Vitalik Buterin, Ethereum founder, and Brian Armstrong, Coinbase CEO, believe that a gradual shift in mindset and important contributions from the community led to them backing Ethereum’s move from a proof of work (PoW), to a proof-of–stake (PoS), consensus.
The industry titans and Viktor Bunin, a specialist in Coinbase protocol, joined Viktor Bunin on Around Block podcast to have an informative discussion about the Merge which will take place in September 2022.
Buterin thought about his past of considering proof of stake as a possible consensus mechanism for Ethereum blockchain. This was initially met with suspicion due to a variety of unsolved issues that made it seem unviable.
The Ethereum co-founder said that one of the first blog posts about the project in 2014 suggested an algorithm called “slasher”, which would penalize a node for voting for contrary actions.
“This was my attempt to make inroads in solving the proof-of-stake problem, which critics refer to as the ‘nothing at-stake’ problem. If you want to build on top two blocks in proof-of-work you must do twice the work. However, proof-of-stake allows you to sign as many items as you like.
Buterin believes that an explicit penalty for signing contrary actions is a viable option. Through 2014, research continued to examine the security assumptions Ethereum would need to rely upon with PoS. It was also possible to make PoS more secure than PoW by reducing penalties that eat into staked deposits instead of staking rewards.
Buterin then thought about a concept called “weak subjectivity” that was introduced at the close of that year. He explained that a PoS network must have a node that is online at regular intervals in order to receive the full security guarantee.
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It could be every week or month, but longer time periods are more difficult for liquidity-minded stakers. This was Buterin’s key consideration when he decided to make the PoS transition.
Ironically, for me, it was realizing it was an inevitable tradeoff that made me feel comfortable with it. This made me see the weakness in my situation, but at the same I felt confident that it was all there is.
Armstrong joined the conversation and admitted that he was skeptical about PoS at first. It took him a few years to change his mind.
“When people started talking of a Turing complete languages on a blockchain I was like, This sounds so easy to attack. So I initially was skeptical.”
After explaining that his initial belief in Bitcoin as the central blockchain of the ecosystem was flawed, the Coinbase CEO started to explore the idea again. Armstrong was more open to the idea of PoS after seeing the success of Decentralized Applications (DApps) that run on Ethereum.
“Just watching Vitalik’s progress on it, and the DApps that were being released, we finally came to the realization at Coinbase that every token and chain that is out there will be an open source project. We cannot keep our eyes on just one asset.
Buterin explained his belief in PoS being more robust and decentralized that PoW. With the ability to set up an Ethereum validator anywhere in the world, Buterin also shared his thoughts. To do this, all you need is a computer and internet access.
They also discussed the move by the United States Treasury to sanction USD Coin and Ether addresses connected to Tornado cash. Coinbase, however, would prefer to stop its staking operations to preserve the integrity the overall network in the unlikely situation it was required to censor transactions.