Ethereum has finally thrown in the towel in the hashrate race. The pastiche of Bitcoin has changed since Proof of Work to Proof of Stake.
Difference between PoS and PoW
PoW, or “proof of work”, cryptographically proves that a certain amount of energy has been spent. It is a core mechanism of the Bitcoin protocol.
In short, miners seek by trial and error a “hashes” particular. They get it by entering a block of data into the famous SHA-256 algorithm. The latter takes as input any amount of data and converts it into a hashes :
You could give the Bible as input which the SHA-256 algorithm would always give you hashes Output 64 digits and letters. For Bitcoin, data provided as input includes:
- Transactions of the last ten minutes (or the roots of the Merkel tree)
- the hashes of the previous block (hence the expression BlockCHAIN)
- A released (a number that miners fluctuate wildly to generate hashes expecting to find one that starts with the correct number of zeros)
- A Time stamp (time stamp)
this block (hashes) is then verified by thousands nodes spread around the world. It is automatically rejected if it does not respect the rules of the protocol.
However, since the energy provided by the miners is not free, the latter are encouraged to behave in a virtuous way. Not to mention the reward of 6.25 BTC per block that would give them a pass.
Ethereum worked the same before the “merge”. But as they say, the electricity used by the miners would be a waste, cutting off the electron population… Not to mention the CO2 emissions… Therefore, it would not be possible to agree on the authenticity transactions, without ambiguity on anything, simply by talking to each other?…
This is what the Ethereum PoS system seeks to do by hiring only nodes (collectors). To become a node 32 ETH must be put in escrow.
The validations are collected in committees every 6.4 minutes according to a pseudo-random process called RANDAO. Each committee includes at least 128 validators and only one of them is chosen to create a block which is verified by the other 127 validators.
The validators earn an annual rate of 5% per year, but the penalty system is mainly (the “slashing”) that encourages people to follow the rules. Depending on the fault, a validator can lose between 0.5 ETH and all of their 32 ETH…
This way of doing things is in stark contrast to Bitcoin. Miners who violate the protocol (badly formatted block, invalid transactions, fork…) do not risk having their machines confiscated… At worst, a little electricity will be wasted.
Where the shoe fits…
First of all, the quantity of ETH is expected to remain constant. Therefore, it is predicted that the caste of collectors will get richer and richer, without doing anything … By the way, 10% of the 120 million ETH in circulation is currently deposited in escrow (Proof of Stake).
Furthermore, slashing is a sword of Damocles that will cause bow collectors to bow down before any change in protocol. To be an ETH collector is to live in fear of failure without having a voice (written by Comrade Vitalik).
Another gait: centering. A blockchain is centralized where a handful of actors can exercise unilateral control over its operation and development, ad vitam aeternam.
Isn’t that what is likely to happen with Ethereum? What if a group with evil intentions gains control of the majority of the nodes ?
End of the game. Conversely, in the PoW system, more machines could be purchased from mining regain control.
Just three entities control more than half of ETH nodes: Lido, Coinbase and Kraken:
Some will argue that the situation is similar when looking at BTC mining pools. Sure, but miners can leak in seconds if their pool starts doing unholy things like censoring transactions. On the other hand, it takes 6 to 12 months to mine ETH from Lido…
And while miners are spread across more than 130 countries and regions, Coinbase and Kraken have offices in the United States. The vulnerability to state attack is enormous.
It is also much easier for an attacker to buy and resell ETH than mining machines.
Finally, can we talk about decentralization as Vitalik Buterin continues to influence the protocol. It is not for nothing that Satoshi Nakamoto has gone and thrown away the keys to his million BTC.
In contrast to Vitalik who did not hesitate to pre-mine 70% of the ETH. Let’s never forget that the founders were offered 18% of the pre-mined 60 million ETH, and a few thousand people inside were able to buy the ETH for $0.30 each…
In short, the shameful and pale imitation after disarmament, it will soon be categorized as “security”. The end of the masquerade. Monetary hegemony is always a fight to the death.
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Journalist reporting on the Bitcoin revolution. My papers deal with bitcoin through geopolitical, economic and libertarian prisms.