Censorship & State Capture with Nic Carter & Lane Rettig

 
 

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“You could describe Proof of Stake in two words: shareholders vote. And guess what, that is how the world works already… I want to build a system that at least has the potential to be democratising, and move towards decentralisation, censorship resistance, these properties that we care so much about; and I think Proof of Stake is a huge step in the wrong direction.”
— Lane Rettig

SHOW DESCRIPTION

Nic Carter is a Partner at Castle Island Ventures & Lane Rettig is a core developer for Spacemesh. In this interview, we discuss the Ethereum merge specifically addressing the issue around increasing censorship of Ethereum transactions, the chilling state attacks on privacy and what Bitcoiners could learn.

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In November 2013 Vitalik Buterin produced the Ethereum White Paper, which set out that Ethereum was to utilise the Proof of Work mechanism to facilitate participation in the transaction validation process. Eight months later, hidden away in the announcement about the Ether ICO, Vitalik stated that “We may choose later on to adopt alternative consensus strategies, such as hybrid proof of stake…”.

Ethereum’s merge in the first 2 weeks of September has been the biggest event in crypto this year. Part of the reason is that it has been a very long time coming. Further, it has been a huge engineering challenge: transitioning from Proof of Work to Proof of Stake in a live blockchain for the second-largest digital currency. Many predicted that it would result in technical issues. They were wrong. The merge was a success.

And yet, in the months that have followed, events have shown that just as Ethereum has sought to resolve some issues, it has caused others. Yes, Ethereum now uses significantly less energy, albeit a smaller drop in energy consumption than they would have many believe. But, evidence of a concerning concentration of staked ETH indicates that not only is the consensus becoming centralised, but it is becoming dominated by entities who are censoring transactions.

The result is a very clear distinction between Bitcoin and Ethereum. The issue at hand for Bitcoiners is that the battle to win the argument with political decision-makers over the importance of Bitcoin’s energy usage is still yet to be won. But, more importantly, there are downstream centralisation and capture risks for Bitcoin. Forewarned is forearmed.

TIMESTAMPS

00:02:32: Introductions
00:05:59: Initial comments on the Ethereum merge
00:08:19: The energy usage narrative
00:14:28: Completing the transition to ETH2 post-merge
00:17:18: Enabling withdrawals
00:20:40: Sharding, and the lack of composability
00:26:36: Statelessness, and the complexity of Ethereum
00:29:32: Reasons for the merge
00:32:03: Proof of work vs proof of stake
00:46:47: Risks associated with proof-of-stake validators
00:51:20: MEV - maximal extractable value
01:02:14: Flashbots and censored transactions
01:10:30: Is Ethereum being fully captured?
01:15:16: Breakdown of Ethereum validators
01:26:41: The chilling impact on privacy, and Tornado Cash
01:33:53: Proposed mitigations
01:37:37: Effects on the Bitcoin Network
01:50:06: Final comments

 

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SHOW NOTES

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