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The cost is all the money paid to validators, which is currently less than the revenue the network receives. This is on the ultrasound money website and also to

The cost is all the money paid to validators, which is currently less than the revenue the network receives. This is on the ultrasound money website and also token terminal (and a few other places) The cost of running the validators is irrelevant to Ethereum (though it is tiny), it'd be like saying you have to calculate employees lifestyle costs to figure out the "real" cost to a company. The cost is the wages you pay the employees (the rewards given to validators) not how much the validators spend.

lottin 4y ago
Sorry, aren't these "validators" part of the network? They run the network, don't they? The money that they get paid is therefore revenue, not a cost, from the standpoint of the network.
- aljungberg 4y ago
  It seems like you’re making a semantic argument to equate the Ethereum network with its validators. That seems confusing. Here are some examples of how “A runs B” does not imply “A == B”: “Employees” are part of a company, they run the company, don’t they? Yet the cost of having employees is not “therefore revenue” from the standpoint of the company. “Drivers” are a part of Uber, they deliver the service, don’t they? Yet the money paid to drivers reduce Uber’s profits. I think where your argument runs into trouble is “from the standpoint of the network”. If you want to equate the network and its validators, to say they are the same thing, then your sentence becomes, “The money [the validators] get paid [by the validators] is therefore revenue, from the standpoint of [the validators]”. That’s non-sensical. You can’t give yourself money and say it’s revenue. Either these two things are in fact not the same thing and we can analyse the cashflow of “Ethereum the network” separately from “the validation service providers”, in which case Ethereum is paying out less than it’s taking in, so it is profitable. Or they are the same thing, in which case the “profit”, to the extent you can say a virtual entity like a network can have such a thing, is even higher. This is because whatever costs the validators bear are less than the ETH they receive is worth. This is true if we assume validators are rational actors (they wouldn’t validate if they were losing money doing so). And even if we take away the assumption that they are profit motivated (maybe they’re all doing it as charity work for some higher purpose), the cost of running an Ethereum validator is tiny, so we end up in the same place: outgoings are smaller than receipts when considering the whole. (The fact that Ethereum the network “burns” its receipts and then “mints” its outgoings to the validators does not affect this calculation since it’d work out the same if Ethereum paid validators from fees directly.)
  - lottin 4y ago
    Seriously, this isn't rocket science. Ethereum provides a service, namely it stores data and does some computations in exchange for a fee. Ethereum users pay a fee and in return they have their computations done. By definition, Ethereum is profitable if and only if the fees that are paid by its users exceed the costs that are incurred by whoever is in charge of doing the computations and keeping the network running. (I thought these were the "validators" but I might have got the terminology wrong, apologies if this is the case.) Therefore we need to know, on one hand, the total amount of fees paid by the users and, on the other hand, the total amount of costs incurred by the network (i.e. by all the entities that do the computations and run the network), over a particular time frame.
    - aljungberg 4y ago
      Whatever that number is, it will be equal or less than the number already discussed. The network “hires” contractors to provide the services you mentioned and it pays a known figure for that. Not much else to it really. Since all we are discussing is whether the network is profitable or not in this thread we don’t need to dig into more specific analysis of the service providers’ internal costs (and indeed that would be difficult since they are globally distributed with different attendant costs and efficiencies). Just to note they are unlikely to themselves be making a loss is sufficient.
      - lottin 4y ago
        No, the costs incurred in providing a service is exactly what needs to be quantified in order to determine whether the provision of that service is profitable. If you insist that the contractors must be excluded from the analysis (for some reason), then you have to admit the possibility that the network is being subsidised by the contractors (as would occur if they were operating at a loss), at which point the entire concept of profitability of the network becomes rather meaningless. So you can't exclude the contractors. And you can't simply assume that contractors are unlikely to be making a loss either, because that's exactly the question that we're asking.
    - 4y ago

lottin 4y ago

Sorry, aren't these "validators" part of the network? They run the network, don't they? The money that they get paid is therefore revenue, not a cost, from the standpoint of the network.

aljungberg 4y ago
It seems like you’re making a semantic argument to equate the Ethereum network with its validators. That seems confusing. Here are some examples of how “A runs B” does not imply “A == B”: “Employees” are part of a company, they run the company, don’t they? Yet the cost of having employees is not “therefore revenue” from the standpoint of the company. “Drivers” are a part of Uber, they deliver the service, don’t they? Yet the money paid to drivers reduce Uber’s profits. I think where your argument runs into trouble is “from the standpoint of the network”. If you want to equate the network and its validators, to say they are the same thing, then your sentence becomes, “The money [the validators] get paid [by the validators] is therefore revenue, from the standpoint of [the validators]”. That’s non-sensical. You can’t give yourself money and say it’s revenue. Either these two things are in fact not the same thing and we can analyse the cashflow of “Ethereum the network” separately from “the validation service providers”, in which case Ethereum is paying out less than it’s taking in, so it is profitable. Or they are the same thing, in which case the “profit”, to the extent you can say a virtual entity like a network can have such a thing, is even higher. This is because whatever costs the validators bear are less than the ETH they receive is worth. This is true if we assume validators are rational actors (they wouldn’t validate if they were losing money doing so). And even if we take away the assumption that they are profit motivated (maybe they’re all doing it as charity work for some higher purpose), the cost of running an Ethereum validator is tiny, so we end up in the same place: outgoings are smaller than receipts when considering the whole. (The fact that Ethereum the network “burns” its receipts and then “mints” its outgoings to the validators does not affect this calculation since it’d work out the same if Ethereum paid validators from fees directly.)
- lottin 4y ago
  Seriously, this isn't rocket science. Ethereum provides a service, namely it stores data and does some computations in exchange for a fee. Ethereum users pay a fee and in return they have their computations done. By definition, Ethereum is profitable if and only if the fees that are paid by its users exceed the costs that are incurred by whoever is in charge of doing the computations and keeping the network running. (I thought these were the "validators" but I might have got the terminology wrong, apologies if this is the case.) Therefore we need to know, on one hand, the total amount of fees paid by the users and, on the other hand, the total amount of costs incurred by the network (i.e. by all the entities that do the computations and run the network), over a particular time frame.
  - aljungberg 4y ago
    Whatever that number is, it will be equal or less than the number already discussed. The network “hires” contractors to provide the services you mentioned and it pays a known figure for that. Not much else to it really. Since all we are discussing is whether the network is profitable or not in this thread we don’t need to dig into more specific analysis of the service providers’ internal costs (and indeed that would be difficult since they are globally distributed with different attendant costs and efficiencies). Just to note they are unlikely to themselves be making a loss is sufficient.
    - lottin 4y ago
      No, the costs incurred in providing a service is exactly what needs to be quantified in order to determine whether the provision of that service is profitable. If you insist that the contractors must be excluded from the analysis (for some reason), then you have to admit the possibility that the network is being subsidised by the contractors (as would occur if they were operating at a loss), at which point the entire concept of profitability of the network becomes rather meaningless. So you can't exclude the contractors. And you can't simply assume that contractors are unlikely to be making a loss either, because that's exactly the question that we're asking.
  - 4y ago