Zcash Proof of Stake Megathread 🧵

…it depends on the size of the stake.

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Very relevant to those who love to misrepresent PoS.

Bigger PoW capital = Bigger yield due to economy of scale.
While in PoS, bigger stake will give you the same yield as those with smaller stake.

And you wonder which one is more equitable.

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I haven’t misrepresented anything.

That article talks about yield as a %.

I am simply saying if one has a bigger stake, then there is more incentive (in absolute terms) to keep said scheme going. That is mathematically correct; not a misrepresentation.

This is all relative though. Like who is to say you are a big fish in a pond or a small fish in the ocean.

POW miners take on **significantly ** more risk in their capital investment because yield isn’t guaranteed. Minimum yield has a lower bound of nearly 0.
With POS, minimum yield is more/less calculated and guaranteed (assuming one stakes). That is less risky.

In finance/investments 101, isn’t that a foundational concept: risk/reward? My point is POW miner inherently take on more (yield) risk than POS stakers, so the financial expectation of higher yield makes sense to me. And POW miners take on that risk EVERY block.

More capital investment in POW equipment should increase your expected return, but it’s not guaranteed because there might be someone else who made a bigger investment or a smarter investment (RD for more efficient miner). So, your “bigger yield” statement for POW is not the whole truth. Because you’re leaving out the risk part.

Ycash is a great example; someone might have 20% of network hash today, but if ETH miners switch en masse, then big fish become small fish overnight.

The underlying driver for this whole POS push seems to boil down to reducing risk for Zcash holders and essentially guaranteeing a minimum return. If someone holds x ZEC then their minimum yield will be y. All while reducing the energy consumption footprint of the network.

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Also there is a huge difference between expected future return from significant capital investment in equipment… versus programmatic yield (essentially) from significant capital investment in a crypto position.

It seems odd to really compare them. The former has uncertainty/risk and you —for sake of argument—start with 0 crypto.
And the latter is kinda like a dividend with minimum yield certainty and you must already have crypto to partake.

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How much is POS expected to improve confirmation times?

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After two hours of reading on this topic, this is my takeaway from a cypherpunk privacy and anonymity angle.

(I won’t talk about the environment, or financial egalitarianism - just autonomy from governments, corporations, and third parties.)

From this perspective, I’ve found that the criticisms of PoS by the Monero community are actually completely irrelevant and moot.

They talk about PoW’s ‘trustless’ and ‘permissionless’ design, with the ability to mine coins from scratch at any time. This means that, technically, PoW allows you to obtain cryptocurrency in possibly the most private and anonymous way on the planet - by mining directly and doing it via Tor.

It’s ideologically beautiful to be able to bypass ‘the system’ and create money completely independent of it at any time, using just computers and the Internet. FREEDOM! But in reality, is that actually what’s happening?

You first have to pay for mining gear, which requires fiat money or something obtained with less decentralisation than what you’re about to produce. Then, proper mining gear for mining anything realistic (whether GPU or CPU) is NOT easy to obtain, NOR operate, with decent privacy, anonymity, or ‘independence’ from the system. If you want those goals, mining - for 99.9999% of people - actually seems a WORSE option than simply trading coins via Bisq, decent coin swapping sites, atomic swaps or similar technologies, and then churning if need be.

The defence of PoW from a privacy angle seems completely ideological and not practical. Autonomy does not rely on the technical ability to mine your own, independent coins yourself, but instead the practical reality of there being other people in the community willing to trade coins with you. There is no difference between PoW and PoS in that regard. Autonomy (that matters) resides in the final result of your money and its privacy - not the source of the money! All money flows in circles all the time. Who cares about the source if it’s truly made private?

Ideals do still matter. For optics - to increase network effect - we should still strive to design towards inspiring ideals, if we agree with them. (E.g. if we can remove ‘trusted setup’ from the design, without compromising anything else, obviously do that - much appreciated!) But if warm and fuzzy ideals conflict with practical, immediate, real-world privacy for users, choose the latter.

Conclusion: PoW permissionlessness is pointless for coin privacy, anonymity, and autonomy. Our only practical hope is to ‘clean’ the ‘dirty’ money we obtain (i.e. centralised money - including pre-crypto fiat money), through decentralised community trading and private churning, away from those centralised sources. That’s what cash is after all.

Therefore:

It seems that Proof-of-Stake has no privacy disadvantages, and only positives: it can make a coin more decentralised, more financially egalitarian, more helpful by using less resources on the planet, more resistant to consensus attacks, and more resistant against governments trying to crack down on physical accessibility to the coin, such as targetting tradability of PoW mining equipment. All those things only increase financial security. PoS sounds like the direction to go in!

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There is something called “finality” in Eth2 speak for their POS. Not sure if Zcash will have the same property.

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:clap:

Given that North Star, we have four high-level goals for proof-of-stake product research:

  • We aim to improve ZEC’s position as a leading private, global, permissionless cryptocurrency in the emerging Web3 paradigm, as well as extending its utility for the real-world economy.
  • We examine all design decisions with a lens of usability and product-market fit for existing or potential products that integrate ZEC.
  • If our proposal is to be adopted by the Zcash community, it must satisfy and motivate a substantial economic majority of current and potential future participants.
  • We aim to maintain ECC’s world-class standards for designing and deploying safe, private, resilient, permissionless protocol designs and implementations.
  • We aim to select the best “minimum viable” target protocol, based on the belief that future improvements can be made to the consensus protocol when necessary.

Source: ECC blog

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Please try not to change the current Zcash issuance rate. :pray:

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1000% agree here
Many excellent points

Well the mining gear and power costs of PoW do create a value floor for a PoW coin. A PoS coin has nothing creating a value floor. BTC will not go much below the mining costs per coin, which includes equipment and electricity.

What creates the floor for PoS? It can go to near zero if the utility is not extremely high. It is more of a centralizing force as well as less secure. I have not been impressed with any of the PoS coins thus far and they are much more likely to be scams in general because of the more relative lack of skin in the game. There is a more robust industry when hardware must be manufactured to keep a project alive. We will see what happens with ETH. When ZEC turned to ASIC’s the value has never been the same. It could get worse with PoS. Nobody will buy it just because it uses less energy than it did before. That is irrelevant. That is the main reason I have seen for the past year for people wanting to move to PoS.

@JKDC correlation doesn’t always equal causation. Let me rearrange the words a bit to demonstrate.

Well the value of a PoW coin creates a floor for the cost of mining gear and the power. The mining costs per coin, which includes equipment and electricity, will not go much below (the price of) BTC.

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How can we avoid the power law with PoS in Zcash?

Whats that (power law)?

The power law is simply put

The rich get richer.

For example if the stakers are wealthy and the threshold to be able to stake is too high, then the probability is higher that the staker is rich and that means, depending on the PoS implementation, that the “staker elite” will have more power. And even if the threshold is low, the wealthy can use “multiple ballots”…

So to summarize these issues, I was asking the question from my last post.

PS: Wikipedia link https://en.wikipedia.org/wiki/Power_law

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Ok just wanted to be sure that wasn’t something like some system specific thing

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As someone who tried to be a small miner & lost money, zooko’s reasoning in this tweet sums up nicely what makes sense to me:

I agree with you that the staking threshold should be pretty low.

The rich are already getting richer. I’d consider it an improvement if the non-rich at least get something.

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Some nuance was lost here, but Zooko’s critique is generally perfect about how PoW can in some outcomes be more exclusionary to small fish.

Different PoW solutions create different RR potential for various sized participants -cost prohibitive/ cost productive- for small vs institutional scale miners. Namely the ASIC resistant sorts (GPU friendly) vs the non-intervention sorts (SHA256, Equihash) which trend toward being fully compromised to ASIC only larger scale miners

Zcash could have implemented a GPU friendly solution years ago, hell that could have happened at its creation. And that would have been a Welcome sign for a broader base of small community based miners (hashrate would be less centralized, and less transient also).

WhatToMine - Crypto coins mining profit calculator compared to Ethereum

https://electriccoin.co/blog/proof-of-stake-research-overview/

@nathan-at-least the password “Zcash” did not fit )))

I’m looking forward to the article.

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