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Ethereum in its current state is using proof-of-work (PoW) to ensure consensus amongst the thousands of nodes in the network. While PoW is reliable and secure,

Ethereum in its current state is using proof-of-work (PoW) to ensure consensus amongst the thousands of nodes in the network. While PoW is reliable and secure, it is also extremely energy intensive. To produce each block on the network participants are required to use powerful and energy-hungry GPUs to solve a complex mathematical problem. Alternatively, proof-of-stake (PoS) guarantees the security of the network in a different way. In PoS, anyone with 32 ETH can deposit that ETH to become a validator, a node that participates in the network's consensus algorithm. Finalizing a block requires 2/3 of all active validators to sign off on it. Should a malicious actor try to tamper with the underlying protocol by using a large number of validators to revert a finalized block (the equivalent of a "51% attack" in PoW) their funds are slashed — meaning they lose a portion of their staked ETH. This makes attacks extremely expensive; it would be like a PoW system where if you use your mining hardware to attack the network then your hardware catches fire and is destroyed. PoS does not require the same energy-intensive hardware as PoW. Any relatively recent consumer hardware should be capable of running the software required to operate a 32 ETH staking node. If you deposit more than 32 ETH, you will be assigned multiple "validator slots" by the protocol, but you will still be able to run them from a single computer, though hardware requirements go up the more you stake. Most estimates put the expected energy savings from the switch to PoS to be around 99%. If you have any additional questions please let me know!

steve_taylor 4y ago
Going by that description (I'm otherwise a n00b), my guess is that only a fraction of validator slots would be active, which means the network could be easily hijacked by a well-funded party who just wants to see the network burn (e.g. central bank of a superpower). Another possible weakness could occur if staking is mostly outsourced (i.e. staking as a service) and one provider overwhelmingly dominates the market. That provider would be in a position to hijack the network without having much of a stake in it. Proof of stake doesn't really live up to its name if the validation nodes aren't run by validation slot owners.
- WFHRenaissance 4y ago
  The threat of a 51% attack still exists on proof-of-stake as it does on proof-of-work, but it's even riskier for the attackers. A attacker would need 51% of the staked ETH (about $15,000,000,000 USD). They could then use their own attestations to ensure their preferred fork was the one with the most accumulated attestations. The 'weight' of accumulated attestations is what consensus clients use to determine the correct chain, so this attacker would be able to make their fork the canonical one. However, a strength of proof-of-stake over proof-of-work is that the community has flexibility in mounting a counter-attack. For example, the honest validators could decide to keep building on the minority chain and ignore the attacker's fork while encouraging apps, exchanges, and pools to do the same. They could also decide to forcibly remove the attacker from the network and destroy their staked ether. These are strong economic defenses against a 51% attack. Staking-as-a-service will operate as a market of diverse options. The network could decide to fork from an outsized dishonest market participant. It would be controversial, but the validity of the network is generally a common incentive for most involved.
baby 4y ago
I wouldn’t call proof of work secure btw. Malicious Reorgs have happened in many chains, including ethereum, whereas I’m not aware of any malicious reorgs in PoS chains.
solarkraft 4y ago
> Should a malicious actor try to tamper with the underlying protocol by using a large number of validators to revert a finalized block (the equivalent of a "51% attack" in PoW) their funds are slashed But can't the malicious actor estimate very well whether their attack will succeed beforehand?
aagha 4y ago
Great summary. Thanks. A more in-depth explanation can be found here: https://arstechnica.com/tech-policy/2022/08/the-merge-the-biggest-change-in-ethereum-history-explained/ https://arstechnica.com/tech-policy/2022/08/the-merge-the-bi...
sprkwd 4y ago
I’m literally an idiot. Make this sense for me.
- tootie 4y ago
  You're not an idiot. It's extremely obtuse and only makes sense to insiders. It's orders of magnitude more obscure than how fractional reserve banking works and understood by far fewer people.
  - randomran01234 4y ago
    It takes time to learn but it isn’t obtuse. It’s extensively documented, with multiple open source clients being built in tandem. Besides, it is not the only PoS system running today. All fields of engineering are complex to those that have an not studied them.
    - tootie 4y ago
      The mechanics aren't extremely complicated but they also make no sense. Proof of work or proof of stake are both solving an abstract and meaningless problem. Crypto makes more sense if you study psychology than engineering.
      - ChadNauseam 4y ago
        Permissionless BFT consensus is definitely an engineering problem
wavefunction 4y ago
I am sure staking pools will be available to people with less than 32 ETH
- 1123581321 4y ago
  They are, and there seems to be a drive by legitimate actors to build them up. For example, Coinbase is building theirs by offering up to $50 ($10 every $100 worth) in exchange for initial staking of Eth.
- fullsend 4y ago
  They already are. The Merge refers to the fact that the PoS chain has been running parallel to the main chain for one year now. It has been thoroughly tested live and so now will be merged back into the main chain like a branch of a git repo.
  - p4bl0 4y ago
    How can two chains be merged if one is a fork of the other without having instances of double spending? With source code in Git you can manually pick which version of each line you want in the merged result, but here it's not possible to do that if services or merch have been exchanged with coins. Except if you're fine with having to deal forever with coins and merged-from-the-fork coins on the eth blockchain?
    - mcmeowerson 4y ago
      As far as I understand it both forks have the same ledger, its only the transaction validation method thats changing. The PoS fork is mirroring all of the PoW transactions so no double spending or extra coins.
    - elif 4y ago
      ETH 'on the beacon chain' today is locked in a contract.
    - DennisP 4y ago
      Transactions and state are only on the PoW chain. The PoS chain only runs the staking protocol. When the merge happens, the PoW software (the "execution client") will keep running transactions, but instead of choosing blocks by looking at miner hashes, it will look to the beacon chain to choose them. So stakers will run both the PoS client, and the execution client with the mining function turned off.
rakoo 4y ago
Thanks for the explanation! I have a few questions: - how does the punishment work ? Do all nodes see that a malicious actor changed the chain and write the bad ideas in some ledger meaning "these nodes just lost X ETH" ? - But if the malicious actor owns 2/3 of validators, what does he care what other nodes do ? They effectively control what block is accepted - is there an advantage to run more than one validator, if you have the money (EDIT: and you don't want to attack the network)? Basically, does having more money gives you more (power, control, anything) ?
- entrep 4y ago
  > - But if the malicious actor owns 2/3 of validators, what does he care what other nodes do ? They effectively control what block is accepted As I understand it, anyone who owns that amount of ETH would probably be interested in contributing to the trust of the Ethereum blockchain.
  - yunohn 4y ago
    Sure, but that wasn’t the question. How does the punishment play out, assuming they’re acting in bad faith?
    - rglullis 4y ago
      If you have 2/3 of the validators, there is no way that you can be punished. You will effectively be able to produce the blocks and tell the network that they are valid. If you don't have that, the most that you can do is to attack the network by proposing bad blocks to slow down block production. Anytime that a (selected) validator proposes a bad block, the other validators that catch your mistake will snitch on you (through attestations) and the validator will get their stake funds slashed. The more your funds are slashed, the less of a chance you will have to be proposing new blocks in the future.
  - falcolas 4y ago
    What reason would anyone have to believe in their benevolence? It would be safer to believe in and use their greed and self preservation.
alchemist1e9 4y ago
> If you deposit more than 32 ETH, you will be assigned multiple "validator slots" by the protocol, but you will still be able to run them from a single computer, though hardware requirements go up the more you stake. Is there a good place to read more about this hardware requirements as a function of validator slots? A concern in my mind with PoS is what is the incentive to expand the physical hardware footprint of the network. I understand this implies more energy usage, however it is a requirement for a decentralized, distributed, and resilient system, otherwise it can very easily be physically attacked if the footprint becomes overly concentrated with a few very powerful nodes. Unless the hardware requirements are a convex function of total staked then if me and you both want to stake we will see the hardware and network/bandwidth costs as something we could share, which if everyone calculates the same, the network will physically shrink.
- pa7x1 4y ago
  The HW requirements increase very very minimally. See this response on reddit: https://www.reddit.com/r/ethstaker/comments/nk9qzt/multiple_validators_on_a_single_machine/gzczs1b/ https://www.reddit.com/r/ethstaker/comments/nk9qzt/multiple_...
  - alchemist1e9 4y ago
    Do you see the same issue I see? I don’t understand why they aren’t concerned about it.
    - nuclearnice1 4y ago
      The validators have staked 32 ETH to the network. If they stay up, they get rewards. If they go down, they get hit with penalties. This incentivizes building a reliable system. Is it sufficient? I’m not sure.
    - DennisP 4y ago
      The hardware expense per node is very minor compared to the cost of 32 ETH, so it's a weak incentive to consolidate. Weighed against that, the slashing penalties per node increase, the more nodes fail at once. That gives an economic incentive to decentralize.
mondoveneziano 4y ago
> required to use powerful and energy-hungry GPUs to solve a complex mathematical problem. No mathematical problem is getting "solved". It is much more akin to playing the lottery: Entirely random numbers are being tried out, by sending them through an energy-intensive algorithm (being energy-intensive is the algorithm's only purpose in proof-of-work), until what comes out is less than another number. That other number is chosen according to the desired "difficulty", it has no significance beyond that. The algorithm is literally meant to spend energy, i.e. the outcome of the computation has no meaning by itself. This also means that proof-of-work cryptocurrencies actively counteract any advances to make the computation more efficient: The "difficulty" will just be adjusted up until the efficiency gain is canceled out. Proof-of-work cryptocurrencies are inefficient by design.
- Banana699 4y ago
  This is a lot of words to say that PoW involves an inverse-hash problem being solved. Inverse-hash is a mathematical problem. Finding the nonce is solving it.
  - mondoveneziano 4y ago
    I was explaining in layman's terms.
    - khazhoux 4y ago
      Layman’s explanation: POW works by solving a complex mathematical problem. :-)
      - pavlov 4y ago
        It’s not the layman’s explanation because the average person doesn’t encounter mathematical problems being solved by a brute force lottery. In high school math, problems are solved by choosing the right formula and plugging in the right variables. Throwing the dice trillions of times isn’t what people imagine when they hear “solving a complex mathematical problem.” That framing is designed to make PoW more acceptable to laypersons, as it sounds like the computation is useful or at least clever rather than intentionally designed to waste energy.
uncletammy 4y ago
Care to objectively articulate the arguments against switching to proof-of-stake? Why is it controversial?
- rglullis 4y ago
  It's only controversial in the minds of purists/"maximalists" who are too invested in BTC. Their arguments would be something like: - PoS is not "decentralized" nor "democratic", because it means that only those with capital can participate in the network consensus building. This is "technically correct", but (a) it ignores that existing PoW also require massive amounts of capital to deploy mining facilities and (b) it is not democratic because only those with access to cheap electricity will profit from being a miner. - PoS implies that those staking their crypto are "investing" with their tokens, which would make the token a "security" and not a "currency". This distinction could make it easy for the SEC and governments to intervene and create regulation that would require stakers to only participate if they implement changes at the protocol level. E.g, it could happen that a staker would reject to validate any block containing transactions to smart contracts that got sanctioned. This is a more real concern, if you think about all the big players (read, centralized exchanges) who are staking ETH on behalf of their customers and therefore will have non-negligible control over the network. In this case, the community expectation is that (a) users of staked ETH pull out of the exchanges and run their own validators and (b) the exchanges realize that they will be shooting themselves in the foot, and therefore go on to fight whatever legislation that pushes on that type of control/censorship at the protocol level.
  - swznd 4y ago
    In PoS the rich can become validator as long as they have money. The limit is money. In PoW, they can’t buy gpu as long as they have money, because there is another limit that money can’t always buy, energy, resources, needs (gpu for gamers, researchers, etc)
    - Sargos 4y ago
      > In PoS the rich can become validator as long as they have money. The limit is money. > In PoW, they can’t buy gpu as long as they have money, because there is another limit that money can’t always buy, energy, resources, needs (gpu for gamers, researchers, etc) Just to elaborate, the implications of this are that PoW has an extra layer of centralization that threatens the network as ASICs/GPUs are only produced by less than a dozen companies and they can pick and choose who gets what kind of hardware and when (including keeping the best for themselves). This ensures that mining cannot be a level playing field and economies of scale will take over long term. This is even ignoring the massive corruption in the energy markets. On the other hand PoS only requires one resource which nobody has a monopoly on so anyone can stake with nearly zero overhead. It's a level playing field regardless of size or political connections which allows for a much greater distribution of actors.
nr2x 4y ago
What is the reward in PoS? Like, is it worthwhile for me to buy 32 ETH? Do I get more ETH for being a node?
- miohtama 4y ago
  More about staking rewards and calculators can be found at the Validator FAQ: https://launchpad.ethereum.org/en/faq https://launchpad.ethereum.org/en/faq
rvz 4y ago
One question: How is Ethereum going to comply with looming regulations in the cryptocurrency industry with proof-of-stake when regulators and enforcement agencies such as the OFAC could instruct validators to not mine or process transactions that have come from Ethereum mixers like Tornado.cash or sanctioned addresses and stay as a permissionless network at the same time? If they do comply and enough validators start censoring these transactions, then it no longer is a permissionless network and just censors transactions like any other permissioned network does. If not enough validators censor or comply with these regulations, the funds in those validators will be slashed and may cause a cascade of lost funds and will also allow the processing of transactions from sanctioned addresses. i.e non-compliance and angering the regulators. The energy problem is most definitely solved. But from a regulatory point of view, it appears that the Merge will introduce another can of worms and will make Ethereum eventually a more permissioned network with proof-of-stake.
- miohtama 4y ago
  Validator can only decide transactions for its own block. This is the same as a miner currently. - Some US based miners are already not including Tornado Cash transactions in their block - These transactions are included in the blocks mined by the other miners - Base layer censorship is not likely, because there have sanctioned Bitcoin and Ethereum addresses since 2018 - Getting the required 2/3 validators on the board might be difficult, becaused there is a huge backslash from the community against this and this could lead to another TheDAO hard fork like event and just having your validators slashed by the users / DoS etc. The base layer neutrality make senses. Web browsers don’t censor the DNS addresses you can access either.
SilasX 4y ago
What happens if most validators become non-responsive without unstaking? The network can’t create new blocks then?
- DennisP 4y ago
  The network would still create new blocks but wouldn't finalize them. Finalizing means they can't be undone without destroying a large percentage of the stake. Without finalization, you still reach a point where it's very unlikely that the block will be undone. The non-responsive stakers would gradually lose their stake. The penalty for going offline is normally small, but if most validators go offline at once it's considerably larger. Their stake will shrink, until they don't hold most of the stake anymore and the network can start finalizing again.
  - ChadNauseam 4y ago
    Finalized blocks can never be undone, it’s forbidden by the protocol. Once your client sees that a block is finalized, it will never revert it. (This makes the network a bit subjective, so hopefully it’ll come up rarely)
mattwilsonn888 4y ago
Only when explaining to laymen can you make PoS, and Ethereum's implementation of it, sound reasonable, open and secure.
- WFHRenaissance 4y ago
  Yeah I veiled a lot of complexity for sure, but honestly that's for the best. If we talked too in-depth about the implementation of most protocols, I'm sure we'd find something to scoff about XD.
  - mattwilsonn888 4y ago
    I think its for the worst that most people would rather gloss over the fundamental flaws in Bitcoin, Ethereum and most other chains. They are significant and important.
    - betwixthewires 4y ago
      If they're important why did you just gloss over them? What are they?
    - WFHRenaissance 4y ago
      Name one
null0pointer 4y ago
What happens in the case of a network partition? I assume the conflict resolution algorithm is longest chain but would all the validators from the shorter chain partition get punished for being offline?
ComodoHacker 4y ago
> Any relatively recent consumer hardware should be capable of running the software required to operate a 32 ETH staking node. What about storage requirements? How long before you need a dedicated NAS to operate a node?
mypastself 4y ago
I’ll just paste my questions from below: Can someone clarify the point about expected price action changes for ETH/USD and other pairs? Presumably the author believes a smaller proportion of Ether will be regularly traded than on the PoW system, but will the total staked (i.e. held) amount be sufficient to impact prices significantly? Also, why would we expect stakers to not take their profits on a regular basis? (Note: another commenter pointed out unstaking won’t be possible for the time being. That does answer the question for the short-term). What’s the meaning (and reasoning behind) the following statement: > Ethereum will move from a system that has roughly $20mm a day of structural outflows to a system that has roughly a half a million dollars a day of structural inflows.
- akelly 4y ago
  Today there is $20mm a day of ETH being printed and given to miners, most of which is sold immediately to pay their operating costs. After the merge there will be only $0.5mm a day being printed and given to stakers. Plus the money printed will go to people who are ETH holders, and are therefore less likely to sell.
  - mypastself 4y ago
    That makes sense, but why are they labelled as “structural outflows and inflows”, respectively, if both amounts are referring to, as you put it, “ETH being printed and given to” miners/validators? Perhaps it’s referring to the ratio of Ether being supplied on a daily basis compared to its total supply? So in summary: With PoW, each day fresh $20M is created and sold, which increases the ratio of traded Ether compared to its total amount (“outflow” from held ratio). With PoS, each day fresh $0.5M is created and held, which decreases the ratio of traded Ether compared to its total amount (“inflow”). Do I have this right? That does still leave the question of whether this daily ratio change will be sufficient to impact prices significantly.
thesz 4y ago
You mentioned only the rewrite of history, but there is at least one other attack on a network - a coordinated refusal of blocks with transaction(s) attacker deem ungood. This way, some person(s) will be denied the right to transact. A direct way to do that is to vote NO for such blocks. Does PoS protocol of yours require the NO vote to have reasons for that decision? It can be analyzed and having wrong NO reasons may be a reason to punish validator. An indirect way to do that attack is to timeout on unwanted blocks. E.g., if a malicious validator sees a block it does not want, it will stop sending any messages at all until it sees next block or has an opportunity to be a proposer. How PoS protocol of yours handle such attack?
jules-jules 4y ago
>Most estimates put the expected energy savings from the switch to PoS to be around 99% It's actually closer to 99.95% [1] which is significantly less than a 99% reduction. [1] https://twitter.com/0xstark/status/1457823831360368640 https://twitter.com/0xstark/status/1457823831360368640
- sph 4y ago
  *significantly more 99.95% reduction in power usage is more than 99% reduction.

steve_taylor 4y ago

Going by that description (I'm otherwise a n00b), my guess is that only a fraction of validator slots would be active, which means the network could be easily hijacked by a well-funded party who just wants to see the network burn (e.g. central bank of a superpower). Another possible weakness could occur if staking is mostly outsourced (i.e. staking as a service) and one provider overwhelmingly dominates the market. That provider would be in a position to hijack the network without having much of a stake in it. Proof of stake doesn't really live up to its name if the validation nodes aren't run by validation slot owners.

WFHRenaissance 4y ago
The threat of a 51% attack still exists on proof-of-stake as it does on proof-of-work, but it's even riskier for the attackers. A attacker would need 51% of the staked ETH (about $15,000,000,000 USD). They could then use their own attestations to ensure their preferred fork was the one with the most accumulated attestations. The 'weight' of accumulated attestations is what consensus clients use to determine the correct chain, so this attacker would be able to make their fork the canonical one. However, a strength of proof-of-stake over proof-of-work is that the community has flexibility in mounting a counter-attack. For example, the honest validators could decide to keep building on the minority chain and ignore the attacker's fork while encouraging apps, exchanges, and pools to do the same. They could also decide to forcibly remove the attacker from the network and destroy their staked ether. These are strong economic defenses against a 51% attack. Staking-as-a-service will operate as a market of diverse options. The network could decide to fork from an outsized dishonest market participant. It would be controversial, but the validity of the network is generally a common incentive for most involved.

baby 4y ago

I wouldn’t call proof of work secure btw. Malicious Reorgs have happened in many chains, including ethereum, whereas I’m not aware of any malicious reorgs in PoS chains.

solarkraft 4y ago

> Should a malicious actor try to tamper with the underlying protocol by using a large number of validators to revert a finalized block (the equivalent of a "51% attack" in PoW) their funds are slashed But can't the malicious actor estimate very well whether their attack will succeed beforehand?

aagha 4y ago

Great summary. Thanks. A more in-depth explanation can be found here: https://arstechnica.com/tech-policy/2022/08/the-merge-the-biggest-change-in-ethereum-history-explained/ https://arstechnica.com/tech-policy/2022/08/the-merge-the-bi...

sprkwd 4y ago

I’m literally an idiot. Make this sense for me.

tootie 4y ago
You're not an idiot. It's extremely obtuse and only makes sense to insiders. It's orders of magnitude more obscure than how fractional reserve banking works and understood by far fewer people.
- randomran01234 4y ago
  It takes time to learn but it isn’t obtuse. It’s extensively documented, with multiple open source clients being built in tandem. Besides, it is not the only PoS system running today. All fields of engineering are complex to those that have an not studied them.
  - tootie 4y ago
    The mechanics aren't extremely complicated but they also make no sense. Proof of work or proof of stake are both solving an abstract and meaningless problem. Crypto makes more sense if you study psychology than engineering.
    - ChadNauseam 4y ago
      Permissionless BFT consensus is definitely an engineering problem

wavefunction 4y ago

I am sure staking pools will be available to people with less than 32 ETH

1123581321 4y ago
They are, and there seems to be a drive by legitimate actors to build them up. For example, Coinbase is building theirs by offering up to $50 ($10 every $100 worth) in exchange for initial staking of Eth.
fullsend 4y ago
They already are. The Merge refers to the fact that the PoS chain has been running parallel to the main chain for one year now. It has been thoroughly tested live and so now will be merged back into the main chain like a branch of a git repo.
- p4bl0 4y ago
  How can two chains be merged if one is a fork of the other without having instances of double spending? With source code in Git you can manually pick which version of each line you want in the merged result, but here it's not possible to do that if services or merch have been exchanged with coins. Except if you're fine with having to deal forever with coins and merged-from-the-fork coins on the eth blockchain?
  - mcmeowerson 4y ago
    As far as I understand it both forks have the same ledger, its only the transaction validation method thats changing. The PoS fork is mirroring all of the PoW transactions so no double spending or extra coins.
  - elif 4y ago
    ETH 'on the beacon chain' today is locked in a contract.
  - DennisP 4y ago
    Transactions and state are only on the PoW chain. The PoS chain only runs the staking protocol. When the merge happens, the PoW software (the "execution client") will keep running transactions, but instead of choosing blocks by looking at miner hashes, it will look to the beacon chain to choose them. So stakers will run both the PoS client, and the execution client with the mining function turned off.

rakoo 4y ago

Thanks for the explanation! I have a few questions: - how does the punishment work ? Do all nodes see that a malicious actor changed the chain and write the bad ideas in some ledger meaning "these nodes just lost X ETH" ? - But if the malicious actor owns 2/3 of validators, what does he care what other nodes do ? They effectively control what block is accepted - is there an advantage to run more than one validator, if you have the money (EDIT: and you don't want to attack the network)? Basically, does having more money gives you more (power, control, anything) ?

entrep 4y ago
> - But if the malicious actor owns 2/3 of validators, what does he care what other nodes do ? They effectively control what block is accepted As I understand it, anyone who owns that amount of ETH would probably be interested in contributing to the trust of the Ethereum blockchain.
- yunohn 4y ago
  Sure, but that wasn’t the question. How does the punishment play out, assuming they’re acting in bad faith?
  - rglullis 4y ago
    If you have 2/3 of the validators, there is no way that you can be punished. You will effectively be able to produce the blocks and tell the network that they are valid. If you don't have that, the most that you can do is to attack the network by proposing bad blocks to slow down block production. Anytime that a (selected) validator proposes a bad block, the other validators that catch your mistake will snitch on you (through attestations) and the validator will get their stake funds slashed. The more your funds are slashed, the less of a chance you will have to be proposing new blocks in the future.
- falcolas 4y ago
  What reason would anyone have to believe in their benevolence? It would be safer to believe in and use their greed and self preservation.

alchemist1e9 4y ago

> If you deposit more than 32 ETH, you will be assigned multiple "validator slots" by the protocol, but you will still be able to run them from a single computer, though hardware requirements go up the more you stake. Is there a good place to read more about this hardware requirements as a function of validator slots? A concern in my mind with PoS is what is the incentive to expand the physical hardware footprint of the network. I understand this implies more energy usage, however it is a requirement for a decentralized, distributed, and resilient system, otherwise it can very easily be physically attacked if the footprint becomes overly concentrated with a few very powerful nodes. Unless the hardware requirements are a convex function of total staked then if me and you both want to stake we will see the hardware and network/bandwidth costs as something we could share, which if everyone calculates the same, the network will physically shrink.

pa7x1 4y ago
The HW requirements increase very very minimally. See this response on reddit: https://www.reddit.com/r/ethstaker/comments/nk9qzt/multiple_validators_on_a_single_machine/gzczs1b/ https://www.reddit.com/r/ethstaker/comments/nk9qzt/multiple_...
- alchemist1e9 4y ago
  Do you see the same issue I see? I don’t understand why they aren’t concerned about it.
  - nuclearnice1 4y ago
    The validators have staked 32 ETH to the network. If they stay up, they get rewards. If they go down, they get hit with penalties. This incentivizes building a reliable system. Is it sufficient? I’m not sure.
  - DennisP 4y ago
    The hardware expense per node is very minor compared to the cost of 32 ETH, so it's a weak incentive to consolidate. Weighed against that, the slashing penalties per node increase, the more nodes fail at once. That gives an economic incentive to decentralize.

mondoveneziano 4y ago

> required to use powerful and energy-hungry GPUs to solve a complex mathematical problem. No mathematical problem is getting "solved". It is much more akin to playing the lottery: Entirely random numbers are being tried out, by sending them through an energy-intensive algorithm (being energy-intensive is the algorithm's only purpose in proof-of-work), until what comes out is less than another number. That other number is chosen according to the desired "difficulty", it has no significance beyond that. The algorithm is literally meant to spend energy, i.e. the outcome of the computation has no meaning by itself. This also means that proof-of-work cryptocurrencies actively counteract any advances to make the computation more efficient: The "difficulty" will just be adjusted up until the efficiency gain is canceled out. Proof-of-work cryptocurrencies are inefficient by design.

Banana699 4y ago
This is a lot of words to say that PoW involves an inverse-hash problem being solved. Inverse-hash is a mathematical problem. Finding the nonce is solving it.
- mondoveneziano 4y ago
  I was explaining in layman's terms.
  - khazhoux 4y ago
    Layman’s explanation: POW works by solving a complex mathematical problem. :-)
    - pavlov 4y ago
      It’s not the layman’s explanation because the average person doesn’t encounter mathematical problems being solved by a brute force lottery. In high school math, problems are solved by choosing the right formula and plugging in the right variables. Throwing the dice trillions of times isn’t what people imagine when they hear “solving a complex mathematical problem.” That framing is designed to make PoW more acceptable to laypersons, as it sounds like the computation is useful or at least clever rather than intentionally designed to waste energy.

uncletammy 4y ago

Care to objectively articulate the arguments against switching to proof-of-stake? Why is it controversial?

rglullis 4y ago
It's only controversial in the minds of purists/"maximalists" who are too invested in BTC. Their arguments would be something like: - PoS is not "decentralized" nor "democratic", because it means that only those with capital can participate in the network consensus building. This is "technically correct", but (a) it ignores that existing PoW also require massive amounts of capital to deploy mining facilities and (b) it is not democratic because only those with access to cheap electricity will profit from being a miner. - PoS implies that those staking their crypto are "investing" with their tokens, which would make the token a "security" and not a "currency". This distinction could make it easy for the SEC and governments to intervene and create regulation that would require stakers to only participate if they implement changes at the protocol level. E.g, it could happen that a staker would reject to validate any block containing transactions to smart contracts that got sanctioned. This is a more real concern, if you think about all the big players (read, centralized exchanges) who are staking ETH on behalf of their customers and therefore will have non-negligible control over the network. In this case, the community expectation is that (a) users of staked ETH pull out of the exchanges and run their own validators and (b) the exchanges realize that they will be shooting themselves in the foot, and therefore go on to fight whatever legislation that pushes on that type of control/censorship at the protocol level.
- swznd 4y ago
  In PoS the rich can become validator as long as they have money. The limit is money. In PoW, they can’t buy gpu as long as they have money, because there is another limit that money can’t always buy, energy, resources, needs (gpu for gamers, researchers, etc)
  - Sargos 4y ago
    > In PoS the rich can become validator as long as they have money. The limit is money. > In PoW, they can’t buy gpu as long as they have money, because there is another limit that money can’t always buy, energy, resources, needs (gpu for gamers, researchers, etc) Just to elaborate, the implications of this are that PoW has an extra layer of centralization that threatens the network as ASICs/GPUs are only produced by less than a dozen companies and they can pick and choose who gets what kind of hardware and when (including keeping the best for themselves). This ensures that mining cannot be a level playing field and economies of scale will take over long term. This is even ignoring the massive corruption in the energy markets. On the other hand PoS only requires one resource which nobody has a monopoly on so anyone can stake with nearly zero overhead. It's a level playing field regardless of size or political connections which allows for a much greater distribution of actors.

nr2x 4y ago

What is the reward in PoS? Like, is it worthwhile for me to buy 32 ETH? Do I get more ETH for being a node?

miohtama 4y ago
More about staking rewards and calculators can be found at the Validator FAQ: https://launchpad.ethereum.org/en/faq https://launchpad.ethereum.org/en/faq

rvz 4y ago

One question: How is Ethereum going to comply with looming regulations in the cryptocurrency industry with proof-of-stake when regulators and enforcement agencies such as the OFAC could instruct validators to not mine or process transactions that have come from Ethereum mixers like Tornado.cash or sanctioned addresses and stay as a permissionless network at the same time? If they do comply and enough validators start censoring these transactions, then it no longer is a permissionless network and just censors transactions like any other permissioned network does. If not enough validators censor or comply with these regulations, the funds in those validators will be slashed and may cause a cascade of lost funds and will also allow the processing of transactions from sanctioned addresses. i.e non-compliance and angering the regulators. The energy problem is most definitely solved. But from a regulatory point of view, it appears that the Merge will introduce another can of worms and will make Ethereum eventually a more permissioned network with proof-of-stake.

miohtama 4y ago
Validator can only decide transactions for its own block. This is the same as a miner currently. - Some US based miners are already not including Tornado Cash transactions in their block - These transactions are included in the blocks mined by the other miners - Base layer censorship is not likely, because there have sanctioned Bitcoin and Ethereum addresses since 2018 - Getting the required 2/3 validators on the board might be difficult, becaused there is a huge backslash from the community against this and this could lead to another TheDAO hard fork like event and just having your validators slashed by the users / DoS etc. The base layer neutrality make senses. Web browsers don’t censor the DNS addresses you can access either.

SilasX 4y ago

What happens if most validators become non-responsive without unstaking? The network can’t create new blocks then?

DennisP 4y ago
The network would still create new blocks but wouldn't finalize them. Finalizing means they can't be undone without destroying a large percentage of the stake. Without finalization, you still reach a point where it's very unlikely that the block will be undone. The non-responsive stakers would gradually lose their stake. The penalty for going offline is normally small, but if most validators go offline at once it's considerably larger. Their stake will shrink, until they don't hold most of the stake anymore and the network can start finalizing again.
- ChadNauseam 4y ago
  Finalized blocks can never be undone, it’s forbidden by the protocol. Once your client sees that a block is finalized, it will never revert it. (This makes the network a bit subjective, so hopefully it’ll come up rarely)

mattwilsonn888 4y ago

Only when explaining to laymen can you make PoS, and Ethereum's implementation of it, sound reasonable, open and secure.

WFHRenaissance 4y ago
Yeah I veiled a lot of complexity for sure, but honestly that's for the best. If we talked too in-depth about the implementation of most protocols, I'm sure we'd find something to scoff about XD.
- mattwilsonn888 4y ago
  I think its for the worst that most people would rather gloss over the fundamental flaws in Bitcoin, Ethereum and most other chains. They are significant and important.
  - betwixthewires 4y ago
    If they're important why did you just gloss over them? What are they?
  - WFHRenaissance 4y ago
    Name one

null0pointer 4y ago

What happens in the case of a network partition? I assume the conflict resolution algorithm is longest chain but would all the validators from the shorter chain partition get punished for being offline?

ComodoHacker 4y ago

> Any relatively recent consumer hardware should be capable of running the software required to operate a 32 ETH staking node. What about storage requirements? How long before you need a dedicated NAS to operate a node?

mypastself 4y ago

I’ll just paste my questions from below: Can someone clarify the point about expected price action changes for ETH/USD and other pairs? Presumably the author believes a smaller proportion of Ether will be regularly traded than on the PoW system, but will the total staked (i.e. held) amount be sufficient to impact prices significantly? Also, why would we expect stakers to not take their profits on a regular basis? (Note: another commenter pointed out unstaking won’t be possible for the time being. That does answer the question for the short-term). What’s the meaning (and reasoning behind) the following statement: > Ethereum will move from a system that has roughly $20mm a day of structural outflows to a system that has roughly a half a million dollars a day of structural inflows.

akelly 4y ago
Today there is $20mm a day of ETH being printed and given to miners, most of which is sold immediately to pay their operating costs. After the merge there will be only $0.5mm a day being printed and given to stakers. Plus the money printed will go to people who are ETH holders, and are therefore less likely to sell.
- mypastself 4y ago
  That makes sense, but why are they labelled as “structural outflows and inflows”, respectively, if both amounts are referring to, as you put it, “ETH being printed and given to” miners/validators? Perhaps it’s referring to the ratio of Ether being supplied on a daily basis compared to its total supply? So in summary: With PoW, each day fresh $20M is created and sold, which increases the ratio of traded Ether compared to its total amount (“outflow” from held ratio). With PoS, each day fresh $0.5M is created and held, which decreases the ratio of traded Ether compared to its total amount (“inflow”). Do I have this right? That does still leave the question of whether this daily ratio change will be sufficient to impact prices significantly.

thesz 4y ago

You mentioned only the rewrite of history, but there is at least one other attack on a network - a coordinated refusal of blocks with transaction(s) attacker deem ungood. This way, some person(s) will be denied the right to transact. A direct way to do that is to vote NO for such blocks. Does PoS protocol of yours require the NO vote to have reasons for that decision? It can be analyzed and having wrong NO reasons may be a reason to punish validator. An indirect way to do that attack is to timeout on unwanted blocks. E.g., if a malicious validator sees a block it does not want, it will stop sending any messages at all until it sees next block or has an opportunity to be a proposer. How PoS protocol of yours handle such attack?

jules-jules 4y ago

>Most estimates put the expected energy savings from the switch to PoS to be around 99% It's actually closer to 99.95% [1] which is significantly less than a 99% reduction. [1] https://twitter.com/0xstark/status/1457823831360368640 https://twitter.com/0xstark/status/1457823831360368640

sph 4y ago
*significantly more 99.95% reduction in power usage is more than 99% reduction.