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Road to sustainability in Ethereum, at the cost of everything?
October 17, 2022

The blockchain world is happy that the expected implementation of the change “The Merge” in the Ethereum network has taken place. I do not share this optimism. This change, which some have already called “the greatest milestone in the history of cryptocurrencies”, aims, among other things, but as one of its main objectives, to reduce the energy consumption of the network thanks to to the modification derived from the network mining execution procedure, the “Proof-of-Work” consensus protocol (proof of work) having changed it to the “Proof-of-Stake” protocol (proof of participation). In the first case, the inclusion of new blocks in the chain occurs when one of the miners, in open competition with all the other declared miners in the network, solves the cryptographic challenge embedded in the block. Since all the miners are trying to solve this problem at the same time, and the math problem itself is not trivial, it assumes high CPU/GPU execution, leading to significant power consumption on each node. And since the number of mining nodes in the network is relatively high, the overall consumption of the network is high. This aggregate consumption is what has changed with the implementation of “The Merge” on September 15. With no data yet to support, or refute, this hypothesis, the Ethereum community has estimated that energy expenditure will be approximately 99.5% lower than before with PoW. If so, it will be great news for the planet as a whole; not so good news for companies in the energy sector that profited at the expense of the miners; and not so desirable news, really, for those of us who think that blockchain networks must be fully decentralized if they want to make a significant difference with other technologies.

You will wonder why I write that it is not desirable news for decentralization that “The Merge” has occurred. I explain it.

We have to start by looking at the distribution of mining nodes in the world. We could already observe, even before this milestone, a certain tendency towards centralization in large mining pools associated with venture capital funds (yes, those guys who are so important to the world economy) both in China and in the US and, in lesser extent, in other parts of the world. This was not good news for the health of the Ethereum network as it ultimately meant that an “association” of these miners could alter the chain and, in the worst case, rewrite it. It had not happened yet, in my opinion, because the difficulty of the PoW protocol counteracted that hypothetical plan of evil associated miners. There was no guarantee that a small miner could mine a block, as indeed it did on a couple of occasions this year, and botch the plan. However, the move to PoS makes this manipulation of block chains much easier, if not easy. Let us remember that the PoS protocol is based on the concept that a node that wants to be a validator must commit to the network by maintaining a series of ethers blocked as a guarantee of its good work and that the blocks are proposed by a validator and endorsed. by a select group of other validator nodes (which are no longer all miners in full competition).

But what happens when a sufficiently large group of validator nodes, associated with the same pool, are participating in this game? Well, really, although the protocol establishes a certain randomness in the assignment of validators from time to time, we can see, using a simple probability exercise, that it is very likely that the pool, as a whole, can manipulate the data if the validators of the rounds are all “friends” associated with the same pool.

Even more so, when the benefit now is not given by the mining process itself but by the tips that the transactions leave to the validating miners, with which the lucrative business they previously had has diminished. What is your new incentive to keep mining? just tips? Let’s remember that mining ethers was the most lucrative of the different mining processes so far. Perhaps due to this change in trend associated with the protocol, a massive sale of GPU cards has begun to take place in the second-hand market, which supports this hypothesis that there is a general flight of mining “investors”, leaving only in the process to the big stakeholders. And that’s not good for true decentralization. Because those who are staying are many of those associated with large pools and very few of the individuals.

I find it curious that Vitalik Buterin himself, in statements to certain media, has defended that he always wanted to have PoS from the beginning, but that he was advised to initially implement PoW in order to extend the Ethereum network to a sufficiently large number of people, who did not it could have been achieved otherwise, and lead to technology adoption along with a perverse use-case dependency situation on the network. I am not a friend of conspiracy theories, so I think that PoW was used rather because it is a good decentralization algorithm of the decision and because a few years ago we were not so aware of reducing the associated energy consumption nor did we have a war in Europe. nor a global inflationary economic environment. But, whether or not it was true that PoS was the destiny of Ethereum from the beginning, only Buterin can confirm that for us.

Now it only remains to observe and hope that “The Merge” does not really become an involutive process.

Juan Luis Gozalo Web 3.0 Product Manager at Open Canarias October 2022


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Blockchain and Energy comsuption
October 3, 2022

A few months ago there was an important debate about the possibility of prohibiting certain crypto assets: those linked to blockchains that use consensus mechanisms of proof of work (PoW, proof of work), and which is the method used by the main blockchain networks, such as Bitcoin and Ethereum (the latter network is in the process of replacing it with a more efficient one). This has occurred within the framework of the European Union, in relation to the proposed Regulation of Cryptoactive Markets (MiCA). Although the Committee on Economic and Monetary Affairs of the European Parliament voted against this ban, we are facing an important debate related to the sustainability of these infrastructures, especially due to the immense waste of energy that the aforementioned consensus mechanisms entail.

But is there really such a waste? Definitely yes. It is worth remembering how the proof of work works in the blockchain: the blocks are ordered by the miners, sealing them with the result of a series of cryptographic operations, which finally reward the mining node that achieves a certain value with an amount of cryptocurrency , generating the block to be verified by the rest of the nodes. The goal is to make that reward more beneficial than using computing power to manipulate the chain of blocks. This is the safest method to prevent dishonest behavior, as alternatives such as proof of stake do not provide the same guarantees. But let’s be objective: it’s a huge waste of computation (and by extension, energy), which adds no value, except to the security of the network (and to the miners). If we situate ourselves in the current context, with a set of energy saving measures to alleviate the impact of the war in Ukraine, we must recognize that it is necessary to find solutions to this waste of energy from Software Engineering. By the way, the argument that much of this energy comes from 100% renewable sources is not valid for me (really, I don’t know where they get that data from), because it is still that: waste.

However, it is convenient to provide some elements of judgment that many colleagues who attack the blockchain seem to have forgotten. The idea behind the proof of work I think we can place it at the beginning of the expansion of the Internet, at the beginning of the 90s. At that time, mass mailings (spam) began, and to protect servers began to require clients a computational cost prior to sending, such as some complex arithmetic operations, to discourage these massive shipments. There are even earlier examples, but it is in 1999 when Markus Jakobsson and Ari Juels characterize the concept of proof of work with the following definition: “a tester demonstrates to a verifier that they have done a certain amount of computational work in a specified time interval.” architecture based on a p2p network, in Open Canarias we considered the proof of work as a mechanism to prevent an attacker from generating thousands of nodes per second to collapse network traffic.

But there is another scenario where the waste of energy is flagrant, but somehow unavoidable: the obfuscation of passwords (keywords) with which we authenticate in applications and services. This obfuscation is also done with a hash function, which derives a result from which you cannot extract the original password. When we talk about hash functions we can think of standards such as MD5, SHA-1 or SHA-256, but the problem is that these functions are fast and efficient, and an attacker can carry out millions of combinations until they find the one that allows access {{ < open_link_new_page “brute force attack” “(https://en.wikipedia.org/wiki/Brute_force_attack" >}}. Actually, we use methods like PBKDF2 (Password-Based Key Derivation Function 2), in which we force a slowdown by applying multiple iterations, simultaneously disabling the compute potential of the GPUs (yes , the one used by miners.) This enormous increase in computational cost that occurs billions of times a day has a direct effect: an immense waste of energy. Does anyone dare to calculate it?

At this point, and beyond these specific energy waste scenarios, we must give the software industry the “credit” of being probably the biggest predator of energy. While other industries have tried to make their products, services and supply chains more energy efficient, the reality is that in software development the energy footprint is not one of the factors to consider. Every bit of time saved running a program, or disabling unnecessary services, will generally reduce our energy consumption, but this also doesn’t help if the most popular languages, like Python or Javascript, represent a real waste of computing time. , and despite that we continue to use them for all kinds of scenarios, even for those that were not conceived. Well, we are going to leave it there, because this topic deserves a broader development, and also requires the contribution of empirical evidence on these statements.

As a conclusion, I would like to convey a message of calm for this type of discussion. I remember the debate on the MiCA on social networks, and how the Taliban for and against blockchain technology entrenched themselves in their positions. This technology is still a solution to the problem of representing and transferring value over the Internet, and the wasted energy of proof-of-work makes sense in order to provide the highest degree of security and confidence in those transactions. Other distributed ledger technologies in general, and some blockchain in particular, provide solutions to many other problems, and probably provide a reduction in the energy footprint of many economic and industrial processes. In reality, it is Software Engineering in general that must acquire a greater commitment to sustainability, and stop inhibiting us in the face of the problem we cause (without failing to recognize lines of work such as that of Coral Calero at UCLM).

Antonio Estévez September 2022