Bitcoin’s Incentives Are Perfect – Bitcoin Magazine

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This is a transcribed excerpt from 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 close, as close to opposites of each other as possible. When I think of the Blocksize Wars, I think the corporations within bitcoin and the miners within bitcoin were testing the system in a sense, to see if they could take over bitcoin. Very quickly and very immediately and very simply, Bitcoiners said no.

When we put our money where our mouth is and wrote and ran some very simple software that would prevent the mining cartel from taking over Bitcoin, we said, “We want segwit to turn on. And if you don’t activate segwit on a certain date, your blocks will be considered invalid.

It was UASF (user activated soft fork) logic and enough of us ran it and enough of us pleaded for them to run it. This is a very short version of the probably 35 minute read of my article for you guys.

Fusion is something different. I feel like Ethereum has always been captured by developers, right? Bitcoin struggles to adapt to ensure it continues to work no matter what; Ethereum has a difficulty bomb to ensure that it will stop working no matter what, unless you hard fork as dictated by the devs. One thing is guaranteed to work forever. The other thing is guaranteed not to work unless you do what the developers tell you to do in the form of a hard fork. Now that 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 due to the way proof-of-stake mining works: you must have a minimum of eth, which not many people have. So people delegated, they ceded custody of their eth to these staking pools, which are different from mining pools because mining pools, you keep your mining hardware. You just pointed it to a miner’s node. In a staking pool, you give up custody. The staking pool then places your coins in a contract that it cannot even withdraw the coins from. And so, what we’ve had is this massive centralization and acknowledgment following the events of a week ago around this Tornado Cash story. Now that these companies own all the eth that is declared, and this is the consensus algorithm, they can be commanded or they can take control of what is the truth about Ethereum.

Now there is all this debate about whether a UASF, user activated software, is possible and should be pursued in Ethereum, but the algorithm is so complicated and so untested for slashing and proof of stake , it’s just not easy.

It is very simple to understand bitcoin mining with a little training. I don’t think anyone fully understands all the nuances and details of this new Ethereum proof-of-stake system as part of the merger. I expect there will be talk of creating a UASF to threaten large companies with sanctions if they don’t 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. It’s impossible to run a real full file node for a normal person without thousands of dollars. It is 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 remotely similar. I have a very dim view of Proof of Stake in general because it is the “rich getting richer” with no other job than being rich and the rich also take control of the system. That’s all we tried to get away from. We want hard work to be rewarded; honesty to be rewarded; no one to be able to take control of the system. That’s just not what Proof of Stake is.

Every proof-of-stake system we see has a large majority of bettors who essentially have all the votes and decide what will and will not be the state of the blockchain.

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