Relatively new to crypto. Got a loose understanding of the systems.
Trying to differentiate the two but I’m kinda stuck on something. I understand that mining is more energy intensive, as they’re using mining rigs to process transactions.
My confusion stems from how that differs from POS where you still end up using a computer to process transactions. There just happens to be an extra step (32ETH). Which, I guess I should ask just to be sure - are those 32 ETH just parked somewhere as collateral or is it used as part of a liquidity pool?
Of course penalties keep validators in line, but wouldn’t that imply that btc miners have the capability to misbehave in a similar manner to a bad validator (even though they have no stake)?
To me the two methods seem nearly identical. What am I missing ?
32 ETH is sent to the staking smart contract. If your validator misbehaves, the protocol will slash your ETH.
One big difference is that PoS has this slashing ability while PoW does not. A PoW attacker never gets punished, they can just keep using their rig to attack the PoW network infinitely.
Blockchain is a decentralized database. People use vote to determine what content is in the database (99% of the time there is only 1 candidate). People setup rules to tell their computers how to vote, and leave them on “auto-vote” mode. That is basically what mining and running a validator is.
The problem is what count as a vote. There are many ways one computer can pretend to be 100 computers with very little cost, but that 100 computers combined still only have 1 computer’s computing power.
PoW asks miners to find a number, that on average need X amount of guesses to find every block. The longest chain is actually the chain that received most “total guesses”. Essentially, 1 guess = 1 vote.
To maximize the number of guesses per second, miners need to 100% load their computers, even invent no-other-purpose computers that specialized in guessing. Those computers use 0.001% of their power to process transactions, and 99.999% to guess numbers.
On the other hand, PoS use X amount of coin as 1 vote. So no crazy number guessing. All powers are used to process transactions. Most validators use less than 5% of their CPU.
I’m not sure if the pos is better, the gas prices are going up agin!
The difference is that if you do not habe the 32 -ETH deposit, everyone can run as many validators as they like. That is only limited by hardware costs short term and power consumption long term.
And that is what happens. Bitcoin mints at the moment 6.25 BTC per 10 minutes - that is 2466.25*35.000$=31,500,000 $ per day that miners can burn for operational costs (mostly power) before they become unprofitable.
Ethereum has 800k validators, but even if you have a single validator on a PC, that only costs a few cents per day to operate (example: 10Watts * 24h= 240Wh=0,24kWh -> maybe 2kWh per week, much lower if you run multiple validators).
You should check this article out as I wrote it to clear up exactly what PoW is doing under the hood, how it works from ground up, and why it’s built that way.
The ‘processing’ of transactions isn’t what all of the energy in PoW is being used for, the excess energy is the external or exogenous incentive mechanism it uses to ensure people can’t spin up infinite nodes at zero cost and overtake > 51% of the network. PoS instead has users put up 32e at stake where the capital can be slashed if there is misbehavior.
PoW miners can continue to attack the network and there really is no penalty outside the waste of resources and eventually you can get booted from the network, where as PoS gets 1 shot at an attack before the stake is slashed/deleted and node removed from the network.
PoW - Hardware miner machines PoS - supply inflates via coins sitting in wallets staked
If that’s your take, it is certainly interesting that the biggest PoW project (Bitcoin) is inflationary, while the biggest PoS project (Ethereum) is deflationary.
Yes it is.
Consensus methods are voting models and PoW and PoS are just the methods used to decide who gets to vote.
PoW says anyone who is able to produce a block with a hash containing a certain number of leading 0’s gets to vote.
PoS says anyone who has locked up a certain amount of stake gets a random chance to vote.
They are just ways to limit the number of voters so people can’t just set up thousands of virtual nodes to overload the vote. They are sybil protection methods.
The rewards and penalties are just further incentives to keep the voters aligned with the underlying protocol and to not do things like double vote or post empty blocks. Ethereum’s PoS slashes users who double vote. With PoW it costs electricity to even vote so it’s difficult to double vote in the first place.
Mining does not really “process transactions” in the sense that you might be thinking it does. Fundamentally miners are competing for the chance to create the next block, which of course allows the miner to also include transactions in it.
The actual transaction processing is handled effectively identically in PoS. What has changed is how the network decides, or comes to consensus on, what the next correct (canonical) block is, and who gets to propose (create) it.
The 32 ETH acts as collateral, as you correctly say. If you misbehave by attacking the network, or perform actions that may be interpreted as an attack, a portion of your stake is slashed. The severity of the penalty depends on how many validators have been slashed recently. Similarly, if you are offline and not doing your duties, you very, very slowly bleed away your stake. This incentivizes the participants to do the right thing and to do their duties: both a stick and a carrot, if you will.
In a PoW network, the cost of misbehaving is effectively an opportunity cost combined with the cost of running your infrastructure. Attacking a network costs both the lost rewards, and the electricity/hardware deprecation required to run the attack. However, the network has no real way of otherwise penalizing you, unless it forks off to a different algorithm.
In PoS, malevolent actors can be forcibly exited through protocol-level measures (slashing), or even in a socially co-ordinated hard-fork that removes the malicious actors even if they have not explicitly triggered a protocol violation that would result in a slashing.
there’s great answers here so I’ll just raise the following. You cannot physically go around H/s in PoW so it just works, but I’m still not bought into PoS. Not that I have a way to attack it, but I find it all too based on loose conjectures.