Ethereum creator Vitalik Buterin mentions LessWrong, discusses the various camps and ideologies in Cryptocurrency development

Ander

Vitalik says cryptocurrency developers should "reach out to LessWrong more", in order to not be ignorant of advanced computer science and game theory topics.

https://blog.ethereum.org/2014/12/31/silos/

I think Vitalik raises several major important points, namely:

* Bitcoin's $600 million wasted on electricity yearly in order to secure the network is a huge problem. Various Proof of Stake algorithms are attempting to improve upon this. The ideal solution would be one which combines the low cost of the Proof of Stake algorithm, with the high security or Proof of Work. I not enough of an expert to be able to say which solution is best, but both the Ripple consensus algorithm and the Bitshares Delegated Proof of State algorithm look promising. I am interested to see what algorithm Vitalik will choose for Ethereum.

* ASIC miners are a problem due to the resulting centralization. They have also lead to increased centralization in Bitcoin, as the network is now increasingly controlled by a few large mining pools.

* Blockchain technologies have a great potential to change the world, and solve governmental and organizational problems that society is facing. Beyond simply revolutionizing money, blockchain technologies could also be used in the future to support prediction markets, voting/consensus building, exchanges, etc.

Vitalik says cryptocurrency developers should "reach out to LessWrong more", in order to not be ignorant of advanced computer science and game theory topics.

https://blog.ethereum.org/2014/12/31/silos/

The money spent on mining is not wasted.

New coins are worth something. People will compete to produce them, resulting in marginal value ~= marginal cost. You can either make this simple enough that it's obvious that's what is going on, or you can hide it behind complexity. Proof of stake hides it: it creates bizarre problems like a black market in private keys that used to hold lots of coins so that you can generate new POS coins. Other options (complete pre-mine, for instance) come with their own problems.

Forcing people to spend lots of real resources generating coins has a really desirable side effect: it means that many of the producers will be forced to sell the coins they mine, which means there will be a market for those looking to buy them.

For the same reason, ASIC miners causing hash rate explosions are not a bad thing. The economic incentives don't care about capital costs vs electric costs, just that cost to produce = selling price. The centralization is bad, yes, but the other complaints commonly raised aren't actually a bad thing.

POS and other non-POW schemes lose one of Bitcoin's most appealing features: trustless history. I can tell from my copy of the blockchain that it is valid. If someone disagrees, they can simply present their version with a stronger POW, and I can easily tell who is correct without trusting either party.

If you can have similar or better security properties as mining without the cost incurred by the competition of energy expenditure, then the mining is wasteful.

While absolute trustless history seems good, it has a significant drawback as well: it isn't anti-fragile. That is, there is no way for the network to become stronger after recovering from a double spend attack, e.g. by slashing stake of the attackers.

You don't need long-range fork protection as long as the expiration of a block hash is known in advance. That is, short-range fork protection is all... (read more)

2passive_fist12y

A single example nullifies your entire argument: PrimeCoin. Ok, you say, finding primes isn't all that useful either. Fair objection. But there's no reason to think that someone won't come up with a valid POW system that does something incredibly useful, like molecular simulations. Actually it's not that hard to do, the main difficulty is ensuring cryptographic strength. The idea of cryptographic hashes that do useful computations is already becoming a huge research field. But fact is, POW is entirely separated from the value produced by mining. People often confuse these two concepts.

1Ander12y

When you are trying to use a blockchain as a store of value or currency, as Bitcoin does, then the cost of Proof of Work mining may be acceptable for the reasons you mentioned. However, being used as a currency is not the only thing that a blockchain can do, and many newer crypto projects are attempting to do other things. For example, you can use a blockchain to act as a company (a 'Distributed Autonomous Company', or DAC). The DAC can provide services to users, in exchange for fees, and attempt to make a profit. For example, the Bitshares project functions as a company that provides an exchange on the blockchain, in which you can trade assets such as gold, dollars, bitcoin, etc. When you are attempting to run a company on a blockchain, profits matter, and that means that you need your fees generated from customers to exceed the cost to secure the network, and that means that you need to use a more efficient security algorithm than proof of work. Various Proof of Stake algorithms cost much less to maintain. If the goal of your blockchain is not to represent all of the money in the world, but rather to be an autonomous company performing a certain service to users, then maybe you do not need to go 100% all in on security, perhaps it makes more sense to try and make a profit using a cheaper consensus algorithm. Finally, there are now a variety of different Proof of Stake algorithms. Not all of them suffer from the vulnerabilities of the original proof of stake, in which you can use old keys which used to control many coins in order to attack the network. For example, Ripple (Ripple Consensus algorithm), Bitshares (Delegated Proof of Stake), and NXT (Transparent Forging) algorithms do not suffer from this weakness, as far as I know.