Stake wars are just getting started, and things are already starting to feel a liiittle uncomfortable.
A thread on centralization in Proof of Stake (PoS):
But this is causing stake to gravitate toward a small number of publicly-known validators.
On paper, validators look the same, so delegators crowd into a few validators with a large amount of stake, decent track record, and low fees.
Power laws take over.
1. Pre-existing reputation
2. Fees — offer higher return to delegators
3. Differentiated services (i.e. offer better staking experience or additional crypto services)
Binance using unsustainably low fees to undercut the market is the latest example of this.
Well, we can't rely on honest & uncoordinated majority assumptions to drive security — collusion must be assumed to be possible and probable.
profit(honestValidation) > profit(attack)
@Hasu, @_prestwich, and @bcmakes use this intuition in their model of Bitcoin economics. See here: uncommoncore.co/wp-content/upl…
Networks w lower slashing may tend to be less secure, and it seems unlikely that a slashless PoS could be secure.
A) Social consensus around min. staking fee — 'require' validators charge a sustainable fee.
B) Anti-correlation penalties — slashing that rises in proportion to the amount of stake that misbehaves in the same period.
If this is the case, bribery for chain reorganization (i.e. Binance hack) & censorship may always be within the realm of possibility.
Rather than relying on economic mechanisms to keep validators honest, ZKPs make it impossible for validators to perform malicious behaviors like producing an invalid block.
Cryptoeconomics might be just be a bandage, a short term fix to help bootstrap the crypto ecosystem until cryptography can provide real security.