Indie developer and bitcoin supporter Udi Wertheimer created some buzz within the Twitter community earlier Monday after claiming a Proof-of-Stake (PoS) based performance reward system for staking instead of punishment for those who don’t.
Wertheimer, who is a known critic of Ethereum, believes that the PoS reward system is not exactly a performance reward. With PoS staking, a user cannot do anything with the ETH they have staked, and those who do not receive their tokens and participate in other network activities are not rewarded.
Days away from the Ethereum upgrade, the sneakiness of the PoS system did not sit well with the Ethereum community, including co-founder Vitalik Buterin.
Buterin responded to Wertheimer’s criticism by saying that bitcoin mining is not much different from staking in PoS, because Proof-of-Work (PoW) mining “penalizes anyone whose percentage of hash power is lower than their percentage in the token supply . »
And PoW penalizes anyone with a smaller percentage of hash power than their percentage of coin supply ☺️
(Actually, it penalizes much more than that because of profit – vitalik.eth (@VitalikButerin) September 12, 2022
The PoW penalizes anyone whose percentage of hash power is lower than their percentage in the token supply ☺️. (Actually it penalizes much more than that because of profit)
Wertheimer was quick to remind Buterin that miners and holders are two different layers that don’t necessarily overlap in the PoW ecosystem, although the same is not true for the PoS system. He also explained that due to the loophole in the reward system in the case of Liquid Staking, it could be expected that there will be an overlap of holders and stakeholders.
Also read: The Merger: How will the move to PoS affect the ETH ecosystem?
Another user claimed that the refund comes from gas fees the user paid for processing transactions. However, Wertheimer was quick to point out that the fee per block averages only 1% of the total reward.
people expect a 2-5% “return”, if you only include fees, they get a 0.03% return, so, umm, ask them if they think that’s a great guess
— Udi Wertheimer (@udiWertheimer) September 12, 2022
People expect a 2-5% ‘return’, but if you just count the fees, they’re getting a 0.03% return, so, uh, ask them if they think that’s great, I guess . — Udi Wertheimer (@udiWertheimer) September 12, 2022
Therefore, the rest of the yield reward must come from elsewhere, and many believe that this could come from issuing more ETH, making the value of the existing ETH lower and inflated.
If ETH devs decide to print more ETH and give it to ‘stakers’, that is not a result but token inflation at the expense of holders.
1st principles: if they increase promised reward to 50%, does it mean they created 50% return? It’s not.
ETH is already great, no need to sh*ta https://t.co/SCaUbn9VTy
—Jordi Alexander (@gametheorizing) July 26, 2022
If ETH developers decide to issue more ETH and give it to people who “pledge their assets”, it is not a return but an inflation of tokens at the expense of the holders. First Principles: If they raise wagering rewards to 50%, does that mean they’ve created a 50% return? No. ETH is already awesome, no need to invent stuff https://t.co/SCaUbn9VTy — Jordi Alexander (@gametheorizing) July 26, 2022
With the Merger, which is scheduled between September 13 and 15 depending on the hash strength of the network, Ethereum will see a move from a PoW-like mining consensus to a PoS-like consensus. Ethereum developers and supporters claim that this evolution will make the network more environmentally friendly and scalable. However, critics have pointed to the centralized aspect of the upgrade and how the move can make the Ethereum network more vulnerable to security issues.
