Zcash Proof of Stake Megathread 🧵

Im willing to vote with my balance on this as I will be using Zcash as a medium of exchange, not a store of value if this is ever a PoS chain.

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Wouldn’t PoS encourage a more “store of value” type use case for ZEC, since there’s an incentive to hold and accumulate interest?

Also, forgive my ignorance about the technical side of things, but what are people’s takes on the idea of hybrid PoS/PoW? How viable would that be and would it resolve the concerns of those dedicated to remaining Pow?

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Thanks for the tip. We’ll check out ZEN too.

Our overall set-up is pretty modest. Around 500 ksol/s

To my knowledge, that was never true. We advocated for it during the dev fund discussions and posted results in spite of taking heat for it from the Zfnd and others. See: ECC Response to Zcash Community Polling Results - Electric Coin Company

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Indeed, this is not much. The power of one Z15 device is equal to 420 ksol/s

I see that this model causes a lot of positive emotions, but I will write here later why the consequences of switching to this model can very unpredictable. Don’t forget that Horizon and Pirate are currently on our algorithm. My fears are related to the fact that the hashrate as a result of these actions may be redistributed and the lion’s share will go to competitors. I’m not talking about the price behavior right now, I’m just asking a technical question. In the case of a hybrid model, how painlessly can the hashrate be reduced by half. Will this be the reason for increasing the number of confirmations for exchanges? I don’t know. @nathan-at-least

As for the price… I will give some examples of what has already happened, and because of what Zcash has lost a huge amount of hashrate this year. I need to prepare and I will edit this message a little later.

UPD1
So the first coin that I want to tell you about is Horizon (ZEN). The coin is by and large unremarkable if not for one thing. Barry Silbert is looking after it. He has a huge number of these coins both on personal wallets and on the wallets of the fund. You can check all this out. Its distribution is very centralized. With this distribution, it is not surprising that its price increased from $5 to 150 in less than a year. Barry does not hide that he pump it - he writes about it all the time
These are not my assumptions, these are the facts that I paid attention to:

Grayscale publishes all the smallest ZEN events in its newsletter, and not a word was said about Zcon.

Having exactly the same economic model as ZEC, exactly the same emission schedule and PoW algorithm, ZEN grew 30 times over the year and constantly reduced the gap coefficient from ZEC.

As a result, the ZEN hashrate grew by leaps and bounds:

These were the hashrate-power that Zcash gave ZEN.

And now I will draw your attention to one small period of time. This is two week that marked the difference between Zcash Halving day and the Horizon Halving day. It is noteworthy in it how the hashrate of coins changed.
Let me remind you that Zcash halving took place on November 18, and the ZEN halving took place on December 2. What happens to the hashrate these days, when the reduction of Zcash reward has already fallen by half, and the reduction of the ZEN reward has not yet fallen by half?


Sources:
https://www.coinwarz.com/mining/zcash/difficulty-chart
https://www.coinwarz.com/mining/horizen/hashrate-chart
(I have given a complexity graph for Zcash, but they are interrelated with the hashrate graph, however, there is no hashrate graph for Zcash on this resource. It can be found on other resources, but I chose the one that has both coins. Considering these graphs, it is necessary to average values of lines between days.)

On these charts, we can observe how after the reduction of the reward in Zcash network has occurred, the manners smoothly go into the ZEN network, in fact, more than doubling the ZEN hashrate chart. On the day when ZEN halving occurs, miners abruptly return to Zcash.
This my tweet about it - https://twitter.com/RuZcash/status/1334094346438799362?s=20

What I’m writing about here. It is very important to understand that the price and the amount of remuneration affects the hashrate. The hashrate of different coins on the same algorithm is communicating vessels. The increase in the hashrate contributes to the fact that competition among miners is growing and they will always be distributed to more profitable algorithms.

If we decide to take a part of their reward from the miners, to the funds or in favor of the holders, then we should expect that the miners will run away from you to another owner. I’m not talking now about those who have 500 K/sol in Australia, I’m talking about large numbers. One way or another, the profitability between coins on the same algorithm always tends to balance.

@Zooko I think it will be useful for you to read it too.

PS In Russia, there is a saying: measure 7 times, cut one off. This means that before making decisions that at first glance seem like a solution to us, it is necessary to justify your forecast with mathematical accuracy.

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Ok, when we finally weighed all the pros and cons and realized that each side has weighty arguments, I am sure that there will come an understanding that a compromise needs to be found. I will take a pause to formulate some thoughts in case we do decide to change the alogrhythm of consensus. If somewhere I got excited, then I apologize. I just want the best for Zcash like the rest of us.

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True, the hash from existing ASICs will find an alternate chain to mine. But there’s nothing to fear, it’s not like Zcash is stopping, ZEC will attract validators from several different staking projects who are managing multiple chains & this demand itself can be of a huge boost than another halving that can be years away. Thinking in terms of growing the Zcash user base will remove any fears.
Zcash would be upgrading from a Gen 1 blockchain to a the next Gen protocol without affecting the existing supply or distribution.

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imo moving to proof of stake would be a bad long-term decision for zcash. I wrote up a thread about why I don’t think bitcoin should ever switch to pos, and the arguments are equally applicable to zcash:

If a move to pos is all but inevitable (as it seems, with both major zcash protocol dev organizations ecc and zf signalling support for pos) I offer as a compromise a proposal to switch to a pow/pos hybrid, such as implementing Casper FFG on top of the existing zcash pow protocol:

This would not satisfy those who want pure pos for whatever reasons. But such a hybrid model would get zcash most of the benefits of pos while keeping the unique benefits of pow too.

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look where 7 years of Proof of Stake got Blackcoin.

Blackcoin as well was originally mined, distribution plummeted after the mining phase ended and the developers 1 by 1 abandoned the project to a few community devs who work for free… Would be a shame to see that happen here.

What does a hybrid system look like? Is that possible?

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Here is a description of Decred’s hybrid system

“Decred employs a combination of PoW and PoS to yield the best of both systems, mitigate their weaknesses, and deliver a layered consensus mechanism that makes it far more secure than other cryptocurrencies. Decred uses conventional PoW with a BLAKE-256 hash algorithm, and it is mined exclusively by ASICs. Decred holders time-lock their funds to purchase tickets in a lottery. Those tickets are added to a pool of roughly 41,000 tickets, and five tickets are pseudorandomly selected to validate the Proof-of-Work for the previous block. If at least 50% of the tickets approve the work of the miner, the miner’s reward is approved and the block is added to the blockchain.”

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I think it needs to be made clear what the potential timeframe of the switch from PoW to PoS could be…what is the earliest this could be rolled out? After next halving?

I ask because I recently acquired a Z15 that will come online in October & it would be nice to be able to crunch my numbers with the knowledge of when my rig becomes irrelevant for mining ZEC because of PoS.

I personally would like for the switch to not be before the next halving.

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Yeah I am in agreement. I am considering getting some of the new Z15s myself.

One way we could transition is that we could have a mixture of POS and POW where POS gradually accrues more validation responsibility. You could have 1% of the rewards directed towards POS initially and then slowly increase it’s proportion over time.

This has the benefit of not undercutting POW miners and their hardware investments while also integrating POS in a risk minimised way. I dont know how difficult the technical work would be. I have not looked at hybrid systems.

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Give me a link, please. I want to understand the source of stake-payments, as I see that all new emission is distributed among PoW-miners.

UPD I found it, thanks - ZenNodes - One of the Largest Node Networks
10% оf emission
Ok, If that’s what we’re aiming for when we talk about a hybrid model, then that’s great. 10% will give to holders an additional incentive, and will not create a churn of miners. I see no problem with this.

If this raises prices, then in 2024, the community could reduce the percentage (not monetary) financing of development funds and give nodes even more motivation. It seems reasonable to me.

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PoS may be many things, but more elegant it is not…

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It would take some time. @nathan-at-least will have a blog post out (very soon) that describes a potential approach that includes a hybrid model as a possible intermediate step.

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Hey all!

I seem to be groping for a concept that could suit all parties and completely cover the risks that I wrote about earlier. Let me remind you that I am very worried about the behavior of the PoS model in halving, namely the threat of dumping coins due to a decrease in staking profitability in anticipation of a reduction in reward.

So maybe the community is happy with a hybrid model consensus. I propose to consider options when the share of PoS reward will double at the time of halving.
For example, these can be the following distribution models:
2nd halving: 20% PoS - 80% PoW
3rd halving: 40% PoS - 60% PoW
4th halving: 80% Pos - 20% PoW
5th halving: 100% PoS.

Or this option:
2nd halving: 25% PoS - 75% PoW
3rd halving: 50% PoS - 50% PoW
4th halving: 100% PoS

Such a system mitigates the possible negative economics and psychological consequences of the transition. Also, the concept fully gives a long-term understanding for miners and holders in which vector everything moves without abrupt changes in the rules - very smoothly and very balanced with respect to each side of the community. Also, the concept clearly defines long-term environmental priorities.

In addition, if my theory of cost still works, then such a concept actually has an accelerated coefficient of increase in the cost of one coin at the time of halving, instead of a 2-fold, 2.5-fold increase for the first example and 2,6-3-fold increase for the second. I don’t insist on a specific distribution, but I believe that distributions should provide for a two-fold increase in the share of PoS at the time of halving in order to compensate for staking.

My calculations are very simple. At the time of the second halving, the number of coins in circulation will be 15,750,000. Let’s say 10% of all balances will launch their own stacking nodes (1,570,000 coins). Then the reward in the amount of 25% of the issue will be 1800 coins x 25% = 450 coins per day, i.e. 164,250 coins per year. Which gives more than 10.46% per annum to these nodes. Even if we assume that the balances of the nodes will be significantly higher than 10% (which in practice does not occur), then the reward will tend to 1.04% per annum. I think this range is sufficient to motivate node creation, but this is model not be super profitable, in order to depreciate the value of Zcash.

At the same time, each subsequent halving does not reduce the percentage of remuneration, and the 12-16 year time reserve allows us to believe that the percentage of remuneration from commissions will grow along with the adoption of Zcash as a popular means of payment.

Honestly, I am ready to vote for this model today.

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I like the idea of transition period and giving everyone involved with a chance to adjust their economics, instead of abrupt changes. The option above also aligns nicely with @nathan-at-least timeline prediction for research and implementation of PoS transition after NU5 deployment and ZSA development. Also, if indeed PoS (full or hybrid) proves to be less secure than PoW we will have the chance to evaluate our next move.

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