At 19:27 Eastern time on April 12, the Ethereum blockchain, home to the world's second-most-popular cryptocurrency, ether, will finally sever its links to crypto mining. Within the Ethereum bubble, a sense of anticipation is building; some are planning "viewing parties" for the occasion. Codenamed "Shanghai," the update to Ethereum caps off a process, after "The Merge," which fundamentally changes the way transactions are verified and the network secured.
Under the old system, proof-of-work (PoW) mining, the right to process a batch of transactions and earn a crypto reward is determined by a race to solve a mathematical puzzle. The greater the computing power miners throw at the problem, the greater their chance of winning the race. Under Ethereum's new proof-of-stake (PoS) system, there is no race and there are no miners; instead, the winner is determined by raffle. The greater the amount of ether somebody locks up on the network—or stakes—the greater the chance they hold a prize-winning ticket.
By demonstrating that a large-scale blockchain can shift from one system to another, Shanghai will reignite a debate over whether the practice of mining that still supports bitcoin, the most widely traded cryptocurrency, is viable and sustainable. [...]
"The energy consumption problem is Bitcoin's achilles heel," says de Vries. "It's a simple fact that as the price of bitcoin gets higher, the energy consumption problem gets worse. The more money miners make, the more they will typically spend on resources: hardware and electricity.
But many bitcoiners dispute the characterization of the network as energy-guzzling and carbon intensive, saying that mining is increasingly powered by renewable energy. And, they say, PoS is inferior to PoW—prone to centralization (crypto's great nemesis), concentrating influence and wealth in the hands of the wealthy, without any mitigating forces, like energy costs, pulling in the opposite direction. All of this makes Shanghai a proxy battle over the future of crypto.
[...] According to de Vries, it would be perfectly possible, from a technical perspective, for Bitcoin to follow in the footsteps of the Ethereum network. "Bitcoin could move to PoS, no problem," he says. "But it's a social challenge."
[...] The impasse is worsened by the ideological opposition to PoS among bitcoiners, separate from the environmental considerations. Some find unthinkable the idea of tampering with Satoshi Nakamoto's original invention, and others, like Bendiksen and Pritzker, believe PoS introduces greater risk of centralization and censorship—and therefore represents a threat to crypto's founding principles. "PoS is essentially the fiat system," says Pritzker, "because whoever has the gold makes the rules." For this reason, explains Bendiksen, bitcoiners will "never agree" to a shift.
"Any attack on bitcoin is an attack on their morality, values, and often their net worth. This makes everything feel personal," Von Wong told WIRED. "Because most people don't see themselves as intrinsically bad, they feel misjudged and misunderstood, which is a terrible place to start a conversation."
(Score: 2, Interesting) by darkfeline on Wednesday April 12, @06:16AM
The way PoS works, simply, is that people stake currency and they have a chance to be chosen to validate a transaction block. How do you think they get chosen? Basically, they use the blockchain as a source of randomness to seed a PRNG.
You might wonder if it would be possible to manipulate what gets added to the blockchain so that you get chosen more often or someone else gets chosen less. Well, you'd need a lot of compute power to try a lot of combinations. You would also be competing with anyone else who'd want to do the same thing.
Join the SDF Public Access UNIX System today!
(Score: 2) by maxwell demon on Wednesday April 12, @06:29AM (7 children)
In other words, the shift is from those getting more who do more work to those getting more who already have more. Does that make Ethereum more capitalist?
The Tao of math: The numbers you can count are not the real numbers.
(Score: 0) by Anonymous Coward on Wednesday April 12, @11:38AM (5 children)
It sounds like it would be more like a shift from those who already have more and can set up and run massive farms back to giving everyone a shot again.
(Score: 2) by stormreaver on Wednesday April 12, @12:33PM (4 children)
It's like this: A lottery is offering a $30M prize. The odds of winning are one in ten million, and a ticket costs one dollar. You put down your one dollar and buy a ticket, giving you a one in ten million chance of winning. A rich person puts down $10M, and is guaranteed to win the jackpot. He's betting that no one else will pick the winning numbers (a really good bet). However, he's rich enough that he's able to lose the entire $10M without losing his shirt, but the odds favor him tremendously.
Sure you have have a chance, but it's minuscule.
(Score: 2) by Immerman on Wednesday April 12, @01:43PM (3 children)
Basically, except your math is wrong.
The odds of winning a raffle are based on the number of entries - if you and rich dude are the only ones playing then when you bought your ticket you had a 100% chance of winning, which fell to a 1 in 10M+1 chance of winning when rich dude bought his 10M in 10M+1 chance of winning. He's *not* guaranteed to win, but the odds *highly* favor him.
If however you had a 1 in 10M odds when you bought your ticket, they fall to a 1 in 20M chance when rich dude buys his, while he gets a 50% chance of winning, and whoever had the first 9,999,999 tickets has the other ~50%.
Of course, from the tiny bit I've read I don't think anyone buys anything - sounds more like you essentially put the money in escrow during the raffle to prove you control it, and then get it back once the drawing has occurred.
And the prize is just that you get to add the next block to the blockchain. Though of course that also lets you collect fees from everyone who wants a transaction recorded.
(Score: 0) by Anonymous Coward on Wednesday April 12, @06:14PM (1 child)
So in either case, to use the terminology from the parent post, it sounds like no matter what, it only affects the ones who have more, and the ones who have less are screwed whether it is PoS or not.
(Score: 2) by Immerman on Wednesday April 12, @06:37PM
Pretty much.
Doesn't really matter whether it's PoW, PoS, or really, pretty much any other part of the economy even outside the financial industries... any endeavor within a capitalist system will disproportionately reward those who already control the most resources. That's why it's called capitalism - it's an economic model explicitly designed for the benefit those who control the capital.
Those of us who work for a living can sometimes get in on the ground floor of something that's about to skyrocket, but as a rule we'll have such a small stake in it that, while it may be a windfall for us, almost all the wealth generated still goes to the already-wealthy.
(Score: 0) by Anonymous Coward on Wednesday April 12, @08:28PM
except GP's math isn't wrong. At least not for a lottery, which was their example (which isn't what's discussed in TFS and, as such, is a bad example). In a lottery, the probability of winning with a single entry is independent of the number of other entries.
So no. GP's math is fine. it's just that their example doesn't fit the circumstance under discussion.
Your math is also correct, as in a raffle, the probability of winning is dependent on the number of other entries. And has the added benefit of being apropos to the topic at hand.
tl;dr: good math, bad example.
(Score: 2) by JoeMerchant on Thursday April 13, @01:07PM
>do more work
When did the definition of work shift from physical labor to running some canned software on a computer?
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 0, Disagree) by Anonymous Coward on Wednesday April 12, @06:30AM
... It's a steaming pile.
(Score: 5, Insightful) by bradley13 on Wednesday April 12, @06:31AM (6 children)
Renewable energy that - if not used for mining - could be used for other things.
But the real reason is because they have sunk so much money into establishing their mining centers. The ones making money by mining don't want to risk change, because they might not be the one making money under PoS.
Whatever you think of crypto, you should be rooting for the alternatives: Ethereum (now), Solana, Near, and others that don't use mining to run their blockchains. Bitcoin was a great prototype - genius, actually. But as with all prototypes, time and development lead to better solutions.
Everyone is somebody else's weirdo.
(Score: 2, Interesting) by Anonymous Coward on Wednesday April 12, @07:33AM (2 children)
As for transferring money to other countries they don't even appear to be significantly cheaper for "normal people".
Maybe for laundering money and hiding illegal money they're better but why should we be rooting for this?
Sure, existing "conventional" financial transactions could be much cheaper in theory but so far this crypto stuff isn't much competition for legit stuff.
(Score: 0) by Anonymous Coward on Wednesday April 12, @08:17PM (1 child)
The current primary use case for cryptocurrencies as a modicum of exchange (not getting into hodling [investopedia.com] here) is to facilitate financial transactions that might raise the hackles of one or more governments.
And I have drugs to buy on the dark web. Even though cannabis is legal where I live, I can buy it with crypto (I exclusively use Monero for that, as it's actually anonymous, unlike Bitcoin) for 1/4-1/10th the price I'd have to pay at a legal shop.
As such, I'm all for cryptocurrency.
In the longer term, digital currencies (whether based on blockchains or not) will become normalized in the legal economy. But that isn't the case now -- primarily because any legal transactions are more efficiently and safely done within the current financial system.
Until that changes (and it will, eventually), cryptocurrencies are for "illegal" transactions, scams and speculation for the most part.
(Score: 0) by Anonymous Coward on Thursday April 13, @09:11AM
However for obvious reasons whichever gets the most popular they'd be full of illegal transactions (which probably would make hiding your legit/gray transactions easier).
I mean if I had to do illegal transactions and was the final stooge forced to do the actual deed I'd use cash and/or Monero.
(Score: 3, Insightful) by JoeMerchant on Wednesday April 12, @11:32AM (2 children)
The genius in Bitcoin was the social manipulation. Gambling, get rich quick, sure thing... It exploits common human weaknesses to propel its own growth, and it managed to navigate loopholes in the existing regulations that protect people from themselves against Ponzi schemes and similar.
There are strong parallels with how vaping brought nicotine addiction to a whole new generation in spite of the previously successful efforts to reduce that self injurious behavior.
Bitcoin made a lot of people rich, by taking money (willingly given) from a lot more people. I didn't complain about my 50:1 return on a 3 year investment, I only wish I had invested 1000x as much back in 2010.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 2) by maxwell demon on Thursday April 13, @11:59AM (1 child)
Actually I wish I would have gotten into Bitcoin mining shortly after it had been invented, when you still could mine considerable amounts on a standard PC. And of course then held all those easily mined bitcoins until the peak value, and sold them at that point. I'd probably be insanely rich now.
The Tao of math: The numbers you can count are not the real numbers.
(Score: 2) by JoeMerchant on Thursday April 13, @01:04PM
I looked at mining in 2010, and again in 2013 and 2017. Each time, the payoff was better to just buy BTC from the market, unless you were "getting your electricity and/or mining gear for free" aka stealing it.
I only "invested" $5 in BTC in 2010, sold it all for about $250 in 2013. I have invested a few thousands in almost as crazy things over the years, total or near total loss on most, lucky big returns on others that more than cover the losses, but never more than about 10x ROI and that usually over 5-10 years.
BTC was a crazy outlier, and unlike my other big winners, it still stands at significant risk of losing all value at any time.
Україна досі не є частиною Росії Слава Україні🌻 https://news.stanford.edu/2023/02/17/will-russia-ukraine-war-end
(Score: 5, Interesting) by Unixnut on Wednesday April 12, @07:44PM
I won't get into the energy/political/ideological side of things (primarily because TFS has already provided a summary of it, secondary because its been done to death, the opposing camps aren't budging).
However I have used ETH pre switch to PoS, post switch to PoS, and BTC to transfer funds. All I can say is that back when ETH was PoW, transfers were confirmed much faster. You could get a transaction confirmed within a few mins if you paid in enough in fees, and if you went with the standard fee it would be there within an hour.
Transferring via BTC likewise was fast and efficient, faster than ETH (and usually lower fees), but not so much better that it was worth converting from ETH to BTC just to transfer.
With the switch to PoS for ETH, it is much slower. It takes 300-500 confirmations for the ETH to appear in my account, and that can take hours. Sometimes I just wait until next day to see if it has arrived. I don't like seeing my crypto vanish from my wallet, and not appear at its destination for hours on end, so now I actually do switch my ETH to BTC when I want to transfer, and then switch it back (if necessary) at the other end.
So at this point in time, for me ETH has actually gotten worse as a cryptocurrency. Perhaps this will improve with future upgrades, but really as it stands, its moved away from being a competitor to BTC and cryptocurrency, to being more like a utility token. Its utility is that it can host contracts, and provide income if staked, and the other tokens that rely on its network are useful themselves, all of which will continue to draw demand for ETH in some form.