This is not correct. Gas fees are essentially an auction for blockspace, the basefee is adjusted dynamically via EIP-1559 but the tip is essentially an auction (highest bidders go first). If demand outstrips blockspace gas fees go up, independently of ETH price. If supply of blockspace is greater than demand, then gas fees go down irrespectively of ETH price.
EDIT: To clarify. What you say would be the case if gas fees were a set amount of ETH. Then, of course, gas fees denominated in $ would be totally correlated with ETH price. But this is not the case. Gas fees work as explained above and thus are, in principle, decoupled from ETH price. Although some correlation might occur due to market dynamics (bull markets bring network activity, bear markets take away network activity) but is not built-in into the gas price mechanism.
> - As price increases it's more attractive to mine.
This is correct.
> That means devs will increase the mining difficulty.
The mining difficulty adjusts itself, the devs do not need to modify. Same as in Bitcoin, it's designed to adjust to maintain an even block production. You might be thinking of the difficulty bomb that needs to be defused once in a while but it has nothing to do with this topic.
> It also makes Ethereum Visa, so what's the point?
Not following.
Did you mean extra steps or fewer? Either way, I think it mostly remains to be seen on the centralization question. The newer-fangled PoS chains are certainly more centralized than Bitcoin or Ethereum, but nobody has actually tried distributing tokens broadly through a bunch of years of PoW and only then switching to PoS. It could plausibly end up being quite a bit more decentralized than Bitcoin.
Eh I was trying to be extra clever but, that's practically a synonym for being opaque.
To zoom out a little, I just think these systems have a kind of reverse entropy. Think about all the "decentralized" systems we started off with: email, newsgroups, payments, web apps, State government in the US. They kind of congeal into walled gardens, one and all, and that's probably because frog boiling is very easy (give up an imperceptible amount of control for a hugely perceptible amount of convenience) and the end goal is very profitable.
Like, any company would love to be able to scan every Gmail user's email for ad leads. Holy shit. And we let that happen because of... idk search, anti-spam and storage so large you never have to think about it. Maybe a good deal, honestly, I don't know.
And we're seeing this happen in crypto right? The pitch of literally every crypto service is "simple and you'll get rich". Well this is the same thing: people are giving up imperceptible levels of control for super perceptible levels of convenience. And sure, that's their choice. And we can laugh in people's faces when they get rug pulled saying "not your keys not your crypto" but that's not gonna win us any friends. And we'll be laughing while the blockchains centralize (as they are already doing, right now).
So I think PoW is centralization with extra steps. I think PoS is also centralization with extra steps, but the huge buy-in bakes centralization in right at the beginning, so it's fewer steps than PoW. Crypto was supposed to democratize money and payments! Why is there a $130k entrance fee? And then for those who can't afford that, how many of them will really band together to buy stake shares? How much of that will be a scam? How much of that will be big conglomerates who actually run the nodes, give you your 2% return, but meanwhile they've seized control of the Ethereum network, all while you funded it! So if we're taking crypto's values earnestly, I really do think we have to see PoS as an acceleration towards centralization and a big step backwards.
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I can't even get excited about some potential positive outcomes (PoS happening, energy use declining, centralization also happening, crypto dying, switches to PoS causing schisms, crypto dying, nations banning crypto mining, crypto dying) because so many good, honest people have been hoodwinked into this bonkers scheme and they'll lose so, so much money.
And honestly, for what? So banks can't stop you from making an ACH transfer for weed? Seriously, just get out there and vote already.
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Broadly I think this a problem with the fundamental libertarian underpinnings of blockchain currencies. They sort of presuppose that everyone starts from the same place, and then you're rewarded in line with what you contribute to the network. But in the world we live in, there's huge inequality--we absolutely do not start from the same place. So unless your protocol has some mechanism to even things out, it'll just reproduce that inequality.
And that inequality has a lot of second order effects. Rich people can buy a lot of mining or a lot of stake. They can afford to start businesses like exchanges or crypto news websites (or buy them after they get popular). They can afford to buy ads pumping their coin, or astroturf campaigns against changes they don't like. They can build services on the chain and collect rent. Same as it ever was.
There's this whole conundrum in progressive politics about why some people so consistently vote against their own self interest. There's a lot of reasons, but one I thought was just absolutely wrong was "well, everyone thinks they'll be rich someday"--so they vote against taxes and regulation and such. But that is 100% the dynamic in crypto right now. I honestly don't see any positive outcome from any of this, I really don't.
Just to say one thing: something I like about PoS is that it forces validators to keep skin in the game. If validators do anything that screws with the legitimacy of the protocol (like big validators getting together to collude on some nefarious action) then that will affect the value of the asset that they are forced to hold in order to be a validator. So they have an incentive to run the network in the way users expect.
FWIW: there is a good (in my view) decentralized staking protocol called RocketPool just launched, which I hope will be popular among those who don't have $130k.
I'm not so sure it's a given that corrupting the network outright destroys it though. That defense mechanism assumes at least a few things:
- Enough people would notice
- Enough of those people would sell their ETH as a result
- Enough of those people would sell enough of their ETH
I think it's pretty plausible some off-chain action would occur instead, like a fork or some governance issue. It seems unlikely that the majority of ETH holders would participate in a mass sell-off that would bankrupt many (most?) of them, to say nothing of the social (my whole life is ETH) and investment (my whole business and the businesses/careers of all my friends are ETH) costs.
You could also imagine a conglomerate doing this for "noble" reasons. "We reversed transaction Y because they're child pornographers" or whatever the worst thing is in the crypto community (maybe they discover Hillary Clinton's wallet address or something). This could be enough grey area for most people to not pull a run on ETH.
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(Sorry hit Submit by accident, if you can believe it)
Rocket Pool looks, idk it makes me nervous. From a quick read (could be getting this wrong) they're essentially selling their tokens for ETH, but you can't redeem your tokens to get your ETH back unless the staking pool can cover it, which I think they currently can't because the Beacon chain isn't sending ETH rewards yet. So you spend fiat for ETH, and you spend ETH for an IOU.
I guess my preference here would be something like a straightforward DAO where people buy shares of a staking operation and there some kind of governance when they want to leave. Anything more complicated than that and my spider sense starts tingling.
But as a broader comment, one of the things that makes me (and probably others) suspicious about the crypto space is that it's just littered with small and large reminders of how rich you're gonna get. Like the docs about their rETH token is a green graph going up tremendously with an example of how you're gonna make a 25% profit [1]. Like, I'm not saying all examples should include a losing money case and all graphs should be red lines going south, but there are real MLM vibes everywhere you look.
[1]: https://docs.rocketpool.net/guides/staking/overview.html#the...
Also I didn't know the network would automatically set the difficulty, but yeah good to know.
PoS centralizes to the rich, which is the existing payments system, e.g. Visa.
PoS is not more centralizing than PoW. I explained this in detail in another post: https://news.ycombinator.com/item?id=29390152
Feel free to counter the points made there.
[0] https://www.coindesk.com/business/2021/11/19/banksy-painting...
And yeah, I do think probably most people still think in fiat, so if you kind of elide all of the ETH/GWei steps and say:
> Hey, buy a mining rig for $2k, you'll make $60/day after electricity costs, you'll make your investment back in a month and after that it's pure profit
That's all people care about, and rightly so. If, on the other hand you say:
> Hey, buy a mining rig for $2k, you'll lose $10/day after electricity costs... that's it
That's not super appetizing right. And the only way the system makes fiat is if ETH is worth fiat. You can't abstract it out of the system, it's the only reason the system is relevant at all.
If Visa could be shared by anyone (without restriction) that is willing to stake capital into it, if it took at least 66% of the shares to try to collude, if it managed to do it at a fraction of the cost of the existing financial infrastructure, if it were uncensorable by governments and if it continues to be permissionless... then Mission. Fucking. Accomplished.
Meta aside, you described the stock market. You don't even need 66%, just a big percentage of shareholders (there are efforts to do this with big evil companies like Exxon).
Uncensorable is a pipe dream, crypto isn't beyond the reach of governments, as China's mining ban has demonstrated. And you're wildly mischaracterizing the costs of the existing payment systems vs crypto; maybe you think there wouldn't be all the ancillary bureaucracies and services, but that's literally all the exchanges and such are so you'd already be wrong.
Unlike most companies in the stock market, the fact that Ethereum has a low point of entry leads to two things happening:
- The sheer amount of people needed to be involved in collusion would make such an attack practically impossible.
- The chance of such an attack being profitable is so low to make it economically unattractive. An attack of the network would lead to a loss of the value of Ethereum itself, so unless those in collusion have other assets on the chain that are more valuable than the staked Ethereum itself, it will end up being net negative.
> Uncensorable is a pipe dream (...) China's mining ban has demonstrated.
China may ban mining as much as they want, this is not the uncensorable part I am talking about. What I am talking about is that there is no single entity that can stop you from making transactions on the blockchain. Even if someone is deemed "subversive" in China and gets denied a service by the social credit system, they can still have access to the blockchain, buy, sell and use services.
We don't need even need to talk about China. Just think of all the people who had problems with Paypal and had their funds frozen with no recourse. Think of all the people that live in countries with strict capital controls and can not move their money if they want to. This is what I mean by "uncensorable".
> you're wildly mischaracterizing the costs of the existing payment systems vs crypto
Currently, it costs more (a lot more) to make even simple transfers on the blockchain, but as the technology scales and new solutions come up, these will go down. There will also be insurance, fraud-detecting and even conflict-resolution [0] systems based on the blockchain, so at one point the UX will be just as good as swiping a credit card.
[0]: https://kleros.io
As far as censoring or control or whatever, sure there are institutions that can do this (and have): governments and banks. All they have to do is ban crypto just like they ban buying anything else. It's so, so super easy.
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Ok so, to be a little less antagonistic, I also think banks are junk and buying things should be private, etc. I think those things are a little at odds with preventing things like the drug trade and modern slavery, but I don't think the financial system is the place to attack them.
Broadly I just don't think blockchains are necessary for payments, privacy, distributed computing, you name it. Literally everything anyone can "imagine" (insurance, fraud detection, oooooh) already exists and works great.
Maybe it's corny but, I think these problems are best solved by functioning democracies. Elect people who think bank regulation is important, etc. Erecting a shadow financial system based on blockchains seems about the worst way to it.
- Please continue to talk about PoW as a strawman for blockchain in general.
- "Governments and banks can just ban crypto" is beyond missing the point. The more "banks and governments" try to shut it out and stop people from using it, the more people will be marginalized and get to the point where crypto will be their only choice. Black markets thrive in authoritarian societies, not free ones.
- The world does not care about what you think. "Oh, you can solve that with functioning democracies!" No shit, genius, what a revelation. Now go tell that to the people in Venezuela who can not run a fucking grocery stand without the government telling them they are not allowed to take a profit, and tell the others that it is okay to starve to death or being forced to flee to Colombia because "blockchain is burning the planet".
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Just like 99% of the "critics", you don't know what you are talking about you and you project your totalitarian tendencies onto others, while having this childish arrogance of claiming to have a monopoly on what is moral and just.
At least now I am certain that it is just a waste of time to discuss with you.
- Gas fees are based on price
- As price increases it's more attractive to mine. That means devs will increase the mining difficulty. That means more electricity use.
> The transition to PoS cuts the energy consumption by 99.95%, btw.
It also makes Ethereum Visa, so what's the point?