Bitcoin’s Incentives Are Perfect – Bitcoin Magazine
This is a transcribed excerpt of the “Bitcoin Magazine Podcast”, hosted by P and Q. In this episode they are joined by Tomer Strolight and Nico to discuss the Ethereum merger and how it proves that bitcoin and eth are completely different assets and whose networks have very different architectures.
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Tomer Strolight: I really fundamentally see Bitcoin and Ethereum as almost opposites of each other. Or maybe not even almost, as close as opposites of each other as possible. When I think about the Blocksize Wars, I think Bitcoin companies and Bitcoin miners were kind of testing the system to see if they could take control of Bitcoin. Very quickly and very immediately and very simply Bitcoiners said no.
When we put our money where our mouth is and we wrote and ran very simple software that would prevent the mining cartel’s control over Bitcoin, we said, “We want segwit to be activated. And if you don’t activate segwit by a certain date, your blocks will be considered invalid.”
That was the logic of UASF (user activated soft fork) and enough of us ran it and enough of us advocated for it that they ran it. That’s a very short version of the probably 35 minute reading of my article for you guys.
The merger is something else. I feel like Ethereum has always kind of been captured by the developers, right? Bitcoin has a difficulty adjustment to ensure it continues to run regardless; Ethereum has a difficulty bomb to ensure that it will stop running anyway, unless you do a hard fork as dictated by the developers. One thing is sure to run forever. The other thing will definitely not run unless you do what the developers tell you to do in the form of a hard fork. Now we have this hard fork planned for the merge and low and behold, people have discovered that another party might be able to take control because of the way proof-of-stake mining works: You have to have a minimum of eth, which not enough people have. So people have delegated, they’ve handed over custody of their ethics to these staking pools, which are different from mining pools because mining pools, you keep your mining hardware. You just point it at a miner’s node. In a stake pool, you surrender custody. The staking pool then stakes your coins into a contract that they can’t even withdraw the coins from. And so what we’ve had is this massive centralization and this recognition after the events of the past week around this Tornado Cash thing. Now that these companies have all the eth that is stated and it is the consensus algorithm, they can be ordered or they can take control of what is the truth of Ethereum.
Now there’s this whole debate about whether a UASF, a user-activated software, is possible and should be followed in Ethereum, but the algorithm is so complicated and so unproven for slashing and proof-of-stake, it’s just not easy.
It is very easy to understand bitcoin mining with a little practice. I don’t think anyone understands exactly all the nuances and details of this new Ethereum proof-of-stake system during the merge. My expectation is that even if there is talk of making a UASF to threaten the big companies with punishment if they do not do what is supposed to be done, which is ambiguous. I don’t think it can be coordinated because not enough people are running nodes. Running an actual full archive node is impossible for a normal person without thousands of dollars. It’s impossible to bet unless you have tens of thousands of dollars worth of coins and a very meaty system. So these things are not the same. I just don’t see these things as even equal. I have a very weak view of proof of effort in general because it is the “rich get richer” for no work other than being rich, and the rich also gain control of the system. That’s the whole thing we’ve been trying to get away from. We want work to be rewarded; honesty to be rewarded; no one should be able to take control of the system. It’s just not what proof of effort is.
Every proof-of-stake system we see has a large majority of stakers who basically have all the votes and decide what will and what won’t be the state of the blockchain.
