<<and the remaining part of that story. Just for future reference, as it's interesting, and some good stories can be hard to find again.>>
As per the link.
Ethereum’s “Merge” is about to put every ether miner out of work | Ars Technica
In contrast, the Ethereum community is still led by 28-year-old founder Vitalik Buterin, who has shepherded the network through a series of significant upgrades. Buterin has long recognized the environmental downsides of proof-of-work mining. Several years ago, he announced plans to transition Ethereum to proof-of-stake, which has been pioneered by several lesser-known cryptocurrencies.
While proof-of-work mining operates on the principle of "one hash, one vote," proof-of-stake is based on "one coin, one vote." Anyone who wants to participate in Ethereum's validation process must post ether as collateral, a process known as "staking." The more ether someone stakes, the more influence they have over which blocks get added to the Ethereum blockchain.
Every 12 seconds, a pseudorandom number generator selects a subset of stakers to form a committee to decide on the next block. One of them is designated to propose the next block, while the rest, called validators, verify that the new block follows all the rules of the Ethereum network. For example, if the block contains a payment transaction, the validators check that the source address has the required funds, that the transaction has the correct digital signatures, and so forth. If two-thirds of validators approve a block, it becomes part of the official blockchain.
Validators that faithfully follow these rules earn additional ether as a reward for their efforts, with the size of their reward proportional to the ether they've staked. On the other hand, if a validator tries to cheat—for example, by validating two different, incompatible blocks for the same blockchain "slot"—they will face financial penalties. If another validator posts evidence of such a cheating attempt, some of the cheater's collateral will be destroyed ("slashed," in Ethereum jargon), and the whistleblower will get a reward.
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A difficult transitionWhile this scheme is pretty simple in principle, getting it to work right is fiendishly complicated in practice—especially because once the system goes live, many people will probe it for vulnerabilities they can exploit for personal benefit.
For example, it's crucial that the algorithm for random committee assignment produce truly unpredictable results. Otherwise, a malicious party might be able to manipulate it to gain a majority control over some committees. The validation algorithm also needs to deal flexibly with the normal turnover of validators without opening the door to either ballot-box-stuffing or denial-of-service attacks.
On top of that, the Ethereum team had to figure out how to make the switch with zero downtime—a feat some commentators have compared to replacing an airplane's engines while it's in the air. Much of the delay over the last two years has been due to evolving plans about how to handle the transition. Early plans called for proof-of-stake to be part of a larger "Ethereum 2.0" upgrade that would simultaneously change other aspects of the system. But the community has gradually scaled back its ambitions, deciding to implement proof-of-stake first and consider other enhancements down the road.
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The plan the community ultimately settled on was to create a new proof-of-stake blockchain called the "Beacon Chain" that would initially operate independently of the existing Ethereum blockchain. The Beacon Chain launched in December 2020. Over the last 18 months, thousands of people and organizations have staked ether and have become validators on the new network. But they haven't had much to do since the Beacon Chain has no users. In a few weeks, the two networks will be merged together. At that point, the existing Ethereum network will be rechristened the "execution layer" of the new merged Ethereum network, while the Beacon Chain will become its "consensus layer," taking over the role currently played by proof-of-work miners.
The exact transition date isn't known; the Merge will happen when the network reaches a pre-set "terminal total difficulty"—a measure of the aggregate quantity of computation the miners have performed. Recent estimates suggest that will happen sometime between around September 15 and September 19, but the exact date depends on how much computing power miners bring to bear over the next month.
Fear of Uncle SamLast week, the Treasury Department announced it was slapping sanctions on Tornado Cash, an Ethereum "mixing service" that allows people to swap ether with anonymous strangers online. While advocates describe Tornado Cash as a way of protecting financial privacy, the US government considers it a tool for money laundering. The sanctions mean it's now a federal crime to use or interact with the Tornado Cash service.
Cryptocurrency advocates argue the Treasury Department has overreached because Tornado Cash is not a person or organization. Rather, it's a bit of code that's executed automatically by the Ethereum blockchain. Once the authors of Tornado Cash posted it to the blockchain, they lost the ability to change how it operates or shut it down. Advocates question whether the Treasury Department even has the authority to sanction a piece of software that's not under anyone's ownership or control.
A key question here is whether Ethereum miners and validators are affected by the sanctions. Above, I said that Tornado Cash is "executed automatically by the Ethereum blockchain," but that's not quite accurate. The code is executed by Ethereum miners. Individually, miners may lack the ability to change Tornado Cash's behavior, but their collective efforts make the Ethereum network—and hence Tornado Cash—function. Could the Treasury Department prosecute Ethereum miners who execute the Tornado Cash code as part of the mining process?
So far, the government has largely taken a hands-off approach toward bitcoin and Ethereum miners. This is largely a matter of practicality: A crackdown would probably push ether mining outside of the United States without fundamentally changing how the network operates.
The switch from proof-of-work miners to proof-of-stake validators could change things in a couple of important ways. Validators have to stake large sums of ether—the minimum is 32 ether, or more than $50,000. This requirement may mean that the types of people and organizations who become validators in the future will be different from the types of people and organizations who became miners in the past. In particular, bitcoin exchanges like Coinbase hold millions of dollars in ether and have been major participants in the Beacon Chain so far. These are large companies with strong ties to the US. They can't afford to thumb their noses at the US government.
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Second, the new proof-of-stake system doesn't make it easy for a group of entities to suddenly drop out of the validation process the way miners can. If several parties drop out all at once, the network may interpret this as a denial-of-service attack and impose financial penalties on validators who go AWOL.
All of this means that the new group of Ethereum validators could prove more vulnerable to government coercion than the old Ethereum miners were. It's not hard to imagine the US government waiting until shortly after the Merge and then approaching a bunch of US-based validators and demanding that all of them refuse to validate transactions involving Tornado Cash addresses.
If a critical mass of validators complies, it could effectively prevent Tornado Cash from operating and set a precedent that the US government can block the operation of Ethereum smart contracts it doesn't like. That would create a kind of constitutional crisis for Ethereum because independence from government regulation has long been considered a core feature of networks like bitcoin and Ethereum.
To be clear, we don't know if the federal government will try something like this or how things would play out if it did. Coinbase CEO Brian Armstrong said he would shut down Coinbase's staking service rather than comply with demands to block specific Ethereum addresses. But the larger point is that the switch to proof-of-stake is far more than a technical tweak to improve energy efficiency. It's a fundamental change to how Ethereum is organized—one that could lead to big and unexpected shifts in power within the Ethereum ecosystem.
And this is precisely why the bitcoiners have resisted making major changes to their own network. The bitcoin community has a stronger ideological streak than the Ethereum community. More than anything, bitcoin's leaders care about preserving the network's independence from governments. And some see a risk that Ethereum's switch to proof-of-stake could undermine that autonomy. |
