The foundation of consensus: economic effects are the lifeblood of blockchain

There is a reader's message:

"When the market is bad, the bottom of POW is much stronger, the price of Ether falls, and it is good to stop work if it falls below the shutdown price, so that the lower limit of Ether is relatively high."

"POS, these large pledge investors do not have the cost of mining machines, and when they expire, they put forward to see that the market is not good to smash the market, and the most unfavorable rules of this game are retail investors."

Regarding the pros and cons of POW and POS, I have shared my opinion in a previous article. Although I have some questions and puzzles about POS, and I am still in the process of learning, when it comes to staking, there is still a clear difference between POW and POS.

The actual cost of validators who actually stake ETH is not low. One of the points is that the POS consensus mechanism penalizes mistakes in the verification process. In addition to deliberate evil, "dereliction of duty" (such as disconnection and mistakes) due to various reasons in the verification process will lead to a certain degree of staking forfeiture. Therefore, if you want to carry out stable and reliable POS staking, the requirements for operation and maintenance are not low.

In terms of dealing with "evil" and "dereliction of duty", POW is not as good as POS. There is no punishment for evildoers, and there is no so-called "dereliction of duty".

As for the disadvantages of the current Ethereum POS mechanism for retail investors, Vitalik proposed a solution early on and will implement it in the near future:

The functions of validators are decomposed into block producers and block validators. Block producers are required to stake more ETH and use stronger and more efficient hardware devices to improve the overall efficiency of Ethereum; For block validators, less ETH is required, allowing more retail investors to participate in staking and validating blocks even with light wallets.

In general, it is to improve operational efficiency in a more centralized way and verify the network in a more decentralized way.

All of this is a technical analysis of which consensus mechanism is better or how to improve the existing consensus mechanism to make it better. This is certainly the way it should be, and it should be sustained.

But if we go to a deeper level, in addition to technical guarantees, consensus guarantees are more important to some extent. The guarantee of consensus will become more and more closely related to the economic effect with the passage of time.

The phrase "matter determines consciousness" could not be more appropriate to describe this relationship.

When the economic effect of a blockchain is stronger, its consensus will be stronger. A blockchain with a weak economy will eventually fall, no matter how technically decentralized and secure its consensus mechanism may seem.

"Bitcoin is gold, Litecoin is silver".

This sentence should still be fresh in the memory of old players, right?

Litecoin, like Bitcoin, is a consensus mechanism of POW. Litecoin was once one of the top targets in the crypto ecosystem. But now we only hear that Bitcoin is "digital gold", and do we hear people say that Litecoin is "digital silver"?

In the vast majority of crypto media, we hardly hear anything about Litecoin.

Why?

Compared to "monumentality", it is no better than Bitcoin; When it comes to ecology, it has nothing. In such a situation, the gradual dissipation of its consensus is inevitable.

In an early article, I shared one of Bitcoin's concerns:

If we simply rely on transfer transactions and halving the block reward, unless the price of Bitcoin can continue to rise in the future, there will be a day when the price of Bitcoin becomes more and more stable, resulting in this income becoming less and less attractive to miners, and the Bitcoin network is a security risk.

This concern has been pointed out by many pioneers of the Bitcoin ecosystem very early.

So what can guarantee that the price of Bitcoin will continue to rise in the future?

Is there a consensus based solely on the qualities of "decentralization", "censorship resistance", and "rarity"?

It seems that our predecessors did not give a clear answer at that time. What's more, the skyrocketing price of Bitcoin over the past decade or so has left us with little to no need to worry about it.

But it's always there.

But if Bitcoin can generate an ecosystem like Ethereum, then this concern can be completely eradicated.

So when the inscription ecology became ecological back then, in addition to the money-making effect, what made me even more excited was that this hidden worry was expected to be completely eradicated.

It's a pity that the Bitcoin ecosystem has not risen, so this concern will definitely resurface. It seems to me that there is only one hope left to completely dispel this hidden worry:

The crypto ecosystem is experiencing a real economic boom, with viable business models, real cash flows, and profits, allowing the economic benefits of this ecological boom to spill over into the Bitcoin collection.

In this way, it will not only stay young forever, but also reach high points forever.