BigM #47

Ok, the IMF just released this great report on crypto and it's just too good not to make a joke out of all of it, so here' goes the terrible 1-slide comic. Somewhere deep in the political apparatus ...

Proof of Stake and Stake by Proxy

With the inevitability of PoS mining on Ethereum, and the possibility that the total number of staked nodes may be limited, it is important to develop alternative approaches to ensure a robust decentralized staking system. We explore one of those alternatives in this post.

The problem with creating a pool for a Proof of Stake (PoS) system is you're basically giving someone else control over your money, and no one likes that. Instead, of transferring your hard-earned ETH to an individual, we suggest that a smart contract can be used to deployed to enable pooled PoS mining. This will allow a single account / machine to stake for multiple individuals. This is important because currently, there is the possibility that only 16^2 nodes will be allowed to participate in the PoS process. This is alarmingly small compared to the number of nodes mining on the Ethereum chain in the Proof of Work (PoW) system. Smart contracts and stake-by-proxy, however, should provide an answer on how to successfully concentrate staking nodes without severely sacrificing the decentralization process.

The basic elements of a smart contract to make this type of system work are as follows:

A smart contract 'A' is setup which holds an array of who has contributed to the pool, and how much, if they want their earnings to be reinvested, and when should their deposit be automatically sent back to them and destaked. There is also a base setting for monthly pool fees, which is deposited into a separate account under the pool owners control. A final value is the pool earnings.

Pool Owner's Deposit is sent to smart contract 'A'. The pool owner's deposit is used as a 'skin-in-the-game' mechanic, to ensure that if the pool owner is delinquent in their duties of maintaining the server system for the trust, they will loose out just as much as everyone else. The pool owner's deposit can only be refunded once all other contributers to the pool have been paid (thus if there is a loss, the pool owner will feel it first). 

Depositors can match the owners deposit, or contribute less, but not more, which ensures that their risks are equal or less to that of the pool owner.
Deposits placed in the contract can be set with a refund date, at which time they will automatically be removed from staking and refunded to the contributing account number.  If you follow the axiom of never contribute more to a pool than the pool owner, you should feel fuzzy and warm.

The pool owner draws upon the pool fee to setup server systems and pay for electricity, internet, and ddos protection etc..

At this point, the PoS system needs to support stake-by-proxy. This will enable contract 'A' to stake the funds it contains, but also assign a proxy account 'C' which is controlled by the pool owner, to sign on behalf of contract 'A'. This way, the pool operator can setup their machine, and have it perform the betting required by PoS, while not actually having withdrawal privileges on contract 'B', where all the money is kept.

From Alchemy to Blockchain

In past generations, rulers saw that people were easily directed when they were offered a chunk of material mined from the Earth's core. This meant that rulers with many of corechunks, could hand them out to people and those people would do whatever was asked of them. Tasks typically involved forcibly confiscating life, property, virginity, and other people's corechunks. 

Now rulers soon realized what mystical power of these corechunks. To harness more people to do the ruler's bidding, more corechunks would be required. Thus the profession of Alchemy was born. The alchemist was tasked with creating corechunks out of anything, ideally something useless and easily available. For many years these alchemists tried to create this magical material, but the Earth would not yield it's secrets to them. 

It was not until ages later the that alchemists succeeded in creating something not quite unlike a corechunk. The item was a special bark derived from trees and on it was inscribed a magical charm called 'Promise'. The alchemists believed that the charm worked by making the holder believe that they would receive a corechunk if they gave the ruler the enchanted bark. People slowly started accepting bark in lieu of corechunks. Now the only thing limiting the ruler's power was their ability to hire alchemists to enchant bark. 

Almost two centuries after the introduction of enchanted bark, a wise being shared with the people the secret of the 'Promise' charm. The charm does not work because of some enchanted in the bark, it works because the people themselves were imbued innately with essence of 'Trust' which they were channeling into the bark. With the veil of knowledge lifted for all to see, it became clear to some that there was no need to use bark or corechunks. People were free to exchange 'Trust' via whatever means they chose: on the wind by eagles, or through the ether borne by spirits, or by a packmule over land. 

And that leads us to today. The knowledge that 'Trust' exists is the Apocalypse, the great unveiling of knowledge. While alchemists attempt to reassure people that 'Promise' is in the enchanted bark, the self-evidence of innate 'Trust' provides a heavy counter claim. Rulers grow uncomfortable as they realize that harnessing man will become more difficult with each coming year as more people cast their corechunks and bark aside in favor of gathering more essence of 'Trust' inside their soul. 

Knowing all this, I have one question for you. Are you still ensnared by corechunks and enchanted bark? Or do you believe in that you have the essence of 'Trust' inside of you? 

Commentary: 

If you have enjoyed this story and would like me to keep writing in a similar style, please feel free to send a beer to: 

BTC: 14eE5cVKyKjzR1Kcu6BGPvBTb7Up4J26YA

or

Eth: 0x8e61bf5a2e46d15774172781cf100ed0962cbb63 

In our story, corechunks refers to gold and silver. Alchemists refers to a wide variety of professions from alchemy to economists and central bankers. Rulers range from the regional warlord to kings and queens of yesteryear, to the elected officials of today. Enchanted bark is any type of promissory note or fiat currency. The essence of 'Trust' is in fact real and it resides inside of you. In this story it is used as an aphorism for blockchain-based currencies which allow 'Trust' to be exchanged between people without the use of corechunks, enchanted bark, or any other enchanted objects. Satoshi Nakamoto appears in this story as the wise being. Apocalypse literally means the great unveiling of knowledge, not whatever else you think it means. 

Disclaimer:

Any claims of the abandonment of corechunks and enchanted bark are vastly exaggerated because people are lemmings. Bark is the primary means of exchange to acquire drugs, alcohol, or virgins that haven't read this story.


From Alchemy to Bitcoin by skithuno is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.
Based on a work at http://spacience.blogspot.com/2016/01/from-alchemy-to-blockchain.html.