30 ms·

The future of cryptocurrency is at stake in Ethereum’s switch

96 points by zonotope 4y ago

bottlepalm 4y ago
The future with Ether maybe.. and many don’t trust the fundamentals under ‘proof of stake’ so if anything it might just be Bitcoin left as the dominant cryptocurrency if the migration fails.
- kloch 4y ago
  ETC is also waiting in the wings with feature parity to ETH but remaining POW. Some hashpower has already migrated to ETC, doubling in the past two months: https://2miners.com/etc-network-hashrate https://2miners.com/etc-network-hashrate
purpleblue 4y ago
A couple of questions: 1) Will this decrease gas fees, which make using Ether and its ecosystem completely unusable? 2) Does proof-of-stake mean that the richer people in the ecosystem have more power?
- arthurcolle 4y ago
  1) ostensibly 2) yes
- gweinberg 4y ago
  It's not clear to me how this is supposed to help with gas. As I understand it, the reason gas costs so much is there are only so many transactions that can fit in a block, and the price is what you have to pay (competing against other customers) get your transaction through. It does seem that if the miners just have to prove they have stake and not do any work, it means the rich will get richer.
- pcthrowaway 4y ago
  1) Possibly a little bit since block time is supposed to decrease from ~13 seconds to 12 seconds. But it's not the primary goal. Side note, the network is generally more expensive during high-traffic times (due to the limited number of transactions which can be sent), but during low-traffic times (over the weekend for example) simple transactions could be made for ~$0.14 2) It means that if you want to participate in consensus directly, you need exactly 32 ETH to stake. People with smaller amounts of ETH can stake through staking pools though. Block-producing nodes do get to choose which of the transactions in the mempool get included, so in a sense, they have power (in the same way miners with higher hash-rate do currently). Not all the "richer people" will be running nodes though, as it does lock the ETH for a currently-indetermined amount of time. Unstaking isn't an option (yet), and if your node goes off-line, you'll be penalized by losing some of your stake
  - e9 4y ago
    so what you are saying is that only very rich people will be able to participate because: - you need good hardware and access to good networks to meet the up-time guarantee s (can be solved with pooling the money I guess) - you need to have enough eth to spare locking up portion of it for years (this can only be solved if you find another person to join the pool and take your place by giving eth to you but there is no incentive for pools to offer this)
    - pcthrowaway 4y ago
      Actually, the second is definitely possible. There are many liquid staking pools, which tokenize your share of the stake, and allow you to trade it (usually at a modest discount to the current price of Ethereum) I believe the majority of staked ETH right now is actually pooled
      - e9 4y ago
        I see, so money is locked up but they'll deploy another smart contract that you have some stake in but you still have to find a buyer otherwise you are out of luck and your money is actually locked up
- okwubodu 4y ago
  1) Effectively no. I don’t think they even care anymore. 2) Rich people had more power under POW—miners aren’t cheap. What matters is the enforcement mechanism. Slashing remains a risk to every validator regardless of stake weight.
  - rglullis 4y ago
    They "don't care" because the EF has been saying for at least 5 years that the way to scale transaction throughput will be through the myriad of roll-up systems. The idea is that people could use roll-ups as a "checkings account" and that they would only hold the funds that they don't want/need to move often at the base layer. With roll-ups, the funds are still secured by the base layer, so participants wouldn't need to trust the roll-up operators.
- jlynn 4y ago
  I'm not convinced proof-of-stake means less equity. PoW is very capex intensive between hardware and energy. Especially during a time when energy prices are soaring, the big players have access to extremely cheap electricity that keeps them profitable, while the small players shut down.
twstdzppr 4y ago
Seems kind of like a waste either way. Crypto was sort of neat years ago, but it hasn't amounted to anything useful
- Hellion 4y ago
  It’s amounted to a lot, actually. One of the stated goals of Bitcoin was to reduce government control. And it has, magnificently: in the drug trade. Seriously, online drug marketplaces have become massive and highly lucrative. Estimates vary anywhere between $700 million to over $1 billion each year. Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries. So much so, that an estimated floor of $3-4 bil of cryptocurrency assets during the peak was just that. I used to joke: if someone says they’re into crypto currencies, they’re either a tool or have good ketamine. Years later, that rule still shakes out.
  - deleted 4y ago
    [deleted]
  - easrng 4y ago
    But you don't use bitcoin to buy drugs, you'd want to use monero.
    - paulpauper 4y ago
      hmm but you still have to cash out and convert btc to monero or monero to btc . It's not as simple as use monero.
    - galangalalgol 4y ago
      Do people really use either? My impression is that most people use credit cards.
      - easrng 4y ago
        idk the people i know who buy drugs either use monero (online) or cash (in person)
endisneigh 4y ago
I find proof of stake to be ironic. Isn't the entire point of cryptocurrency to remove the centralization of power? Proof of stake is just an admission that those who have more, get more. Power waste aside, I find the purity of PoW and Bitcoin to be superior in fulfilling the nebulous goals of crypto.
- dahdum 4y ago
  PoW is much the same, those with more capex and opex for compute and power earn more. PoS cuts the opex, and makes the capex fungible.
  - wyager 4y ago
    The opex is the part that tethers on-chain security to reality.
    - operator-name 4y ago
      Can you elaborate on why you think this is the case?
      - themoonisachees 4y ago
        Stealing private keys (through whatever means) is considerably easier than stealing a comparable amount of mining hardware then running it. It's not that big of a risk in reality of course, but there is still a considerable amount of security provided by the fact that obtaining enough compute for a 50% attack is harder than obtaining enough eth to do the same.
      - wyager 4y ago
        Key phrase to search - "nothing at stake problem"
        operator-name 4y ago
        For the most part ethereum doesn't suffer from this issue.
rvz 4y ago
'The future of Ethereum, and the thousands of projects built on it is at stake in the switch to PoS.'
aliljet 4y ago
If the value of the currency has anything to do with the value of the energy spent, then there may be a significant shift away from a protected base value. And let's be clear, I'm thrilled. Waiting for those eBay GPUs as I write this.
- timbit42 4y ago
  The GPUs will be repurposed to mine other PoW cryptocurrencies.
tschwimmer 4y ago
After reading this article I looked into the actual process[0] to run a validator node and in my opinion it's quite an involved process. You need dedicated hardware with a large hard drive (with good durability!) and an unmetered high speed internet connection. You need to run two services at what seems to be near-production quality and you need to use monitoring tools like Grafana to manage them. Oh and if you make a mistake like restoring a backup of the server incorrectly your stake will get slashed and your Eth gets destroyed. Seems like an epic pain in the ass for a 4.1% yield (not to mention the capital required to stake). [0] https://ethereum.org/en/run-a-node/ https://ethereum.org/en/run-a-node/
- ipnon 4y ago
  The optimistic view of this is that you can run a node in a distributed payment and compute platform for a few thousands bucks. Consider the alternatives: the infrastructure running PayPal, the massive and archaic automated clearing house systems used by megabanks, whatever it is Western Union does to move money. You can participate in a distributed, open source alternative for what amounts to an affordable price for those in developed countries. I am not claiming you should do this! What I'm attempting to illustrate is that this momentum towards freer and more open systems is what drives the technical optimism in cryptocurrencies and blockchains. There seems to be a Moore's law effect dropping the price of what is currently gatekept by governments and megacorporations. Hard work is once again creating exciting innovations that at least have the potential to improve the world.
  - e9 4y ago
    Can you elaborate more on the distributed compute platform part? How will that work and prevent down-time issues and other mistakes that will cause slashing?
    - ajhurliman 4y ago
      I think they're referring to being a single node in a distributed compute/payment platform.
  - 4y ago
paulpauper 4y ago
The price keeps falling. It's like the bubble is already over. The biggest problem with crypto is it does not live of to its promises and does not solve any real world problems. It's a cool application of cryptography, but not something that will compete with the financial system or subvert tyrannical governments. It's sorta like a very expensive hobby that has enthralled the world. Whatever problem it does solve, does this mean it's worth $1 trillion still? Likely not.
- nwiswell 4y ago
  Bubble is over? Price keeps falling? When I first discovered Bitcoin it was trading in the double digits. Every time I see a number like $19k it absolutely blows my hair back. There are a million legitimate criticisms to level against crypto but "the price keeps falling" is way, way too zoomed in. This isn't even the biggest relative drop in the last five years, let alone the entire history of crypto.
  - jfghi 4y ago
    To me it seems that as interest rates go up bonds will take the place of riskier investments. Down the road the interest rates will drop again but I don’t think that crypto prices will rise much until that happens. It’s been marketed heavily recently but hasn’t seemed to catch on as much as a marketer would hope.
  - imtringued 4y ago
    I want to buy your Bitcoin at 2013 prices.
epx 4y ago
Is there any cryptocurrency that is not a PoS?!
- elevaet 4y ago
  Piece of Shit?
- imtringued 4y ago
  Their corpses form mountains.
- flanfly 4y ago
  Bitcoin, Litecoin, Bitcoin SV, Bitcoin Cash, Raven coin, Zcash, Monero, Kadena, Ethereum Classic, Dogecoin, Shiba Inu and Flux. Eth Classic, Flux and Kadena are the only PoW smart contract platforms in the top 100 AFAIK.
BryLuc 4y ago
FlacoJones 4y ago
https://archive.ph/PiYYA https://archive.ph/PiYYA
fyvhbhn 4y ago
hestefisk 4y ago
I’ve been watching crypto from the sideline for a few years. In the last six months I have realised what it actually is: a big Dutch tulip Ponzi scheme but unlike what we saw in the dot com boom with VCs inverting in speculative start ups because of FOMO. When interest rates go up further and people get incentivised to put their cash in the bank to earn some low risk, yet boring interest rates on term deposits, I hope we will see this giant Ponzi scheme come crashing down like there’s no tomorrow.
- lamontcg 4y ago
  Cash is flooding out of Coinbase already. Be interesting to see what happens when they run out and can't raise any more, and people with their crypto on the platform become unsecured creditors in a bankruptcy. Another way to look at crypto is a banking system with no lender of last resort or controls like FDIC to prevent a systemic bank panic. The only real hope that the crypto system has is that billionaires who are still True Believers will step in to serve as lenders of last resort and buy it all up on a firesale, but if they instead don't choose to catch a falling knife it'll just fall. The crypto system as a whole has never yet had to survive a high interest rate sustained collapse of the external economic environment yet. The 2020 pandemic wasn't really a test because everything got immediately bailed out. Concretely, if Tesla is pretty screwed because nobody has money to buy cars any more and everyone is out of work, will someone like Musk toss cash at crypto to save it or not?
- curlftpfs 4y ago
  Yes this is copy and pasted on every crypto thread. Tulip Mania, dot-com bubble, fomo, a Ponzi scheme with no substitute for Charles Ponzi. It's so decentralized it's dangerous AND somehow simply controlled by a single Madoff-like entity. Do you have any thoughts about the subject of the article? If not please add another hot take like "crypto uses too much energy!"
  - LBJsPNS 4y ago
    Damn, your losses are that high, huh?
unboxingelf 4y ago
Here’s the best argument I’ve heard against Ethereum’s move to PoS, and why it’s “A Monumental Blunder”: https://youtu.be/gyP0uxxB6V8 https://youtu.be/gyP0uxxB6V8
neojebfkekeej 4y ago
When are we going to admit that blockchain is just a new type of data store, useful for a limited number of use-cases that require certain sorts of irreversible, immutable guarantees across a worldwide network of computational devices? Crypto is cool, in so far as any other new data storage technology is cool. It is not a new world order
- kranke155 4y ago
  It all depends on how large the addressable area is for irreversible, open-access, immutable data is. Right now it looks rather big from my POV.
Jeff77 4y ago

96 points by zonotope 4y ago

The future with Ether maybe.. and many don’t trust the fundamentals under ‘proof of stake’ so if anything it might just be Bitcoin left as the dominant cryptocurrency if the migration fails.

kloch 4y ago
ETC is also waiting in the wings with feature parity to ETH but remaining POW. Some hashpower has already migrated to ETC, doubling in the past two months: https://2miners.com/etc-network-hashrate https://2miners.com/etc-network-hashrate

purpleblue 4y ago

A couple of questions: 1) Will this decrease gas fees, which make using Ether and its ecosystem completely unusable? 2) Does proof-of-stake mean that the richer people in the ecosystem have more power?

arthurcolle 4y ago
1) ostensibly 2) yes
gweinberg 4y ago
It's not clear to me how this is supposed to help with gas. As I understand it, the reason gas costs so much is there are only so many transactions that can fit in a block, and the price is what you have to pay (competing against other customers) get your transaction through. It does seem that if the miners just have to prove they have stake and not do any work, it means the rich will get richer.
pcthrowaway 4y ago
1) Possibly a little bit since block time is supposed to decrease from ~13 seconds to 12 seconds. But it's not the primary goal. Side note, the network is generally more expensive during high-traffic times (due to the limited number of transactions which can be sent), but during low-traffic times (over the weekend for example) simple transactions could be made for ~$0.14 2) It means that if you want to participate in consensus directly, you need exactly 32 ETH to stake. People with smaller amounts of ETH can stake through staking pools though. Block-producing nodes do get to choose which of the transactions in the mempool get included, so in a sense, they have power (in the same way miners with higher hash-rate do currently). Not all the "richer people" will be running nodes though, as it does lock the ETH for a currently-indetermined amount of time. Unstaking isn't an option (yet), and if your node goes off-line, you'll be penalized by losing some of your stake
- e9 4y ago
  so what you are saying is that only very rich people will be able to participate because: - you need good hardware and access to good networks to meet the up-time guarantee s (can be solved with pooling the money I guess) - you need to have enough eth to spare locking up portion of it for years (this can only be solved if you find another person to join the pool and take your place by giving eth to you but there is no incentive for pools to offer this)
  - pcthrowaway 4y ago
    Actually, the second is definitely possible. There are many liquid staking pools, which tokenize your share of the stake, and allow you to trade it (usually at a modest discount to the current price of Ethereum) I believe the majority of staked ETH right now is actually pooled
    - e9 4y ago
      I see, so money is locked up but they'll deploy another smart contract that you have some stake in but you still have to find a buyer otherwise you are out of luck and your money is actually locked up
okwubodu 4y ago
1) Effectively no. I don’t think they even care anymore. 2) Rich people had more power under POW—miners aren’t cheap. What matters is the enforcement mechanism. Slashing remains a risk to every validator regardless of stake weight.
- rglullis 4y ago
  They "don't care" because the EF has been saying for at least 5 years that the way to scale transaction throughput will be through the myriad of roll-up systems. The idea is that people could use roll-ups as a "checkings account" and that they would only hold the funds that they don't want/need to move often at the base layer. With roll-ups, the funds are still secured by the base layer, so participants wouldn't need to trust the roll-up operators.
jlynn 4y ago
I'm not convinced proof-of-stake means less equity. PoW is very capex intensive between hardware and energy. Especially during a time when energy prices are soaring, the big players have access to extremely cheap electricity that keeps them profitable, while the small players shut down.

twstdzppr 4y ago

Seems kind of like a waste either way. Crypto was sort of neat years ago, but it hasn't amounted to anything useful

Hellion 4y ago
It’s amounted to a lot, actually. One of the stated goals of Bitcoin was to reduce government control. And it has, magnificently: in the drug trade. Seriously, online drug marketplaces have become massive and highly lucrative. Estimates vary anywhere between $700 million to over $1 billion each year. Cryptocurrencies have also become useful asset stores for the wealthy living in authoritarian countries. So much so, that an estimated floor of $3-4 bil of cryptocurrency assets during the peak was just that. I used to joke: if someone says they’re into crypto currencies, they’re either a tool or have good ketamine. Years later, that rule still shakes out.
- deleted 4y ago
  [deleted]
- easrng 4y ago
  But you don't use bitcoin to buy drugs, you'd want to use monero.
  - paulpauper 4y ago
    hmm but you still have to cash out and convert btc to monero or monero to btc . It's not as simple as use monero.
  - galangalalgol 4y ago
    Do people really use either? My impression is that most people use credit cards.
    - easrng 4y ago
      idk the people i know who buy drugs either use monero (online) or cash (in person)

endisneigh 4y ago

I find proof of stake to be ironic. Isn't the entire point of cryptocurrency to remove the centralization of power? Proof of stake is just an admission that those who have more, get more. Power waste aside, I find the purity of PoW and Bitcoin to be superior in fulfilling the nebulous goals of crypto.

dahdum 4y ago
PoW is much the same, those with more capex and opex for compute and power earn more. PoS cuts the opex, and makes the capex fungible.
- wyager 4y ago
  The opex is the part that tethers on-chain security to reality.
  - operator-name 4y ago
    Can you elaborate on why you think this is the case?
    - themoonisachees 4y ago
      Stealing private keys (through whatever means) is considerably easier than stealing a comparable amount of mining hardware then running it. It's not that big of a risk in reality of course, but there is still a considerable amount of security provided by the fact that obtaining enough compute for a 50% attack is harder than obtaining enough eth to do the same.
    - wyager 4y ago
      Key phrase to search - "nothing at stake problem"
      - operator-name 4y ago
        For the most part ethereum doesn't suffer from this issue.

rvz 4y ago

'The future of Ethereum, and the thousands of projects built on it is at stake in the switch to PoS.'

aliljet 4y ago

If the value of the currency has anything to do with the value of the energy spent, then there may be a significant shift away from a protected base value. And let's be clear, I'm thrilled. Waiting for those eBay GPUs as I write this.

timbit42 4y ago
The GPUs will be repurposed to mine other PoW cryptocurrencies.

tschwimmer 4y ago

After reading this article I looked into the actual process[0] to run a validator node and in my opinion it's quite an involved process. You need dedicated hardware with a large hard drive (with good durability!) and an unmetered high speed internet connection. You need to run two services at what seems to be near-production quality and you need to use monitoring tools like Grafana to manage them. Oh and if you make a mistake like restoring a backup of the server incorrectly your stake will get slashed and your Eth gets destroyed. Seems like an epic pain in the ass for a 4.1% yield (not to mention the capital required to stake). [0] https://ethereum.org/en/run-a-node/ https://ethereum.org/en/run-a-node/

ipnon 4y ago
The optimistic view of this is that you can run a node in a distributed payment and compute platform for a few thousands bucks. Consider the alternatives: the infrastructure running PayPal, the massive and archaic automated clearing house systems used by megabanks, whatever it is Western Union does to move money. You can participate in a distributed, open source alternative for what amounts to an affordable price for those in developed countries. I am not claiming you should do this! What I'm attempting to illustrate is that this momentum towards freer and more open systems is what drives the technical optimism in cryptocurrencies and blockchains. There seems to be a Moore's law effect dropping the price of what is currently gatekept by governments and megacorporations. Hard work is once again creating exciting innovations that at least have the potential to improve the world.
- e9 4y ago
  Can you elaborate more on the distributed compute platform part? How will that work and prevent down-time issues and other mistakes that will cause slashing?
  - ajhurliman 4y ago
    I think they're referring to being a single node in a distributed compute/payment platform.
- 4y ago

paulpauper 4y ago

The price keeps falling. It's like the bubble is already over. The biggest problem with crypto is it does not live of to its promises and does not solve any real world problems. It's a cool application of cryptography, but not something that will compete with the financial system or subvert tyrannical governments. It's sorta like a very expensive hobby that has enthralled the world. Whatever problem it does solve, does this mean it's worth $1 trillion still? Likely not.

nwiswell 4y ago
Bubble is over? Price keeps falling? When I first discovered Bitcoin it was trading in the double digits. Every time I see a number like $19k it absolutely blows my hair back. There are a million legitimate criticisms to level against crypto but "the price keeps falling" is way, way too zoomed in. This isn't even the biggest relative drop in the last five years, let alone the entire history of crypto.
- jfghi 4y ago
  To me it seems that as interest rates go up bonds will take the place of riskier investments. Down the road the interest rates will drop again but I don’t think that crypto prices will rise much until that happens. It’s been marketed heavily recently but hasn’t seemed to catch on as much as a marketer would hope.
- imtringued 4y ago
  I want to buy your Bitcoin at 2013 prices.

epx 4y ago

Is there any cryptocurrency that is not a PoS?!

elevaet 4y ago
Piece of Shit?
imtringued 4y ago
Their corpses form mountains.
flanfly 4y ago
Bitcoin, Litecoin, Bitcoin SV, Bitcoin Cash, Raven coin, Zcash, Monero, Kadena, Ethereum Classic, Dogecoin, Shiba Inu and Flux. Eth Classic, Flux and Kadena are the only PoW smart contract platforms in the top 100 AFAIK.

BryLuc 4y ago

FlacoJones 4y ago

https://archive.ph/PiYYA https://archive.ph/PiYYA

fyvhbhn 4y ago

hestefisk 4y ago

I’ve been watching crypto from the sideline for a few years. In the last six months I have realised what it actually is: a big Dutch tulip Ponzi scheme but unlike what we saw in the dot com boom with VCs inverting in speculative start ups because of FOMO. When interest rates go up further and people get incentivised to put their cash in the bank to earn some low risk, yet boring interest rates on term deposits, I hope we will see this giant Ponzi scheme come crashing down like there’s no tomorrow.

lamontcg 4y ago
Cash is flooding out of Coinbase already. Be interesting to see what happens when they run out and can't raise any more, and people with their crypto on the platform become unsecured creditors in a bankruptcy. Another way to look at crypto is a banking system with no lender of last resort or controls like FDIC to prevent a systemic bank panic. The only real hope that the crypto system has is that billionaires who are still True Believers will step in to serve as lenders of last resort and buy it all up on a firesale, but if they instead don't choose to catch a falling knife it'll just fall. The crypto system as a whole has never yet had to survive a high interest rate sustained collapse of the external economic environment yet. The 2020 pandemic wasn't really a test because everything got immediately bailed out. Concretely, if Tesla is pretty screwed because nobody has money to buy cars any more and everyone is out of work, will someone like Musk toss cash at crypto to save it or not?
curlftpfs 4y ago
Yes this is copy and pasted on every crypto thread. Tulip Mania, dot-com bubble, fomo, a Ponzi scheme with no substitute for Charles Ponzi. It's so decentralized it's dangerous AND somehow simply controlled by a single Madoff-like entity. Do you have any thoughts about the subject of the article? If not please add another hot take like "crypto uses too much energy!"
- LBJsPNS 4y ago
  Damn, your losses are that high, huh?

unboxingelf 4y ago

Here’s the best argument I’ve heard against Ethereum’s move to PoS, and why it’s “A Monumental Blunder”: https://youtu.be/gyP0uxxB6V8 https://youtu.be/gyP0uxxB6V8

neojebfkekeej 4y ago

When are we going to admit that blockchain is just a new type of data store, useful for a limited number of use-cases that require certain sorts of irreversible, immutable guarantees across a worldwide network of computational devices? Crypto is cool, in so far as any other new data storage technology is cool. It is not a new world order

kranke155 4y ago
It all depends on how large the addressable area is for irreversible, open-access, immutable data is. Right now it looks rather big from my POV.

Jeff77 4y ago