Is there any mechanism or inventive discouraging current Ethereum POW miners from rebelling against the coming switch to POS, and starting a major fork of the network when the network is slated to switch over ("The Merge")? How will everyone instantly agree that ETH1 is worth nothing on that date?
I haven't read enough to know the answer, figure someone here might have a better understanding. Was hoping the article would answer it, but it doesn't really.
The difficulty bomb makes it so that consensus doesn't have to occur to switch, but has to occur to prevent the shift from PoW.
Everyone doesn't have to agree. There will be miners that attempt a fork to keep their position. There is nothing wrong with this, it's how this stuff is supposed to work. But the fact that PoS has been on the roadmap since the beginning takes away legitimacy from any claim that the PoS transition is illegitimate. The fact that Ethereum Classic exists and is a PoW version of ethereum and intends to stay that way will take that even further. There will probably continue to be forks of ethereum, just like there have always been. Anyone can fork an open source codebase and maintain it, anyone can use the software to spin up a consensus network, anyone can use prior state as a starting point. Chain forks are a social thing not a technical thing, game theory not withstanding, that's how nakamoto consensus and FOSS is supposed to work.
Legitimacy is determined in the eyes of the userbase, in which software they decide to use and what ledger they regard as the canonical history of the network, i.e. what blockchain they sync. Whichever "Ethereum" the majority of users use is the "Ethereum."
People will describe technical mechanisms, but they are all pretty irrelevant since a miner rebellion would easily modify the software.
The real mechanism is that all the major players can’t accept two forks and maintain sanity. For example, Circle will have to choose which chain has a $1 peg for their USDC reserves, and they will certainly choose the chain supported by the core devs and the one the rest of the major players are selecting as well.
That leaves the rebel chain in a very compromised position. With the peg being removed many defi protocols would be in an exploitable state. Removing all those abandoned and compromised services ends up with little reason for anyone to use the chain.
To be honest, I still suspect someone will try. But it will be a mess and there will be lots of financial loss for users.
I was one of those people in prior forks. My logic was that the rebel chain would be more open for experimentation, would innovate faster, and therefore win out in the long run regardless of who was supported by Wall St. Turns out that financial backing eats innovation for breakfast. The fast-moving scrappy innovative chains are getting killed by chains that haven’t changed much since genesis except scaling back their white paper ambitions.
If that’s what you took away from my post, I must have done a poor job with it.
Firstly emergent consensus is a big part of decentralized systems. Core providers convening on a decision and supporting it is perfectly healthy. That’s quite different than a CEO saying things will be X way and everyone just having to accept it.
Additionally, my point is that people WILL likely try to have a contentious chain (as is their right in a decentralized project), but due to the maturity of Ethereum the technical consequences are much more impactful than the BTC/BCH scenario.
Appreciate your thoughtful reply here. I can tell you're excited about emergent consensus. So am I! Is there a DAO or L2 project you're particularly excited for here?
There exists a mechanism that current Ethereum PoW miners could "rebel" by continuing to mine a different Ethereum blockchain. This would be similar to the fork that occurred with Ethereum Classic in 2015[1].
But there is a strong incentive to transition to PoS because it seems that the majority of stakeholders and participants in the Ethereum ecosystem agree with the upcoming switch to PoS.
What’s stopping miners from going to Ethereum Classic once the switch happens? It seems like the obvious choice here. I know the hash function is slightly different, so maybe it’s not ideal but it only seems to have a few parameters tweaked. It’s not like ETC is a total shitcoin compared to most other coins on exchanges.
It feels unlikely that miners won’t find something to mine.
As others have said, those other coins will get increased competition splitting the mining returns. Unfortunately (for the miners), Ethereum is vastly bigger than all the other coins.
I checked whattomine a few days ago and compared the hash rates of each coin. To make it simpler to compare, I converted it into RTX3080 equivalents. With this measure the hash rate for Ethereum was equivalent to mining with a bit shy of 10 million RTX3080s.
Ethereum Classic, which is the second biggest coin listed on whattomine, had a hash rate equivalent to about 263000 RTX3080s. I.e. Ethereum has 37 times more miners than Classic, and if they all moved to Classic the revenue would be slashed to 1/38 of what it is now while everybody would incur the same costs as now.
Ravencoin is the second biggest mineable coin (Monero isn't profitable to mine even now, so it does not matter) and Ethereum is 83 times bigger than Ravencoin.
It turns out Ethereum is more than 16 times bigger than every other coin listed on whattomine combined.
Yes, the question is if the thing they mine makes sense financially. If overall, people will use the POS chain better, the value of POS ETH will be much greater. So, the financial rewards, in USD, buying power, whatever, will be lower. They will also flock to other coins and they will increase difficulty, getting diminishing returns. So overall market cap of rewards decreases, the amount of hash power increases leading to much much much lower rewards.
I am willing to bet money that after ETH POS transition, graphics boards prices will crater.
> Perhaps it wouldn't happen overnight, but wouldn't ETC prices rally with more people participating in the network?
If my understanding of the crypto economics is right, no. The token price drives the mining effort, not the other way around. People buy these tokens because other people are willing to trade at that price, not because of the mining power within. Having more hash power does nothing for me as an owner of a token. The auto-scaling of the difficulty level is there to make attacks more expensive as the token value increases, it maintains the cost/benefit balance out of whack for any attacker. Only difference is slightly longer block mining time. Overall, nothing a normal user would feel.
Some people claim the other way, but I think they simply misunderstand the incentives. There was news that the Kazakstan crackdown led to the Bitcoin slump at some point, but that is, IMO, wrong, and they mistook some other events as causation. (in the same period, the stock market was also down).
GPU mining will still be a thing, but there simply will not be enough value to go around and the mining will crater until profits will be sustainable again. Extra mining gear will be sold. I maintain my prediction, and am really willing to put money where my mouth is.
I agree they'll likely find something to mine, but whatever it is has to make economic sense. If the block rewards don't cover the operational costs it won't work.
It is the obvious choice and it will definitely happen. Miners are in the business of mining with their hardware, they do it where it is the most profitable with their hardware. Since mining will give 0 return on ethereum, expect a glut of hash power pouring into other networks when it happens.
If any miner is dedicated to ethereum for some reason, I expect that they saved some of their block rewards to begin staking, and the smart ones are likely already staking on the beacon chain.
Actually yes, and it's pretty brillaint: the difficultly bomb.
The current fork of eth is programmed to kill itself sometime next year. This means even if miners want to continue mining they must prepare and propogate their own forked software. There is no "do nothing" default option.
I don't think it's brilliant. I think that the difficulty bomb is something akin to the debt ceiling in that it can be arbitrarily pushed back so, in reality, the real effect of the "bomb" is to give smaller groups of people outsized control over the network by holding miners hostage. My mind is open here - what are the flaws in my interpretation?
So the idea isn't about a deadline really, since it can be pushed back indefinitely. The idea is that you don't need consensus for it to go off, you need consensus for it not to go off. The status quo is always that it will go off if left untouched. It makes sure that miners can't just refuse the update, they have to fork the code to stop PoS. Which they're of course free to do, ETC removed the difficulty bomb entirely.
It's brilliant because it prevents a small constituency - PoW
generators and client developers - from sabotaging a roadmap by simply deciding to not support its planned upgrades.
With this safeguard in place, to change the roadmap, they need to gain support of users at large, by getting them to actively switch to their fork, just as the roadmap supporters need to do.
Therefore, supporters of change and statis are on equal footing, ensuring that the system isn't biased toward stasis even when the roadmap calls for change.
To summarize, the difficulty bomb encodes the roadmap's plan to implement a change in the protocol, into the protocol, graduating the plan from having mere social consensus, which requires active participation to enforce, to having a technical one, which is autonomously enforced.
Eh, if they act dishonestly the consensus can move to a different fork. The key is that fork has to have active consensus and can't just exist by default.
As I understand, it’s complete open source. So what is preventing a couple of miners to team up and change some integer to say year 2100 & recompile and distribute?
The blocks produced by this new software would be rejected by other miners still using the unmodified software, because difficulty(block)<difficulty_enforced_by_bomb_at-that_time.
Hence: the very definition of a fork, that is some blocks seen as valid by some faction and seen as invalid by others.
They could, but the question is would anyone buy it? And is it worth trying to do that over switching to mining another GPU coin? (though mining profits from them should collapse as there is not currently nearly enough buyers for those coins to sustain the current hashrate that etherium is using).
How will everyone instantly agree that [a rebel chain] is worth nothing on that date?
Everyone doesn't have to agree, just the exchanges. If the rebel chain isn't listed on exchanges then it's effectively worth zero and it will wither away.
If the value of the coin is based on the energy required to mine the coin, then surely the value won't change substantially for the PoW rebel fork, since the "real" value remains unchanged. Nobody wants to throw away their millions of dollars of GPUs. Despite the many problems with PoW, it's at least easy to see why PoW mining's output has any value of its own.
Unless the value never really was tied to the energy use in the first place, which isn't a great story for folks who want to treat the coins as anything other than speculative assets.
Value has never been based on energy; value comes from demand which is created by FOMO and enabled by exchanges where people can buy in. Of course crypto is entirely speculative.
Rebellion is not as simple as it looks like. I'm saying that as a person who played a big role in Ethereum Classic "rebellion".
As many mentioned here, you need to disable the Difficulty Bomb. But it is not the bigger problem actually, maybe it's even the simplest one.
What you also need:
- Organized community. I.e., some places to communicate. That's not easy. And be aware of ETH-maximalists that will come to trash it.
- Wallet that works out of the box. Not that Metamask, which is the most popular wallet in ETH, will never agree to support fork like it never agreed to support ETC.
- Block Explorer. People need to see their balance, check transaction status, exchanges need to point to that explorer as proof, etc.
- Miners would risk losing all their money if the chain eventually fails. Most miners are not so invested.
- Replay Protections to separate balances in forks. That's not easy. I mean, we have EIP-155, which was proposed by Ethereum Foundation, but it ensures that EIP-155 kind of replay protection would hurt forks because all of the software would need to be fixed for it. I.e., it's not a solution "out of the box", not user friendly.
- Exchanges. Maybe not so hard now. But without proper Replay Protection in place, some exchanges would lose their funds and would actively fight new forks to avoid liability.
- Public API endpoint. Like Infura. Because nobody runs its own node.
No, and I suspect many miners will do this because they anticipate the same thing I do: PoS will be a catastrophic failure with myriad exploits, vulnerabilities, and philosophical paradoxes that arise with popularity.
None, however they'd lose out on all the economic activity that drives the value of POS ethereum long term. And they'd lose the same economic activity drives the value of what they forked; and presumably that would cause a drop in value and less transactions; both of which are an incentive for miners to do something else with their resources.
That economic activity consists of all the smart contract/web3/whatever you want to call startups that are currently building solutions based on the main Ethereum network and the investors/traders/opportunists backing them by speculating on the value of their coins/NFTs/etc or the value of their solutions.
Most of those companies will probably benefit from the improved scalability and reduced cost associated with POS; or even require it to be viable at all. At least I would expect this to be true for the ones with some ambition to actually deliver working products; which are probably also the ones with the most investor backing. Of course, many more serious applications switched to alternate blockchains because of the scaling issues with POW might now consider switching back. And additionally, improved scale associated with POS might bring some new companies with investors as well. So, I would advice people to just follow the money when speculating on the future value of any fork.
I suspect that won't stop anyone from creating that fork and you should actually anticipate multiple parties doing this and claiming to be the one true fork with varying degrees of credibility to trick people into buying some of their forked ETH. That's just how pump and dumps work and there are plenty of opportunists active to make that happen. And of course a fork means there are plenty of people not interested in the fork that would end up selling their forked eth so they can buy some more actual eth. Lots of people selling and not a lot of people with a good reason to buy means forked eth is not going to be worth a lot. Miners are going to run whatever has the highest yield. That probably is not going to be a forked Ethereum. Probably it's more lucrative to switch to some other POW blockchain (doge, bitcoin, etc.) if you have any serious amount of hardware.
Disclaimer: I don't hold any Eth and am not really into crypto investing. Ironically, that makes me a more reliable source of information because I have no stake in this game.
The mechanism is staking. People stake Eth 1.0 to get 2.0 later, along with a bridge to convert Eth 1.0 to 2.0. They can't unstake for a period of time but get decent automatic returns.
There won't really be much reason for people to use 1.0 to execute smart contracts*. There really isn't much for miners to do besides eventually cashing out and becoming a validator. Eventually when "the merge happens" Eth 1.0 will be automatically converted to 2.0. This won't be for a few years (but PoS will launch this year)
*The 1.0 network supposedly uses 1000x times the energy of the 2.0 one to execute a smart contract and would obviously be more expensive to work with, so people will probably avoid using 1.0 as soon as possible. Less use means lower gas fees means lower payouts for miners, who already had payouts reduced by EIP 1559, and will likely have payouts reduced once more. So miners will see a slow death.
There is no “ETH 1.0” token or “ETH 2.0” token. There is only ETH. They never “convert”.
Anyone can fork the code at any time and keep mining. Many have. ETC and ELLA are a couple examples. Ethereum Genysys is a recent project in response to the PoS move.
ETH 2.0 was always just a series of upgrades. “The merge” which will end PoW mining is expected to go live between March 30th and June sometime at the latest. Code is expected to be complete in February sometime. Testing is well underway already.
I am not intimately familiar with the staking terms on Coinbase, but from what I recall, you should be able to withdraw your ETH at any time and receive it in at most a few days. If it has a lockup period, those terms would be very clearly stated, and you would eventually get your original investment back plus rewards according to the terms.
I haven't read enough to know the answer, figure someone here might have a better understanding. Was hoping the article would answer it, but it doesn't really.