Zcash Proof of Stake Megathread 🧵

This thread is to help focus the conversation around Zcash possibly transitioning from Proof of Work to Proof of Stake.

Today Zooko has gone on record (again) that he feels Zcash should reduce it’s carbon footprint and move to Proof of Stake in an article on Forbes:

And further clarified his thoughts on the ECC blog:

This is not the first time the idea of Zcash moving to PoS has been discussed, there are some existing threads:
Zooko talking about PoS. PoS vs PoW Discussion

This tweet from Zooko back in 2018:

And even a basic ZIP proposal: ZIP proposal: Proof of stake

So, with the topic brought up again, as we approach the NU5 activation height coming later this year that means NU6 feature selection is right around the corner:

What are your thoughts on PoW vs PoS?
Should Zcash make the switch?
When do you think would be appropriate if Zcash were to switch?

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Zooko posted a blog this morning to initiate the conversation about a possible move to proof of stake. Please take a look and weigh in!

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great news to me!

Living in a country that makes it impossible to mine because of super high electricity cost, I never understood the decentralized POW argument : the reality is that you can mine where it is cheap.

However, staking is no issue.

I like that you dare the energy waste argument too. So many defend the bitcoin consumption because it is green. Fine, but it’s still MW that could NOT be used.

:+1:

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Most of my concerns would resolve if large holders created by founders rewards, dev funds or grants were excluded from operating validators.

My unease is not a lack of trust, but the influence they might have being perceived as negatively as the ‘toxic waste’ discussions from trusted setups.

Other than that, its just a different way of getting transactions into blocks.

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This is what I like about Zcash, no shying away from moving forward and upgrading the network, all the way down to the consensus level!

For me the question is not about “Should Zcash switch from Proof of Work to Proof of Stake?” but When will Zcash plan to migrate from PoW to PoS? And leave behind the random number lottery using ASICs and miners who sell for electricity costs and don’t need to have much skin in the game.

Once we have the timeline, like 2nd or 3rd halving for the upgrade? I would be interested to contribute, review and compare the various options for Staking consensus rules along with researchers in applied Game Theory(there are several from the competing PoS chains). And get the sentiment from the community to take part in some sort of an incentivized test-net.

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I’ve been continually mining ZEC with ASICs since 2018. Indeed my only contributions to the forum were related to mining and PoW back around that time.

My thinking has evolved a fair bit since starting mining and contributions then. While I agree that the benefit of PoW is its simplicity, I would prefer to see Zcash running PoS. The environmental impact of PoW is a major problem. Also, PoW is fragile since the hardware operations can be regulated/confiscated whereas capital is free from confiscation risk.

I don’t think there’s any tangible difference in centralisation concerns, I see all economic system converging towards centralisation over time.

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As long as regulators know the location of the miners they can be shut down. I would also say as long as they know the top holders the FBI can show up at their house. Just because it hasn’t happened in “Democracies” doesn’t mean it won’t. It is also expensive to be moving around all the equipment. US has shown that it is not all too friendly as it appears to crypto. Although I also have concerns about POS. I think having a lock mechanism would be great too. I like what ICP is doing with Neurons. The longer you lock your coins the more rewards you get. It aligns stakers with the long term vision of the project.

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I generally support a move to PoS so long as it does not compromise privacy. My main concern is that assuming zec must be staked transparently this would just lead to a shrinking of the shielded pool, perhaps to a point where it becomes almost useless. I’m not sure how ZSA support might factor in, maybe if they were made private only it could help offset the potential reduction in the anonymity set.

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I believe no one is suggesting this. If we are going to do PoS on Zcash, shielded is the way to go.

Also, let’s not play with those legacy bitcoin scripts anymore. It’s 2021 not 2012.

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"First they ignore you, then they laugh at you, then they fight you, then you win”. We are in the fight stage. The infrastructure bill malware law is just the beginning. Chair Gensler says the SEC needs more power from Congress to fully regulate crypto. Privacy coins will be target number one. This is why we need PoS. Climate will just be used as another information tool to shut it down. My only concern with POS is the distribution of the coins. But zcash has the best community to figure it out. Specially as we get shielded assets, every person of power will not be happy.

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Well I was mining since 2017 this was my first coin I ever started to mine then when Asics came along it threw me off from ZEC and I had to find a new home for my miners. I still have all the coins I mined back in the day and POS will finally then be able to bring me back to my origins so I say yes move over it will bring everyone back that could not afford the new Asics and electrical costs

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This is about everything I could find that I ever posted about it. The details evolved a little over time but the overall scheme is pretty much the same now as then. It didn’t garner much interest but since we’re discussing it now then I suppose I should post about it again, they may not follow chronological order.

There are several questions to which it would be nice to understand the answers. When we talk about changing the economic model, we must clearly understand that it changes the motivation of participants not only in the medium term, but also in the long term. When making decisions, we must take into account the forecasts of the development of the network, based on motivations and balances of opinions.

We know how things are with the hash rate on the bitcoin network, and how halvings affect the hash rate in fact. Let me remind you: miners continue to contribute to the stability of the network and all this is balanced with the price. However, bitcoin has a dead end development due to a possible lack of transactions (lightning network, wrapped bitcoin - all these decisions do not stimulate commissions in any way). And as a result, due to the lack of commissions in the future, a situation may arise when the motivation of miners will remain only if the price of bitcoin continues to rise.

Before that, I assumed that Zсash would be devoid of this drawback, because I hope that the number of transactions will significantly exceed the number of Bitcoin transactions. The reasons for this opinion are that the Zсash network will be used for its intended purpose - as a payment network, due to the presence of confidential transactions. Today, as far as I understand the vector of this decision, is the motivation is to reduce the sales pressure. (Although I always say that we should not fight supply, but need increase the demand for the use of Zсash, distributing information about why it is safer than using transparent blockchains). I want to understand, has anyone thought about other long-term motivations?

Is there any motivation to distribute Zсash among new users?
Is there any motivation to hold onto coins the day after the halving?
What is the motivation to hold coins in the event of a three-year bearish cycle, when the price will fall every month?

What is the motivation to keep the nodes when the emission ends, and the network does not receive sufficient distribution to become asset of payments? This will happen if: 1) everyone will be carried away only by the price 2) Zcash will depreciate not withstanding competition and losing all users as a result of lack of distribution.

Are we not afraid to lock Zсash in a narrow circle of users until the third halving, when everyone will just start selling it due to the lack of further motivation to retain?

Are you ready to gamble on a dream for a short-term price increase?
@zooko @nathan-at-least @joshs

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About price

In the short term, this may raise the price, but we cannot avoid bad seasons. ZEС cannot be out of the market, it will be subject to the same trends. Even those people who now welcome this decision can change their minds if expectations fail them. I had a bad experience. I had a lot of Stratis-coins. There was a lot of positive at the very beginning and grandiose plans. But when the bear market started, I saw people throwing everything on sale. The price dropped from 21 dollars to less than $1. It was very unpleasant. Therefore, I do not believe that PoS will lead to high prices. People tend not to appreciate what comes for free. And PoS has just such a model.

Moreover, the ZEC has a model for reducing bitcoin, this implies halving, which means a significant reduction in PoS-rewards. Usually in PoW-coins halving they provoke an increase in prices, (well if you do not believe in my model, let it be an increase in prices based on expectations from experience from the past). But if you analyze PosS coins that have halving, there are everything is exactly the opposite.

We should not build models on the simple belief that people will act differently than they did before. There are objective reasons for this in psychology.

Another reason. ZEC has a limited limit. What happened to the PoS-coins that had a limit (Waves, Nem, Stratis again and others) and reached it? They had to remove the limit, simply because otherwise the motivation to keep nodes from users would have completely disappeared. Yes, they had a limit, but now it is not. Cause? They were unable to get the necessary transaction flow to keep the motivation for keeping the nodes at the expense of fees alone. Ether does not have this problem. As far as we can be sure now (with our low commission) that in 8 years this will not be a big problem for ZEC. What if the price not rises enough? How are we going to motivate the nodes? We will not be able to roll back PoS, we will not be able to increase the limit. We’ll get the problem of Bytecoin.

The reason for these questions is a deviation from the Bitcoin working model. We can’t just say “come what may” and hope for God. We must foresee everything.

One more thought before I forget. ZEC privacy properties are excellent, but few people appreciate them. This will continue until a significant price pump occurs. Crypto market people figure out the reasons later. Then people start talking about wonderful properties. That it is obviously better than Bitcoin and that it may repeat the price chart. By themselves, the properties of the coin will not tell about themselves. Need a pump. And only then, after a lot of people notice ZEC, a cyclical process starts: ZEC gets new users - demand grows - its price rises - hash rate grows - on the eve of halving everyone starts to buy the bottom - after halving the price reaches a new maximum - ZEC gets new users again. This all will happen with PoW. But it takes time.

If we want to speed up the process, then we must stifle the pride of the developer of the best solution and start advertising our product. You need to allocate a budget for this. Does anyone know that every James Bond movie has an advertising budget that matches the production budget? It’s true, check the wiki. We can influence demand if we want. Context advertising on Twitter for the best articles is not expensive. This is a permitted type of advertising activity. There are many other ways of effective advertising. I want to advertise my site in the future on the context of the cryptocurrency in search results. We live in the information field every day, we can influence it.

This is a non-issue in my opinion but I applaud Zooko for trying to market Zcash since this is a hot topic right now. Zcash is only worth a little over a billion dollars and its’ footprint is nearly nothing. Zcash should concentrate on getting all of its’ features implemented and get a corresponding market cap increase before this will be an issue. Also, Ethereum needs to prove it can pull off the transition to PoS before Zcash attempts to do so. Maybe 2023-24 would be a good time to revisit the need for PoS for Zcash.

I hate everything about the idea.

I will probably find another chain, namely Tezos, to make my new home for my favorite crypto if this happens, I have better opportunities elsewhere aside from Zcash, of which being mined was a key denominating factor as to why I supported it originally.

After overcoming all the headaches and transition a mine from GPU’s to ASICS, this would just make Zcash a joke to me on an industrial scale.

I guess I wasted my time sourcing the Liquid Natural Gas wells in Canada and design Seacan sized mining rigs to sell to the dying oil field here, which will tell me to get fucked as soon as I dont have a mineable coin for them to invest their GREEN ENERGY INTO that they JUST GOT ATTACKED POLITICALLY for trying to access for the last decade…

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What about this new amendment to the infrastructure bill that would make it illegal to run a PoS node? PoW may be all we ever have.

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I understand You perfectly. This is such a significant change that I cannot imagine the situation of the people who invested money in ASICs. I know a lot, a lot of people in Russia who are mining and buy only ASICs for Zcash. Some have organized infrastructure with gas generation, huge investments. Someone initially had access to cheap energy. But at the same time they are holders and do not sell anything. These people invest in ZEC more than anyone else. Because these are all very large investments. Such people buy coins through the purchase of equipment and do not even have an account on the exchange. And now they probably don’t know about this news yet, because they didn’t ask questions. But if they found out, they would be in complete shock from the fact that the rules can be changed so easily without a roadmap. At the snap of your fingers. It is extremely dangerous to do so. You can undermine any confidence in the coin and this will alienate investors with really big money, who are watching Zcash, perhaps not as constantly as we (these are busy people), but who continue to buy it in good volumes. Do you know what I envy the Americans? Your constitution is not changed at the request of the president every 2 years. @Zooko think about it please.

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It is totally understandable. But it is to me another proof that mining makes things very centralized and only accessible to a few that have access to such incredible amounts of energy at super low price. I can’t do this. They do take the risk of high capital investment, investing in equipment that only supports one blockchain, and that is a big risk. But in my view, it’s part of the risk analysis before such investment. It cannot be a complete surprise to these investors.

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Things like that need to be planned. In the morning, in a specialized Telegram channel posted five Z15 units of 800 thousand rubles each (this is more than $ 10,000). Someone has already bought them. Three different people.

What kind of centralization? Who is stopping you from doing this at home? PoS leads to centralization much more strongly, but I will not go on, so much has been said about it that it makes no sense.

Better see how great two ASICs work in my house - https://twitter.com/RuZcash/status/1409219007677403137?s=20

I ordered this ASICs on March 17, 2020, this is the very first batch of Z15. At that moment, one ZEC was worth $23. And what will the PoS miners do in difficult times?

Anyone who invests money will always stand to the end. Mining is the most anonymous and most decentralized way to buy Zcash.

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