Ethereum as delivered as we know a proof-of-work
Proof of stake is a different kind of consensus mechanisms to proof of work. Proof of work is a way in which the computers that make up the bitcoin network and Ethereum network and many other crypto networks talk to each other and agree on what messages to process in what order.
Proof of work is a voting mechanism where one unit of computing power equals to one vote which is a huge oversimplification, but it is kind of okay to think about it. Proof of stake replaces that with essentially one coin inside of the system equal to one vote.
These two mechanism are kind of similar because they both use economic resources to gate keep what level of participation you can have in the network and that is something which is necessary because if you don’t have that mechanism then one participant can pretend to be billion of face participant. Proof or work does however proof of stake does that better for couple of reasons such as
- With proof of work, in order to prove that you actually have these competing powers, you have to basically turn on computing power and let the mathematical algorithm run 24/7 and this will lead to huge amount of energy consumption.
- Proof of stake is much more efficient because instead of proving that you have the computer by using them 24/7 to prove that you have coins, you just need to sign digital sign with the same cryptographic key that has no coin and so the network can run with much more lower energy consumption.
Walk me through what are some technologies are and where they fit in that stack?
Sharding is base layer upgrade. It changes the structure of blockchain so that instead of every single computer in the network needing to download the data that everyone sends in the system, you break up the data into shards and some random selection of nodes verify each individual piece of data. The purpose of this to allow you still have the whole chain be verified but at the same time do not require an individual known to process more than one or 500 of the entire data that is being processed by the chain so you increase the scalability of the entire system by the factor of 500.
Is there a trade-off in term of the overall security or where is that trade-off?
There are trade-offs, but the good news is there is not any kind of trade-offs that says security goes down by the factor of 500. There are more naïve designs than people have thought before where it actually is the case that each node only needs to process one over 500 of the data that means you break one over 500 of the network you can one over 500 chains. The more recent design uses multiple designs. The more recent design use multiple layer of defense, one of them is random sampling mechanism which means that if you are an attacker you don’t know ahead of time which nodes you will have to verify and which nodes to take over in order to take over the system. There is something called data viability proof, fraud proofs, proof of custody.
What have you seen in terms of the games and trade-offs?
So far the testing has focused much more on the proof of stake site rather than the scalability side. And our intention is to release proof of stake part before the Sharding part because we want to have period which is kind of like early chain where the test is running where you get to test proof of stake part are working but also at the same time real life economic test where the economic Bruce take are being tested because it is people actual money are at stake.
If I was to describe as being netting but for the network will that be clumsy analogy?
Yeah, netting is definitely a great analogy here. But in the general principle here, you just try to do stuff off of the blockchain for example I just randomly go offline or you decide you wants to take back your money but you try to claim you only paid for cent, if something happens like that then you appeal to the blockchain. Plasma is a different kind of constructions, but it uses the similar principles.
Define plasma and then jump to call it on capital efficiency?
Suppose you have a plasma chain that has some single operator and I have lot of users and there is also many separate kind of coin that plasma chain is keeping track. Simplicity, you can think of say a thousand coin as being thousand different objects. So on chain these 1000 coins are all controlled by the plasma smart contract and what happens is that there exists some kind of mapping of ownership based on these messages singed up chain that says that you have this coin and someone else has some other coin.
If you want to send your coin to someone else you send the transaction that does and then every 15 seconds of some interval of time, I take everyone’s transaction that submitted basically I made a commitments and I put these transactions together and make a cryptographic commitment to them.