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Vlad Zamfir proposes cutting the mining reward and the community response gives evidence in favor of his oligopoly hypothesis by dana-edwards

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· @dana-edwards · (edited)
$26.10
Vlad Zamfir proposes cutting the mining reward and the community response gives evidence in favor of his oligopoly hypothesis
<html>
<h1><br>
What is an oligopoly?<br>
</h1>
<blockquote><br>
An oligopoly is a market form in which a market or industry is dominated &nbsp;by a small number of sellers. Oligopolies can result from various forms &nbsp;of collusion which reduce competition and lead to higher prices for &nbsp;consumers. Oligopoly has its own market structure.<br>
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</blockquote>
<p><br></p>
<h1>Vlad Zamfir: "<em>When miners become more powerful, everyone else gets less of a say."</em><br>
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</h1>
<p><br>
The definition above taken from Wikipedia gives a simple description of what an oligopoly is. We can see in Bitcoin that oligopolistic competition is taking place between mining cartels, Core developers, and users. In Bitcoin the users are the least powerful and are treated as the least important. Developers and miners have nothing to lose by ignoring the preferences of the users and the users have no way to vote besides switching clients. Yes it is true that miners can be users, developers can be users, but the point is that both miners and developers form clubs and become interest groups with great power over the evolution of the Bitcoin network. Bitcoin can never change it's SHA-256 algorithm because to do so could upset companies like Bitfury.<br>
<br>
<img src="https://pbs.twimg.com/media/C7TmJLPW4AMQkLd.jpg" width="1160" height="819"/><br>
https://twitter.com/VladZamfir/status/843552270784614402<br>
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<br>
<br>
</p>
<p><strong><br>
Vlad Zamfir: "</strong><em><strong>The increase in the price of block rewards means that miners will have much more incentive and ability to devote resources to participating in governance."</strong></em><br>
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<br>
<br>
As we can see from the example by Bitfury, the economic interests of the miners are not always aligned with the security of the Bitcoin network. Could the same be said about developers as well? I think this example is evidence that Vlad's hypothesis is correct as Vlad predicted this exact reaction. This indicates at least to me that he is on the right track designing Casper and at this point in time I have to say he's ahead of the game.<br>
<br>
Pure hash power does not indicate security if you prioritize decentralization. A blockchain which appears decentralized to outsiders but which is controlled by clubs, cartels, groups, who have interests which aren't aligned with the best interest of the community itself, would be an oligopolistic competition and in many cases this can result in lack of progress, broken governance, slow adaptation, and failure.<br>
</p>
<blockquote><br></blockquote>
<blockquote><em>Every blockchain has a corresponding ecosystem. It is this community’s responsibility to make sure that the blockchain lives up to its promise. The ecosystem has to guarantee the blockchain’s security assumptions (e.g. 51% of miners are honest) and it has to upgrade the blockchain (to make it scalable, secure, usable).If it fails to achieve either of these goals, it’s going to have a bad time.<br>
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</em><br>
</blockquote>
<blockquote>The increased security from increased block rewards (if there even is such a thing in practice) does not justify the ecosystemic risk of making miners a more important part of the community.Remember, the more powerful miners become, the less of a say you have.<br>
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</blockquote>
<p><br>
References<br>
1. https://twitter.com/VladZamfir/status/843552270784614402</p>
<p>2. https://twitter.com/petertoddbtc/status/843448818259709952<br>
3. https://twitter.com/VladZamfir/status/843445814420783105&nbsp;</p>
<p>4., https://medium.com/@Vlad_Zamfir/the-case-for-smaller-block-rewards-fb0eab38e15c#.ei1pxakzd<br>
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</p>
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vote details (136)
@twitterbot ·
$0.29
### ![VladZamfir](https://pbs.twimg.com/profile_images/683736320691298305/jHM6N6FK_normal.png) **[Vlad Zamfir](https://twitter.com/@VladZamfir/status/843445814420783105)** tweeted @ 19 Mar 2017 - 12:55 UTC

> If the price of ether stays high, I really hope the Ethereum community considers slashing block rewards by at least a factor of 4.


### ![petertoddbtc](https://pbs.twimg.com/profile_images/801927034603794432/H6vCS6tj_normal.jpg) **[Peter Todd](https://twitter.com/@petertoddbtc/status/843448818259709952)** tweeted @ 19 Mar 2017 - 13:07 UTC

> With some miners threatening 51% attacks against Bitcoin, researching a PoW change is a good backup plan: [btcpowupdate.org](https://t.co/SEZ1qlxhAH)


### ![VladZamfir](https://pbs.twimg.com/profile_images/683736320691298305/jHM6N6FK_normal.png) **[Vlad Zamfir](https://twitter.com/@VladZamfir/status/843552270784614402)** tweeted @ 19 Mar 2017 - 19:58 UTC

> This. This is exactly what I'm afraid of. https://t.co/z2OfP9MT3m


###### *Disclaimer: I am just a bot trying to be helpful.*
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vote details (1)
@acidyo ·
Vitalik Buterin's response:

>I feel ambiguous about this.

>Object level argument first. ETH block rewards are currently $14.3 per second. Next highest is Zcash at $4.77 per second. If we drop 4x, then that would put ETH at second place. If the price drops 3x then we would go down to $1.2 per second, which puts us down to third place below Zcash and Monero. At this point, we may be much more vulnerable to 51% attacks. A drop up to 2x seems safe to me, a larger drop less so.

>Second object-level argument. Suppose conservatively the proof of stake switch happens in 15 months. A 4x block reward difference starting 3 months from now is only ~7 million coins, and quite possibly less if we do hybrid proof of stake in the mean time. It may be most pragmatic to just let the issue slide until we can reduce block rewards even further (I am projecting 0.1-0.6 ETH per 14 sec) through a full PoS switch.

>Now, the meta-level disagreement. I think that as Ethereum is maturing, we need to start taking norms, schelling points, and stability of policy more seriously, especially on key economic parameters. That is, moving fast on precompiles is still fine, but mucking around with block rewards, staking rewards, etc arbitrarily much less so. This is in part because while Vlad fears what miners would do to the blockchain if unfettered, I have similar fears long-term with what developers would do if unfettered, and we should be acting to limit through social norms what any of these groups can do on its own.

>There are two situations in which I support dropping the block reward:

>1. As part of a hard fork which delays the ice age, and has the property that miners get net expected revenue that is somewhere between the revenue that they would get if the ice age was not stopped and the revenue that they would get if 5 ETH blocks with no ice age continued forever. That is, taking the ice age delay into account, the hard fork would not hurt miners relative to the baseline of inaction. Such a reduction should also have strong community consensus.
>2. As part of a switch to hybrid proof of stake, that is a step along the roadmap to full proof of stake. If Ethereum switches to an algorithm that can be reasonably described as only 50% relying on miners and 50% relying on stake, then it seems totally reasonable to cut the reward given to miners by 50%, and give stakers 50% the reward that they will eventually receive.

[Link to the Reddit comment Source.](https://np.reddit.com/r/ethereum/comments/609yjl/vladzamfir_if_the_price_of_ether_stays_high_i/df4r7hq/)
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vote details (1)
@dana-edwards ·
I have to say I think it's an error to focus on stability for something like this over adaptability. I do understand the users require some stability but at what cost does that stability come? In essence, what do you get in exchange for this stability?

Bitcoin lost adaptability for stability and what did it get?
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@acidyo ·
$0.29
Not sure what you mean by adaptability here.

Could you elaborate?
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vote details (1)
@barrydutton ·
This is a very good post my man!
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@crypt0 ·
As always, researched well, and informative. Keep em coming, Dana!
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@dana-edwards ·
You've been researching the same topics I notice. I watch your Youtube videos.
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@malteserlover ·
Good discussion. Will watch with interest for outcome.
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