Wouldn't it be possible for a government seeking to destroy the blockchain just "print out" the money for getting 51%? if they plan to bring the network down then the printing wont effect the fiat economy since they will "burn" the money right after printing it? Also If proof of stake give the most reward to the biggest coin holder won't it just make the rich richer thus centralizing most of the coins to a handful of people?
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Trying to buy 51% of the currency may either take a long time at "normal" price or may shoot the price to moon because of huge short demand thus making it even more expensive.– KozuchCommented Dec 29, 2017 at 12:02
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3 Answers
Wouldn't it be possible for a government seeking to destroy the blockchain just "print out" the money for getting 51%?
Possible? Yes.
But then this isn't any different to the current situation with PoW, whereby government agencies could collude to generate enough hash power to stage an attack. And to generate that hash power they could either requisition the hardware, or print money to buy it. (The problem with printing money and buying the hardware on the open market is the associated inflation.)
Related: How much would 51% attack cost?
if they plan to bring the network down then the printing wont effect the fiat economy since they will "burn" the money right after printing it?
The currency of staking is ether (ETH), rather than fiat cash. To get their hands on that amount of the existing ETH they'd need to buy it on the open market. To do that without upsetting the market would take time.
Related: An old official blog post from Vitalik on the distribution of ETH. Presumably this distribution has changed over time, but there might be something useful in there: Ether Sale: A Statistical Overview
Also If proof of stake give the most reward to the biggest coin holder won't it just make the rich richer thus centralizing most of the coins to a handful of people?
The barriers to entry are probably (possibly) going to be lower than they are for PoW. It remains to be seen, but presumably anyone will be able to join staking pools, whereas now only people able to afford hardware are able to join mining pools.
Related: Will a higher stake make more money in PoS? (Also talked about here: What are the major risks of Ethereum moving to Proof of Stake?)
answered Jun 28, 2017 at 19:32
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Thanks, thing are much more understood now. Will ethereum based coins be forced to stick or will they have the option to stay with PoW? Commented Jun 28, 2017 at 19:52
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I think @wacax answers that pretty well in the comments on his answer. :-) Commented Jun 28, 2017 at 22:13
There are two parts that I will try to answer here.
- Wouldn't it be possible for a government seeking to destroy the blockchain (or any blockchain) by just "printing out" the money enough to get 51% of the tokens?
The short answer is yes. They won't even have to print any money, just use whatever is stored in accounts without going though exchanges i.e OTC exchanges so it won't inflate the price after buying half the amount of tokens. And they could actually buy +50% of total Ether in circulation. This has been described already by Vlad Zamfir as a cartel attack meaning that a group of people or in your case a single government has a large amount of tokens in a blockchain that could use to censor non-cartel nodes in their own favor.
More information on: https://medium.com/@Vlad_Zamfir/the-history-of-casper-chapter-4-3855638b5f0e
Realistically, Casper is being developed with a vision of "Oligopolistic competition" which "is the norm in many “real-life” markets"
A solution was proposed on The History of Casper part 5 and on Ethereum's proof of Stake F.A.Q.
In short:
The cartel had to be punished whenever validators appeared to be missing. It has to be punished severely enough and for long enough so that it is not in its interest to censor non-cartel members.
(...) this definitively showed that proof-of-stake was fundamentally more censorship resistant than proof-of-work, reaffirming my intuition that security deposits are king.
It was possible to see how this could be implemented: if a validator failed to get their blocks into the chain, all of the validators who did have their blocks in the chain would be penalized. It also became clear that the cost of censorship resistance in the cartel model is that a validator could deliberately go offline in order to make online validators lose money.
It was therefore also necessary to penalize validators who go offline, because it could not be clear to the protocol whether they were being censored, or whether they were offline of their own accord.
Since Casper would have access to stacked Ether to both cartel nodes and Non-cartel nodes it could punish cartel miners and other nodes in the cartel's chain equally plus punishing offline nodes as they could be offline deliberately. You can see the absence of non-cartel nodes a could punish cartel nodes sufficiently enough to effectively make them lose the majority of tokens staked thus rebalancing the percentage of non-cartel tokens to the majority.
Finally, if censoring attacks were successful in stopping a public network by knocking down at least 1/3 of validators as is the case with Tendermint. A hard fork could be used to recover it.
For the second part of the question:
- Also If proof of stake give the most reward to the biggest coin holder won't it just make the rich richer thus centralizing most of the coins to a handful of people.
PoS gives rewards proportionally to what the node is staking and a chance of processing transactions depending on the amount staked. One has to keep in mind that rewarding validators with small stakes by making them process transactions more often than validators with large stakes opens vectors of attack as you won't need to acquire large amounts of a token in order to make an attack like the scenario just mentioned in question one but a small budget well spread across micro-validators could also open the possibility of cartel attacks.
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Thanks for the extensive overview, will ethereum based tokens will be forced to switch? Commented Jun 28, 2017 at 19:57
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ERC-20 tokens will be untouched after Serenity and they will remain with PoS unless they fork out to another Ethereum chain or migrate to other chains like Storj did. In fact even Ether itself will become an ERC-20 token (or whatever ERC specification will be at the time).– wacaxCommented Jun 28, 2017 at 20:11
Adding to (or perhaps correcting) Richard Horrocks answer, money wouldn't get "burned" in this case. The effect a government printing money to buy a digital asset would be the same as if it did the same for any other asset: the fiat currency would simply deflate and holders of that currency would have become poorer. This is why Milton Friedman called printing money taxation without representation.
The higher the market cap of the cryptocurrency is at the time, the more expensive such attack would be.
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IMHO, this answer seems to be self-inconsistent but can easily be remedied. If there are a trillion US dollars and a (crypto) currency had a total value of a billion US dollars and the US dollar and Euro were on par, the US could print 9 trillion more dollars resulting in a "market cap" (yes, I'm aware this is often how it's referred to) increasing to approximately 10 billion US dollars but still one billion euros. From a future-share-of-US-economy, market cap is the same. It is only nominally more expensive in US dollars (and approximately the same in euros).– lungjCommented Sep 16, 2017 at 4:43
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I.e. I think the missing part is the distinction of nominal-same-denomination price increasing vs. the less precise "more expensive". I think this is what you've said in the first part of your answer.– lungjCommented Sep 16, 2017 at 4:44
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I'm not quite sure I understood what you meant. But my point is that for a currency to not inflate from printing money there must also be growth in value (products and services) or the prices of everything (including all cryptocurrencies) climb.– mtsfariaCommented Sep 17, 2017 at 14:31
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In your first paragraph, you mention how one can print money to cause monetary inflation and (if done quickly enough) price inflation, thus abolishing an absolute notion of "expensive". As a result, I think the second should be amended to read "The higher the market cap of the cryptocurrency relative to a base currency, the more the attack would nominally cost, denominated in said base currency." to account for the base currency being inflated monetarily and price...ily to remain consistent.– lungjCommented Sep 17, 2017 at 15:21