing), refuse to disclose your pre-image and lose your pledge. Now it's 50/50 you win. 50% win and keep pledge. 25% win and lose pledge. 25% lose and lose pledge. EV (0.510k + 0.259k + 0.25*-1k)-5k = 2k. You can submit more than 1 pledge to get your odds arbitrarily close to 100%.