So I’ve been meaning to write something after watching a video by JayzTwoCents about crypto-currency and the gaming community. I was hoping to do some more research, as I’m about to make some assumptions, but with everything else I have going on in my life that hasn’t happened yet. So feel free to correct any mistakes I make, that’s why I’m writing it here – I also didn’t find any real forum for JayzTwoCents.
In the video, Jay just goes over the recent history of the crypto market, its impact on the graphics card market, and what the future might look like. The intention of the video was to spark a discussion, and I think it’s one worth having as well. Since I’d like to eventually re-write this as an article for the non-crypto enthusiast, who may or may not have some technical knowledge, I’d like to give my brief description of how crypto-currency works.
Let’s start by looking at a possibly upcoming proof-of-stake (POS) algorithm proposed by Ethereum’s creators. We can even abstract the theory and think of it in terms of people interacting with one another. Let’s say you and a group of people got together and decided to validate a ledger of transactions, similar to a checkbook ledger, by voting on whether a new entry, transaction, was legitimate or not. They each place an amount of money of their choosing into a pool. When a new transaction is posted to the ledger, they vote either yes, it’s a legitimate transaction, or no, it’s illegitimate. For sake of explanation, let’s say the transaction is actually illegitimate, and the majority of the group votes no. If you voted no, you would get rewarded the same percentage of the new coin minted as was your percentage of money put into the pool. If you had voted yes, because you’re a shisty person who stands to gain from a falsified financial transaction, then the money you put into the pool would be distributed to everyone else in the group, or network of people. Pretty simple right? You’re encouraged to make the honest vote, because you want to gain the reward of future transactions, whether it be from new coin rewarded or a transaction fee paid by the two parties transferring funds.
I think for most people, this is enough of an understanding. As far as I know, the act of mining is just another form of people putting a stake in the game. Instead of putting money into a pool, that they may loose, they risk loosing what they invested in computer hardware and electricity. Currently, as I understand, when two parties create a transaction, then that transaction gets encrypted. Then the network of computers begin trying to decrypt the transaction to post it in plain sight for everyone to verify. So if in the end it’s un-encrypted, there’s really no need to encrypt it in the first place, other than it forces people in the network to have a financial stake, hardware and electricity.
I think it’s worth it for those who care about the gaming community, and the sky-high gpu prices, to advocate POS algorithm coins. I’d like to see Wendell, Jay, Paul, and Linus motivate their communities to get involved in moving Ethereum to a POS coin. If Ethereum, or any POS coin, becomes the dominant crypto-currency, and therefore the most valuable one, then mining hardware becomes obsolete.
Ethereum was supposed to move to a POS algorithm in November of 2017, but still hasn’t and I’m not sure why. I have a theory that they really want to run the new wallets on smartphones, since so many people have them and are almost always turned on and connected to the internet. I’m guessing though that this would cause serious battery drain, which could make it unpopular – no one likes being unpopular! I think a better implementation would be a patch to WRT routers allowing them to host wallets. The audiences I mentioned above would largely be able to deploy the firmware updates on theirs, and friend’s and family’s, hardware.
The other reason I think a POS algorithm is likely to take the lead in the future, is that the ‘artificial’ injection of new coin can’t last forever. Eventually new coin production will need to be at least limited to the rate of inflation. So if a current non-POS algorithm requires enough electricity to power three homes for a day, then no one will want to pay the transaction fees to use it.
I’m looking forward to all of your feedback, and thanks for taking the time to read this. I know it could use a bit more cleaning up, but I’m tired