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Ethereum staking – More sustainable crypto

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Re: Ethereum staking – More sustainable crypto

#71

Post by DennisP »

jude- wrote: post #64
DennisP wrote: post #62

Earlier quoted context omitted.

> Coins minted from staking would need to be continuously re-staked in order to maintain current profitability relative to your competitors Everybody gets the exact same rate of return regardless of how much they have staked. Each validator has 32 ETH and gets the same amount of reward. You can take your profits and make a new validator or use them for something else, either way your existing validators will have the…

> Everybody gets the exact same rate of return regardless of how much they have staked. I don't think that's true. The amount of ETH created per block is determined independently of the amount of ETH staked. So if you stake 100 ETH and I stake 100 ETH, and we're the only stakers, then the protocol gives us each 50% of the ETH minted. But if someone else comes along and stakes 200 ETH, then you and I only get 25% each…

The total ETH created does depend on the amount staked. Here's a table[1] and formula[2]. The total reward doesn't go up linearly with the number of validators, but it does go up. Lowering the incentive for attacks like you mention is a reason for that.

And while having fewer validators gives you a somewhat higher reward per validator, it's still that case that all validators get the same reward in any given block. Everyone is equally competitive. Someone who reinvests will get higher absolute rewards than they got before, but they pay the price of locking up more capital.

In the same way, a miner could reinvest profits into more mining equipment, but that doesn't make them more competitive, just bigger. Their profit margin will be the same (barring economies of scale that don't exist in staking).

[1] https://docs.ethhub.io/ethereum-roadmap/ethereum-2.0/eth-2.0...

[2] https://github.com/ethereum/eth2.0-specs/blob/dev/specs/phas...

Re: Ethereum staking – More sustainable crypto

#72

Post by PurpleFoxy »

ryebit wrote: post #38
melolife wrote: post #27

Earlier quoted context omitted.

I would argue that under both proof of stake and mining your income is always directly proportional to the amount invested, either in equipment or stake. The main difference is the minimum barrier to entry, however under PoS you have access to various pooling services, which simulate consumer scale mining (complete with the associated inefficiency).

Except under mining, increased investment opens up access to better equipment like ASICs, access to cheaper energy agreements, etc. But no amount of $ unlocks the ability to validate faster (per unit staked).

And then everyone gets their hands on this tech so the mining difficultly goes up and you are back to square one.

Re: Ethereum staking – More sustainable crypto

#73

Post by jude- »

kybernetikos wrote: post #65
jude- wrote: post #53

Earlier quoted context omitted.

I'm talking about the impact of tying coin ownership to coin production on the chain's resiliency, not the morality of earning interest.

And you don't accept the argument that it increases resiliency? I found Vitalik's arguments quite persuasive. https://vitalik.ca/general/2020/11/06/pos2020.html Another angle is that with the arrival of hashrate markets, a PoW miner can attack a blockchain that they have negligable investment in. In PoS that's not possible. You can't attack a PoS chain without a large investment locked into it. You seem to be warning…

I see that Vitalik conveniently left out the part where PoS breaks down if you hack a staker's node and destroy their coins (either by knocking it offline or by forcing it equivocate -- both are slashable offenses). That is far, far, FAR cheaper than trying to buy your way in.

> You seem to be warning of various bad effects that we haven't seen in fiat currencies, despite the fact that interest is analogous to staker rewards.

Except, I'm not. PoS and fiat currencies have very little in common. If PoS was a fiat currency, then the people who staked more of it would not only get more interest yield, but also get to collectively decide who else gets to spend their money, how much they receive, and when (i.e. by deciding which transactions get included and which do not). This is a far, far worse outcome.

Re: Ethereum staking – More sustainable crypto

#74

Post by jude- »

DennisP wrote: post #71
jude- wrote: post #64

Earlier quoted context omitted.

> Everybody gets the exact same rate of return regardless of how much they have staked. I don't think that's true. The amount of ETH created per block is determined independently of the amount of ETH staked. So if you stake 100 ETH and I stake 100 ETH, and we're the only stakers, then the protocol gives us each 50% of the ETH minted. But if someone else comes along and stakes 200 ETH, then you and I only get 25% each…

The total ETH created does depend on the amount staked. Here's a table[1] and formula[2]. The total reward doesn't go up linearly with the number of validators, but it does go up. Lowering the incentive for attacks like you mention is a reason for that. And while having fewer validators gives you a somewhat higher reward per validator, it's still that case that all validators get the same reward in any given block. E…

> The total ETH created does depend on the amount staked. Here's a table[1] and formula[2].

Thank you! I was unaware of this. I stand corrected.

However, my original point stands under the added constraint that we don't have enough tokens to alter the yield (i.e. staking our tokens won't push the total staked quantity across a "yield boundary"). The difference in participation between two different yields is considerable, so I would expect this to be the common case.

> Everyone is equally competitive. Someone who reinvests will get higher absolute rewards than they got before, but they pay the price of locking up more capital.

Joining later puts you at a disadvantage, because you have to buy coins off of people who could be staking them. That's problematic from a resiliency perspective, because it makes it harder for new block-producers to come online. It also means that there's no "reserve capacity" in the system to tolerate the sudden loss of a large number of staked coins. This isn't true in PoW, because obsolete miners that aren't profitable to run today could be brought online in a pinch if enough profitable ones were to suddenly go offline.

> In the same way, a miner could reinvest profits into more mining equipment, but that doesn't make them more competitive, just bigger.

These aren't comparable. I could come up with a better, more efficient way to generate PoW outside of the protocol. But in PoS, the protocol mandates that I only use staking to increase my coin income. Per my original point, what this means in practice is that there will come a point where it's cheaper to increase my staking yield by DDoS'ing staking nodes, who will be slashed as a result (the link you gave indicates that the slashing begins after 25 minutes of over 33% of the staked tokens being knocked offline).

Re: Ethereum staking – More sustainable crypto

#75

Post by ryebit »

PurpleFoxy wrote: post #72
ryebit wrote: post #38

Earlier quoted context omitted.

Except under mining, increased investment opens up access to better equipment like ASICs, access to cheaper energy agreements, etc. But no amount of $ unlocks the ability to validate faster (per unit staked).

And then everyone gets their hands on this tech so the mining difficultly goes up and you are back to square one.

History of stuff like Antminers has been stages of private access, high end market, then low end ...

But while products are moving down those stages, more wattage-efficient ones are entering at top.

I think you're right that ROI curve will get closer to linear (utility costs aside), but I don't think it's going to be a very fast progression.

Re: Ethereum staking – More sustainable crypto

#76

Post by ryebit »

ryebit wrote: post #75
PurpleFoxy wrote: post #72

Earlier quoted context omitted.

And then everyone gets their hands on this tech so the mining difficultly goes up and you are back to square one.

History of stuff like Antminers has been stages of private access, high end market, then low end ... But while products are moving down those stages, more wattage-efficient ones are entering at top. I think you're right that ROI curve will get closer to linear (utility costs aside), but I don't think it's going to be a very fast progression.

To clarify: I don't think proof of stake is perfect.

I think the original pie in the sky dream, as hinted at in the Bitcoin white paper, was for decentralization through anyone (all the way to students in their dorms) being able to participate in consensus.

I don't think proof of stake gets things all the way there, but I think it does get closer to a linear ROI curve, compared to how proof of work is right now.

Re: Ethereum staking – More sustainable crypto

#77

Post by DennisP »

jude- wrote: post #74
DennisP wrote: post #71

Earlier quoted context omitted.

The total ETH created does depend on the amount staked. Here's a table[1] and formula[2]. The total reward doesn't go up linearly with the number of validators, but it does go up. Lowering the incentive for attacks like you mention is a reason for that. And while having fewer validators gives you a somewhat higher reward per validator, it's still that case that all validators get the same reward in any given block. E…

> The total ETH created does depend on the amount staked. Here's a table[1] and formula[2]. Thank you! I was unaware of this. I stand corrected. However, my original point stands under the added constraint that we don't have enough tokens to alter the yield (i.e. staking our tokens won't push the total staked quantity across a "yield boundary"). The difference in participation between two different yields is consider…

Not sure if this is what you meant but there's no actual "yield boundary," it's a continuous function. The table just gives examples of the function outputs.

I think you're overestimating the amount of ETH that will stake. Right now it's just 3%, and they think it's unlikely to go over 30% or so. ETH is used for a lot of stuff besides staking, with major uses so far including collateral for stablecoins and other defi, NFT purchases, and trading. The daily ETH trading volume right now is $34 billion, which is more than triple the staked amount.

Also, while losing over 1/3 results in a loss of finality, we'd be losing something that doesn't exist in PoW networks in the first place. The network continues to run[1], with a nonzero but low chance of reverted blocks, while the quadratic inactivity leak burns away stake until 2/3 of remaining stake is active again.

DDoS that knocked out over a third of the network, running on ISPs and hosting services all over the world on various independently-developed clients, would be quite a feat, and not likely to be sustained for very long. Since there will likely be plenty of non-staking ETH, more stake will be deposited after the attack, bringing the network back to the equilibrium of satisfactory returns. Or, if the attack were so severe it scared people off, then the price of ETH would also be affected, reducing the value of the attacker's stake.

[1] https://ethresear.ch/t/explaining-the-liveness-guarantee/422...

Re: Ethereum staking – More sustainable crypto

#78

Post by SavantIdiot »

capableweb wrote: post #70
DennisP wrote: post #58

Earlier quoted context omitted.

In PoS everybody gets the same rate of return. On Ethereum it's currently about 8% annualized, regardless of how much you have staked. On Bitcoin everybody gets about the same rate of return, but major operations can generally get first access to the newest ASICs or special deals for electric power, so their rates are better. No cryptocurrency has found a way to give the exact same rewards to every human participatin…

> No cryptocurrency has found a way to give the exact same rewards to every human participating. That'd require some kind of verified identity. Proof of Humanity recently launched and claims to have solved this https://www.proofofhumanity.id/

That is crazy. Thanks for the link!

Re: Ethereum staking – More sustainable crypto

#79

Post by DennisP »

antocv wrote: post #54
devmunchies wrote: post #35

Earlier quoted context omitted.

network effects. integrations. ecosystems. its why any big consumer app isn't easily displaced.

Same can be said why ETH PoW wont be displaced. Too much is already invested in it. Move to a different project altogether, if you want a sustainable future.

Ethereum has hard-forked a couple times a year since inception, carrying the ecosystem along with it. Switching to PoS is just another fork.

Re: Ethereum staking – More sustainable crypto

#80

Post by capableweb »

notJim wrote: post #69
capableweb wrote: post #67

Earlier quoted context omitted.

It's not all about the amount of APY, also which ecosystem you want to belong to and who you trust will improve over time too. Ethereum vs Celsius is a no brainer at the moment.

So the bet is that Ethereum has a lot of room to grow, and you want to be in that space, right?

For me it's more about existing developer activity. In my bubble, 90% of the people are building with/on Ethereum or Polkadot. I usually build things together with others, not by my own, so having a large ecosystem is a requirement and so far, Ethereum is the only community that really fulfills that.
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