That has been repeated many times but is not true, the price of an arbitrary unit of currency or crypto has no relationship to its security. That price going up or down has no relationship on the "security level" of the blockchain.
I’m not so sure. Currently each validator has about 60k usd (32 eth) staked. They are disincentivized from misbehaving / attacking the network by the threat of their eth being slashed (and there are clear rules about how this happens).
To me, it seems that as the value of that ether increases, they have more incentive to behave, rather than risk the loss of their investment + large capital gain.
Okay, so imagine a fictional universe in which the exchange rate USD to ETH was 100 times greater. The stake could be... 0.32 eth and it would be equivalent for the purpose of the protocol.
Consider the reverse, the exchange rate for USD to ETH is one one hundredth. So the stake is just 3,200 eth, and again, same thing.
I agree with your math, but that doesn’t address my point. What I’m saying is that the relative value of eth to usd (for example) matters. The validators don’t want to get slashed and the more value eth has, the less likely validators are to misbehave (ie, the network is more secure). I’m not certain that it plays out that way but that’s the theory as I understand it.
Why adjust the stake instead of assume a fixed 32ETH minimum stake? I think we all agree that total_cost_to_attack_usd = stake_amount * usd_per_eth, if stake_amount is fixed, then the total cost increases proportional to usd_per_eth.
Look up Proof of Stake which is what Ethereum is moving to later this year. In Proof of Stake validators put up an ETH bond in order to randomly get picked to help create blocks in the network. The higher the price of ETH the more expensive it becomes to attack the network.
They could just require a higher stake, the price of eth is irrelevant.
Let's say hypothetically one eth was worth about a Satoshi, 0.05 cents or so. So they could just require 1,000,000 eth as a stake. Or ten times that. Or a hundred times that.
It's irrelevant what the price is, the choice of the stake amount is. If eth was inflationary, they could inflate the stake proportionally.
That’s not true, those are two different things. Requiring 100x the total number of possible stakers is 100x lower. Versus if the price increases 100x, that means the same number of possible stakers is possible, but it’s now 100x more expensive to do a 51% (or whatever the PoS % needed is) attack.
The ethereum protocol can choose whatever stake amount (in equivalent USD when they decide the bond to stake) they want. The currency being deflationary or not is irrelevant - the stake could be adjusted. The currency going up in down in value relative to ETH could be adjusted.
They could choose to require one gwei, one ETH, or one million ETH. That's your protection. The exchange rate from USD to ETH is irrelevant.
No, the exchange rate is extremely relevant. Let’s say we need 2/3 of all ETH in order to launch an attack. If ETH is 1 penny, this is much easier for us to acquire than if ETH is $100.
I think you may be misunderstanding staking. Your vote is proportional to how much ETH you stake, it seems like you are picturing everyone gets 1 vote. The only reason for the minimum stake amount is for performance reasons
Would you agree that attacking Eth2's consensus requires a certain percentage [1] of total voting power? If so, then by extension, it requires a certain (somewhat different) percentage of the total Eth supply.
> The exchange rate from USD to ETH is irrelevant.
Unless the attacker already has a large enough portion of the Eth supply to execute an attack, they'll have to pay to acquire it.
[1] 1/3 voting power would theoretically let an attacker double spend by getting two conflicting forks committed; 2/3 would let them commit invalid and/or unavailable state.
But isn’t that “the higher the market cap of ETH, the harder it is to attack”? Does the price of a single unit actually matter here, market cap being held equal?
The thing that matters is how valuable the 32ETH stake the validators put up is as that is the amount of penalty for trying any attack. The theoretical attacks on Proof of Stake are well known and discussed but generally require 33% - 51% of all staked ETH for various annoying attacks on the blockchain but not actually killing it.
3,491,906 ETH is currently staked right now which is actually way lower than will eventually be staked when PoS goes live later this year. 33% of this is 1,152,329 ETH which at current prices of $1,776 puts a minor attack at over $2billion. This is without considering that after the attack the network could easily fork and remove the attacker's ETH from existence so it's hard to see economics working in the attackers favor.
A high price of ETH means it costs an increasingly astronomical amount to attack the network and pretty much no way to do it profitably.
But acquiring ~1/3 voting power is much easier when 32 ETH are worth ~$3.2 vs when they're $60k
Also: People stake ETH under the expectation that the ETH they generate are worth just as much or more as the ETH they staked. If the price would continuously go down, less and less people would stake. The less people stake, the easier it is to buy 1/3 of voting power.
This is just not true for a proof of stake blockchain. The higher the price of Ether is, the harder it gets to loan enough ether to stake to attack the network. And attacking the network or misbehaving does cost you a lot more dollar money.
>The higher the price of Ether is, the harder it gets to loan enough ether to stake to attack the network.
On the other hand, the higher the price of Ether is, the higher the incentive to do so. The return on investment of an attack is independent of the price of Ether (assuming one can actually gain something from attacking a POS chain).
