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Bitcoiners May Change Their Mind on PoS, 'Who Knows,' Says Buterin 101
Vitalik Buterin. Source: a video screenshot.

In a few years, perhaps Bitcoin (BTC) fans will think better of the proof-of-stake (PoS) consensus mechanism, finds Vitalik Buterin, co-founder of Ethereum (ETH).

In an interview at the ETHWaterloo 2, an Ethereum Blockchain Hackathon organized by the core ETHGlobal team and volunteers last week, Buterin shared, entering “a joyful heretic mode,” that in five years from now “who knows […] maybe even Bitcoin will be looking at proof-of-stake a little more favorably.” Currently, Ethereum is in the process of switching from the proof-of-work (PoW) system, used by Bitcoin, to a PoS system. However, it’s unknown when this change might happen exactly.

A lot of cryptos are committed to a capped issuance schedule, Buterin says. They are “really committed to this idea that issuance is evil, and we must have a hard cap, and because a hard cap is the Austrian way, and we must take a strong stance that we are not like those hyperinflations fiat goldbugs.” As reminder, only BTC 3 million left unmined, as well as 120 years to get them all.

However, miners must be paid for security, and it is generally presumed that the transaction fees will be used for this purpose, but “looking at the reality,” Buterin said, the last time he checked BTC numbers, the daily block reward was about USD 7 million and the daily transaction fees about USD 140,000, which is about a factor of 50 difference, he explains. (Seven-day average of the total value of block rewards paid to Bitcoin miners stood at more than USD 15.6 million on November 10, while they received USD 350,000 from fees, or 45 times less, according to blockchain.info data.)

Miners revenue

Total value of coinbase block rewards and transaction fees paid to miners, seven-day average, in USD.

Bitcoiners May Change Their Mind on PoS, 'Who Knows,' Says Buterin 102
Source: blockchain.info

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Total transaction fees

Seven-day average, in USD.

Bitcoiners May Change Their Mind on PoS, 'Who Knows,' Says Buterin 103
Source: blockchain.info

Buterin then compares Bitcoin to Ethereum, saying that the block reward is about ETH 2 and the transaction fees are usually ETH 0.03-0.28. “Basically, it’s not at all clear that blockchains are gonna continue to be secure […] once the amount going to the security providers, or miners, or stakers, is 50 times lower than it is now,” he says.

On the other hand, when he asked the ETH community at a conference if they wanted ETH to have a hard cap, their answer was “universally no,” he claims, as people seem to appreciate a pragmatic approach more, finding it a better idea that “instead of optimizing for predictability of issuance, we’re gonna optimize for predictability of security, because the platform’s surviving is the most important thing, and if the platform doesn’t survive we’re all screwed anyway.”

“We don’t know”

The problem is that “we don’t know the ratio of security-to-issuance ahead of time,” which is “a variable a real world has” and something that may take a decade or two to learn about, but Ethereum chose to focus on stabilizing security over stabilizing issuance, which Bitcoin supporters dislike, Buterin finds, but Ethereum supporters are fine with.

Buterin believes that PoS does better than PoW with lower-security budgets. “But even with PoS, I’m not confident that Ethereum would prove a stake with zero issuance […] Even past PoS, we are decreasing issuance heavily, but there is still some issuance.” Nonetheless, he finds that even a hybrid PoS is a good way to get more security with lower reward and issuance.

While the common opinion seems to be that cryptos will be much more popular in a decade, which will solve these issues, the co-founder of the second largest network by market capitalization believes that:

  • “you’re not allowed to make crazy, super-optimistic assumptions if you’re gonna argue that about the security of a system that protects people’s life savings;
  • that’s not even a correct argument because if a system gets 50 times bigger, then sure the security budget becomes 50 times bigger, but the size of the attackers who care about breaking it becomes 50 times bigger,” says Buterin.

“I think the relative actually matters more than the absolute, and that’s an area where kind of the people that focus on the absolute being canceled out by growth of the ecosystem are just wrong.”

For the end of this part of the discussion, Buterin clarified that: “It’s not just about Bitcoin, […] I hope Litecoin adopts proof-of-stake as well,” he says. “I hope Bitcoin Cash adopts PoS, I hope Bitcoin Satoshi’s Vision adopts PoS. I think the thing is a scam, but I think scams running PoS is still less environmentally harmful than scams running PoW.”

Meanwhile, a recent report by Binance Research found that once Ethereum introduces its staking, it will be a game changer as the volume of staking activity “will more than double.” The report stated that currently the increasingly-popular staking accounts for USD 8 billion in crypto activity, while USD 15.4 billion of all crypto tokens can be staked.

At the time of writing (15:00 UTC), ETH is trading at USD 188. It’s almost unchanged in the past 24 hours and is up 0.7% in the past seven days. Meanwhile, BTC is changing hands at USD 8,766, being down 1% in the past day and 6% in the past week.
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Learn more:
Christmas Fights: Vitalik Buterin vs. Proof of Work Camp
Vitalik Buterin on The Five Biggest Misconceptions in Crypto
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Watch the whole interview with Vitalik Buterin.
He’s also discussing the following topics:
– Is ETH money?
– How the Ethereum developer experience has improved since 2017
– The legacy of the ICO craze of 2017
– Is Ethereum undervalued relative to technical progress?
– DeFi and whether Ethereum should be a finance-only chain

Sead Fadilpašić , 2019-11-11 15:13:00 ,

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NewsBlock © 2019 - 2020 All rights reserved.

NewsBlock © 2019 - 2020. All rights reserved.


While Bitcoin’s price seemingly moves without rhyme or reason — collapsing by dozens of percent and embarking on face-melting rallies on a whim — the cryptocurrency market is filled to the brim with fractals.

Related Reading: Analyst: Bitcoin Price Likely to Fall to Low-$8,000s as Chart Remains Weak

A brief aside: A fractal, in the context of technical analysis and financial markets anyway, is when an asset’s price action is seen during a different time. This form of analysis isn’t that popular, but it has proven to be somewhat valuable in analyzing Bitcoin.

One recent fractal popularized by a well-known cryptocurrency trader is implying that BTC is going to return to the low-$7,000s in the coming days.

Bitcoin Fractal Implies Retracement to Low-$7,000s

A well-known crypto trader going by “Tyler Durden” on Twitter recently posted the chart below, which shows that a Bitcoin price fractal may be playing out. The fractal has four phases: horizontal consolidation marked by one fakeout, a surge above the consolidation phase, a distribution, then a strong drop to fresh lows.

If the fractal plays out in full, BTC could reach the low-$7,000s again, potentially as low as $7,100. This would represent a 20-odd percent collapse from the current price point of $8,800.

It isn’t only a fractal that is hinting Bitcoin has the potential to visit its lows. As we reported on Saturday, Bloomberg believes that if the GTI Vera Convergence Divergence Indicator flips red, a downtrend could push the cryptocurrency back to $7,300.

Related Reading: Stephen Colbert Pokes Fun at Bitcoin in Monologue: Mainstream Gone Wrong?

Can Bulls Step In?

But again, many believe it is irrational to have such bearish interpretations of the cryptocurrency’s chart at the moment. As reported by NewsBTC earlier, Popular crypto trader Mayne recently noted that the “people waiting for $6,000” are irrational. He quipped that Bitcoin retracing and consolidating after its fourth-biggest bull move in history ($7,300 to $10,500, a 42% gain) is perfectly par for the course, but noted that it’s totally possible we can go lower from $8,800.

The medium-term technicals support this.

Trader and CoinTelegraph contributor FilbFilb found that by the end of November or start of December, the 50-week and 100-week moving averages will see a “golden cross,” which he claims is far more significant” for the Bitcoin market that other technical crosses.

Also, a Bitcoin price model created using Facebook Prophet machine learning found that the leading cryptocurrency is likely to end the year at just over $12,000. What’s notable about this model is that it called the price drop to $8,000 months in advance, and forecasted a ~$7,500 price bottom for BTC.

To put a cherry on the cryptocurrency cake, Crypto Thies observed that when Bitcoin bottomed at $7,300, it bounced decisively off the 0.618 Fibonacci Retracement of the move from $3,000 to $14,000, which correlates with the two-week volume-weighted moving average. He added that summer 2019’s consolidation was marked by Bitcoin flipping major resistances into support levels, implying that a bullish reversal and subsequent continuation is likely possible in the coming weeks.

Featured Image from Shutterstock


Nick Chong , 2019-11-10 12:00:38

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