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Ethereum's Switch to Proof-of-Stake Will be 'Substantial' to the Industry, Binance Research Suggests

Binance’s latest research report published on Oct. 28 stated that Ethereum’s upcoming switch to Proof-of-Stake (PoS) from Proof-of-Work (PoW) is expected to take a ‘most substantial’ portion of the crypto market’s attention.

Governance and rewards

PoS blockchains allow network participants to earn rewards by staking cryptoassets on-chain. Compared to block rewards being awarded to miners in proportion to their hashpower in PoW blockchains, rewards in PoS are distributed in proportion to users who stake their cryptoassets on the network.

Participants involved in staking are incentivized to vote for decisions and enhance governance calls for the chain and the ecosystem. This will encourage participants to engage in online discussions, forums, and communicate with other nodes to develop better standards and best practices.

Although there are physical hardware costs for PoS systems, the costs go nowhere nearly as high as those involved in PoW blockchains.

Risks

Staking rewards are usually denominated in a non-fiat pegged cryptocurrency, which means that it could carry potential volatility risks.

There are also required exposure to governance, where users outside of the large holdings circle may face some risk of being exposed to the whims of larger staking participants. This is due to the fact that large token holders can exert a ‘proportionate amount of power’ in the decision making of the ecosystem.

Users are also encouraged to check if the chain requires un-bonding period and other loss of liquidity towards the count of a balance being staked to avoid risks.

Custody may also be a burden in the case of lost private keys as some staking mechanisms require funds to be directly held on the wallets of nodes participating in staking.

Ethereum 2.0 and Instanbul upgrade

Vitalik Buterin mentioned in a recent conference that there are a few teams already looking into implementing Phase One of Ethereum 2.0, in parallel with all the work involved in Phase Zero to production quality.

After the Istanbul network upgrade, which is expected to happen on the testnet this month and on the mainnet a month from now, Buterin suggested that we can expect to see about 4000 transactions per second in the absolute best case.

The best-case scenario describes where people are just making payments, and everyone is running on a rollup, even in realistic cases, it can reach over 1000 transactions per second.

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Ethereum's Vitalik Buterin Thinks Mining Monero on HTC Phones is a “Fool’s Game”

In a recent Twitter post, Vitalik Buterin, the co-founder of Ethereum blockchain, did not hide his feelings when it comes to the concept of cryptocurrency mining through the use of smartphones. He considers crypto mining via mobile phones as something still not possible with any real efficiency.

Ethereum’s Buterin Faults the HTC-Midas Labs Partnership

Vitalik tweeted: “Mining on phones is a fool’s game. Goes against everything we know about hardware economies of scale and more likely to trick users with false hope than help them.” In other words, Vitalik downplays the recent partnership deal between HTC and Midas Labs to enable users to mine Monero cryptocurrency on HTC blockchain mobile phones. On April 13, Taiwan computer manufacturing firm HTC collaborated with Midas labs, a designer of programmable blockchain mining chips, to enable Monero (XMR) mining on the HTC blockchain-enabled phones via DeMiner app, a Monero mining application developed by Midas Labs. The DeMiner app will likely be released in the second quarter of 2020 (April 1 – June 30). It will allow direct mining from the mobile phone because of its low energy consumption.

However, critics identified faults in the innovation, saying that it is fruitless and somehow worthless. They condemned the DeMiner app, stating that it would take an estimate of 37 years to earn a Monero cryptocurrency if a person mines on the smartphone every day. A series of condemnations continue over the ineffectiveness of the application, which explains why the founder of Ethereum, Vitalik Buterin, intervened and said that such initiative only gives users false hopes.

Buterin said that the idea of a mobile phone managing to mine stands as a contradiction of everything the cryptocurrency industry has learned. It spits in the face of the economies of scale, which has dominated in the cryptocurrency industry. Buterin describes it as a trick to give potential users false hope, rather than helping them. He highlighted that staking would rather work well on smartphones, describing it as quite promising. He mentioned that staking on smartphones does not require any particular resources, and the cost/benefit ratio is greater than the ordinary crypto mining.

However, there were mixed reactions on social media over Buterin’s remarks. Some people think that he underestimated the concept of mobile crypto mining, citing the cryptocurrency mining of Ardor that specializes in mobile phones. Others agree with his comments. But some people feel that mobile phones can maximize connectivity and crypto mining, including staking on smartphones in the future.

Blockchain Phones with Built-In Crypto Wallets

Huobi Global is among the first crypto exchange platforms that launched a new version of smartphones, which include cryptocurrency or blockchain features like DApp store, cold-storage wallet, crypto wallet …etc. The affordable blockchain phones have features like blockchain-related apps and are alerting users when the price of specific crypto increases or decreases. The phones have an optional cold storage wallet with in-built cryptocurrency money wallet app. However, users cannot mine every kind of cryptocurrency using a smartphone. The process may not be profitable because of the low processing power of mobile devices. Buterin’s comments are right because crypto mining is normally a highly sophisticated and complex exercise that average smartphones may not handle.

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Vitalik Buterin Shares Opinion On Crypto Regulation

Ethereum co-founder Vitalik Buterin on Sunday, shared his opinion on crypto regulation, expressing that he is happy that exchange-traded funds (ETFs) are being slowed down.

According to Vitalik, the crypto ecosystem still has some more growing and maturing to do before it starts to get the attention it deserves. He also spoke about the regulations that impact the inner workings of a crypto ecosystem.

“Basically, there are two main classes of regulatory policy goals: (i) consumer protection, (ii) making it harder for baddies to move large amounts of money around. The issues around (ii) are concentrated not in DeFi, but in large-scale crypto payments in general,” Vitalik noted.

With his shared opinions, the Ethereum founder believes regulation that allows inner independence to crypto projects is much less harmful than that which invades the functionality of crypto internally.

Furthermore, Vitalik also mentioned that the idea of KYC (know-your-customer) on DeFi (decentralized finance) frontends seems rather irrelevant. He says, “it would annoy users but do nothing against hackers. Hackers write custom code to interact with contracts already.”

Vitalik further pointed out that KYC on exchanges, which is already happening, is one of the ideas that are much more sensible. In proportion to this, he gave out three recommendations that could be relevant to regulations on DeFi frontends.

The recommendations include “limits on leverage, requiring transparency about what audits, FV or other security checks were done on contract code” and “usage gated by knowledge-based tests instead of plutocratic net-worth minimum rules.”

To conclude, Vitalik endorsed zero-knowledge proofs to meet regulatory requirements while preserving users’ privacy, saying, “I would love to see rules written in such a way that requirements can be satisfied by zero-knowledge proofs as much as possible.”

He added, “ZKPs offer lots of new opportunities to satisfy reg policy goals and preserve privacy at the same time, and we should take advantage of this!”

Matter Labs on Friday announced the launch of ZkSync 2.0, an Ethereum scaling solution that is set to enable developers to host smart contracts and deploy DeFi protocols, NFTs and other types of applications on the Ethereum network.