Over 2 percent of the US’s electricity generation now goes to bitcoin
US government tracking the energy implications of booming bitcoin mining in US.
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Eth has moved to staking, which is good for the environment because it doesn’t have a bunch of computers competing for transactions, unlike bitcoin - instead the network picks a computer for the transaction and takes staked coin if the computer does something nefarious to the transaction. The problem though is that staking requires coins / money. Mining requires electricity and can make money (albeit pennies depending on your setup and electricty costs). For this reason, it’s not just bitcoin that’s a problem, but a whole bevy of other mining-based coins like bitcoin cash, cudos, etc. That problem (the desire for folks to spin up new farms to mine crypto coins which they can mine using the spare CPU/GPU cycles) is likely not going to go away soon.
The benefit of PoW is that it is tied to real world physics and markets. The price of bitcoin is derived from the price of electricity, computing power and the supply. PoS is tied to the price of what the owners of the coins will sell them for and who wants them, in ethereums case there’s an unlimited money printer that could crash the price at any moment - like the usd, but the usd has a huge ass army behind it
The benefit of PoW is that it is tied to real world physics and markets.
Eh.. physics in the sense that faster processing means faster processing but it’s a very wasteful process. It’s like ordering a meal from hotel room service and having 100s of people bring you what you ordered. Proof-of-work-wasted.
The price of bitcoin is derived from the price of electricity, computing power and the supply.
There’s a huge part of PoW that is left up to chance. Individual miners will spend lots of money on an expensive rig and get pennies. Some miners will join mining pools to split the wins but those generally are shared according to your computing power, so pennies. Pennies and unless you’re doing things right, huge electric bills. Hell, even death in some cases. There’s a chubbyemu video about a kid who ran too many miners in his room, which got too hot and he suffered heatstroke.
PoW was great to begin with, but it is the reason why crypto has such a large carbon footprint.
PoS is tied to the price of what the owners of the coins will sell them for and who wants them,
Can you elaborate? I think you (or maybe I) am misunderstanding how PoS is priced. From what I understood, it was loosely tied to bitcoin (because investors will diversify into both coins and bitcoin has much more volume / market cap). As I understand, all cryptos are priced at what a buyer would pay for it. It’s not like BTC miners can ask for more money because the price of electricity went up. I don’t think 1 BTC would sell for $1,000,000 USD in 2024 just because it was scheduled to do so. If a competitor to BTC came out and was better (e.g., SEI) I think that would affect BTC’s price. I don’t see how ETH would be any different.
Proof of Stake at the end of the day is just saying “instead of joining a mining pool and paying my electricity and hardware to do a lot of wasteful work, I’ll instead pick another entity to do the mining for me and give me a share of the profits”. Proof of Stake is still Proof of Work, it’s just sort of a curated proof-of-work where the network picks one machine at random to do the work (depending on the amount staked with / trusted in that machine and the administrator of that machine). It works well enough to provide an estimated APY in lots of cases, which isn’t something you can get from Proof of Work mining BTC.
Physics in a sense of the current limits of computing and energy generation are based on physics. If I come up with a faster computer I get paid more and I also further secure the network. It’s a way to insure against technology advancing enough to break the network. If I come up with free electricity I only have to worry about the cost of compute. And bitcoin miners can and do ask for more money if the price of electricity goes up. They do this by holding onto mined coins for longer creating a supply shortage. The big exchanges often get their liquidity pools from miners so if the miners don’t sell they have to pay a higher price set by the market. And finally if PoW is so bad why do you admit that the price of PoS is tied to it? If bitcoin went PoS its fundamentals would collapse and most of the crypto market along with it.
Physics in a sense of the current limits of computing and energy generation are based on physics.
Moore’s law, sure. The same goes for Proof-of-Stake.
If I come up with a faster computer I get paid more and I also further secure the network.
If you come up with a faster ASICs miner you get paid more, sure. I won’t knock BTC mining for aspiring electronics engineers. Get that coin, baby!
It’s a way to insure against technology advancing enough to break the network.
But you having a faster computer means you get paid more, which means you would be advancing the technology.
If I come up with free electricity I only have to worry about the cost of compute.
Electricity is not without costs. Solar panels, hydro generating equipment, the cost of copper wire and magnets, the cost to maintain the equipment, batteries, etc.. But yes, if you optimize for paying a low amount of electricty you end up only needing to worry about maintaining your mining hardware.
And bitcoin miners can and do ask for more money if the price of electricity goes up.
Well, they don’t ask..
They do this by holding onto mined coins for longer creating a supply shortage.
..they HODL, right? Same thing anyone who owns coin would do if they wanted the price to go up.
The big exchanges often get their liquidity pools from miners so if the miners don’t sell they have to pay a higher price set by the market.
Supply and demand.
And finally if PoW is so bad why do you admit that the price of PoS is tied to it?
Because BTC owners swap coins between ETH (and all other eth tokens) and BTC? Because more ETH is bought with BTC than it is with fiat money? I’m no expert, I’m just making guesses here but it seems to me if a bunch of kids got rich because they mined or bought BTC early on, some of they might want to diversify into ETH and all other tokens?
Any ties between BTC and ETH are purely market related. They have no bearing on Proof of Work or Proof of Stake.
If bitcoin went PoS its fundamentals would collapse and most of the crypto market along with it.
How so?
Bitcoins price is derived from the cost of compute, energy and a finite supply. These are the fundamentals of bitcoin. Just like the price of gold is set mostly by the cost of machinery, energy and labour to pull it out of the ground and then the extra cost of maintaining or protecting the gold reserves, there’s also a finite supply. Bitcoin going PoS would be a bit like the current gold system saying we’re not going to take it out of the ground any more but instead we’re going to say who ever owns the current stockpile gets an imaginary credit for more gold. Any new gold entering into circulation will only be in the form of gold contracts.
PoW / PoS has no effect on how finite a crypto’s coins are.
I know. It’s one of the fundamentals of bitcoin though and that’s what we were talking about
Also fundamental to ETH mining.
Proof of Stake at the end of the day is just saying “instead of joining a mining pool and paying my electricity and hardware to do a lot of wasteful work, I’ll instead pick another entity to do the mining for me and give me a share of the profits”. Proof of Stake is still Proof of Work,
It's literally not this. Proof-of-stake is basically saying "I'm allowed to author the next block because some math formula says a coin I hold is eligible to do this, and here's a signature proving I own the coin". It's not proof-of-work, it's proof-of-ownership.
It's literally not this. Proof-of-stake is basically saying "I'm allowed to author the next block because some math formula says a coin I hold is eligible to do this, and here's a signature proving I own the coin". It's not proof-of-work, it's proof-of-ownership.
It’s literally this (I’m relying on the dictionary defintion of literally which also includes figuratively.
You’re right about proof of stake, in that it gives the machine the ability to write the next block. But that machine still has to do work. That work still must be proved. The only difference is because the machine was picked it doesn’t have to compete with millions of other machines doing the same work.
I’m sure you realize the work involved in Proof of Work isn’t really all that much work for your machine to do, it’s more about getting that work done faster than any other machine you are competing with. So, Proof of Work is more aptly “race to the right answer” with other machines validating that correct answer. Redundency and verification in computer systems is a good thing, but we don’t need millions of machines running the same verification.
As for which machine gets picked, that’s based on the amount of coin staked in that validator / miner / processor / machine / whatever you want to call it. So in a simplified example if 50% of the coins were staked at validator A, 25% at validator B and 25 more validators each at 1%, those percentages are a sort of weighting of the roll of a dice to favor those validators to that amount.
As a validator, you still have to do the work, possibly of other validators (redundency, etc..). If the system picks validator A to mine the next block and validators B and C to confirm validator A did it correctly, validator A earns the reward for that block. The only reason validator A got a chance to do this was because of the people who staked with validator A, so validator A rewards everyone who staked a percent of the reward based on how much each address has staked with validator A. This gives person who stakes with that validator an incentive to do so.
If on the other hand validator A submits the work and it is considered invalid by the other validators, the network (not sure of specifics, contracts I imagone) can pull from the funds from the validator which would be missing from the invalid block, hurting the validator and providing the validator an incentive to correctly validate the work.
If the systems were the same in this hypthetical example, with validator A, B and 25 more validators (a total of 27), with a hypothetical 2 validators validating the chosen validator, we have the same mechanism of action going on cryptographly, (doing the work of validating transactions and trying to write to the block chain, being stopped by other machines to cross-check that it is correct), you have 3 machines running in proof of stake vs proof of work’s 27 machines. There’s still 1 winner of that 27vs1, but the proof-of-stake system has weighed the chance of the winner at who has the most at stake, or who people have entrusted the most with their coins; whereas the proof-of-work system is largely left up to the 3 fastest machines, usually determined not by processing power but by network speed and geographic location.
Ethereum does not have an unlimited money printer. It has a specific inflation rate and network protocol controlling it. Its fiscal policy has changed over time, PoW is better, but you don't have to make stuff up to make that point.
I didn’t know that. What is the protocol? I know last bull run they dumped huge amounts of ether on the market at the two peaks
Somebody more knowledgeable than me about Eth can detail that, it's gotten a lot more complicated in the past few years. But suffice to say a clear economic policy does exist, but it burns coins and/or mints them according to several changing variables within the eth ecosystem, for example, gas fees. But the rules are all out there, written in protocol, for anybody to follow and build around, otherwise the whole system would fail to even operate as a blockchain.
I was just answering your post to basically that Vitalik or whoever doesn't just have a money printer they can unilaterally turn on.
