All right, so next topic proof of work versus proof of stake. And obviously, there are a ton of other consensus algorithms out there. What are your thoughts? Like currently, Ethereum as kind of the one of the main block chains out there is currently in some proof of work, but they have plans to move on to proof of stake within the next year or so. What do you think about that? >> So I'm very anti proof of stake because I feel like it really, proof of stake, so let's talk about, let's rewind here for a second. Let's talk about proof of work and proof of stake. Proof of work is you need a miner in order to solve a hash cash problem in order to get a reward for breaking the block. You find a solution. You find this number, the knots value and then you go get your block reward. >> And that costs energy, that takes effort on the computer's part in order to reach that answer. >> Exactly. >> Hence, proof of work. >> Hence, proof of work and it's a competitive field. So that means that there's always new advancements coming along. There's always new mining boards, faster, cheaper, better and that's always coming out. So what that does is it keeps competition alive and that kind of currently there's a lot of centralization in mining, but I believe that because it's a rat race essentially to get the fastest equipment. It keeps things competitive and makes it so that you have to keep on spending money on upgrading equipment to secure the network. So you're always improving and you always have to make sure you're ahead of the competition and you always have to do work more importantly to make money. With proof of stake essentially, you just have to hold coins and the network says okay, since you hold coins you help validate transactions and you get a certain percentage of block rewards according to the percentage of coins that you own. So let's say I'm very rich and I own 40% of the coins on a network. That means that every time there's a new block I get 40% of those coins and I never have to worry about competition. I can just kick back, relax and just enjoy all the money coming in which makes it very anti-competitive. So it's not like someone else can really come in without really disrupting the consensus, because I'm at 40% now you have to have 51% or you have to have 41% to be more than me. But, you probably can't accumulate that much of a supply. So essentially it's just rich get richer and you can't just come up from behind like you can in mining and innovate and go make some new chip that will mine better. It's just you just have your money, you just kind of sit on it and make more. >> So Nikolai, technically, what do you think the pros and cons of the proof of work versus proof of stake systems are? >> So, I think I have a bit different perspective on the proof of stake. And I think is involved the move to propose take otherwise, they all have the same requirements to do the work and Mining so they were the beginning proof of work that the switch to proof of stake. That's how they got a little bit faster transactions unless there are some changes that I got. No, things are really okay. Otherwise, you would need like really good harder to do the same pretty much. The only thing the difference would be the smart contract, but conceptually, yes that's the thing but depends what is get applying the proof of stake and depends. What are the rules in the network? So the proof of stake if you abuse it yes, but if there is a reward or penalty system, then it gets a little bit more democratized and helps with the innovation because you would get rewarded when you provide good services and it gets some kind of penalty to your stake when you do something bad like you just profit like you said. So the intent is to be able to provide some kind of services that you would get paid for. So you're Kind of tendency will be to get more steak in because you would get more you know users could pay you the same time. You will maybe make them cheaper which translates to cheaper transactions. Yeah. Now reason number one, why start ups are kind of Ethereum, because transaction costs. If you want to build an IT system on Ethereum, you're pretty much dead. That's why you have Stellar or that's why you have Iota and so on. They address different business directions, but the reasoning behind you know transactions or and so so depends and that's one of the limitations for the proof of stake and it was very subjective depends how you interpret. Are you able to actually correctly implement the rewarding and penalty system? That's why you would have other consensus algorithms. For example these parts, we use where this kind of situations are getting tackled and the intent is to provide cheaper faster services, no transaction fees. So you would enable other Innovation means the point is not to be able to profit right now get the whatever percentage because that's a very short-term gain and then there's a relation. So the point is to be able to make you see that if you don't hunt the short term gain, but actually play with the community, you'll have even more gain in the long term because you'll build opportunities. You will build relationships will be able to other businesses based on what if they will others partner with you and so so it depends yes / Fork is now going to the steak perforce take was an alternative faster until 252 proof of work requiring less energy consumption and Don't have to always solve a challenge or whatever. It is. In this case the data or you can invent any other problem to be that requires computing but the proof of stake. I see it as as the first cornerstone to spawn other consensus algorithms that will make those obsolete in time or extend them in a way that they will be allowing more Innovation because everything it's about Innovation and how to do more than what's possible in terms of technical limitations in terms of business directions. >> So what other consensus algorithms have you heard that other block chains are attempting to work with? I've heard of proof of elapsed time. >> Yeah, there is depose. There is all sorts of combinations of letters. They media whatever and the promise is to have faster transactions and load and no transaction. On the white people. They look good. When you look in the GitHub repo know that there's not much there's not a lot of matching. So but still they're good in theory just in someone needs to write down which requires, you know money funding which again that would be possible if you'd have a behaving community and kind of stimulating each other if someone's looking for short-term games like games then you know, that's the side effect is that you limiting everything else is the same kind of misbehaving is happening in proof of work. That's why you have all these mining pools people buying like huge. I don't know are clusters of data servers in China Owens chatter own sweat 20 to 40% of like the overall mining happening in the theory. How is that helping with the Novation right now? Yes, it was good while people in the beginning Satoshi. It was good like start started the whole industry. Yeah. What is it now? The only thing is about the currency is it am awaiting any where else can I go to space suit up? Not really because it's all just met Mining and and getting that and speculating on the speculating on the price may be affecting some some countries economy. The classical fear, but what is that pushing in terms of technical innovation terms of just technology innovation and and business-wise. How is that addressing the questions about financial regulations? It's not, so internally the step was proof of stake. It had limitations then it did kind of explode into a bunch of things. Everyone wanted to address how they saw the problem can be solved otherwise and that's why you have so many that still need time to be proven. So we'll see in about a year or two. I will not try not to be like, so I at Dispatch I think we have a good solution for it, which will try to solve a lot of problematic slated to the proof of stake. That is yet kind of to be put in practice. >> Yeah. >> So I mean we really are at this point where there's for the next year or two up to like five years, we're really going to see which of these ideas which these white papers are actually going to translate to real solutions that are actually going to solve it that issues? >> And by now, all this concepts of proof of work, proof of stake, they're more of a general concept of how the original algorithm was. Because right now, you would have liked deviations or extensions to the original proof of stake to address because everyone knows their weakness so they know how to forge it, or how to attack it and fake all sorts of things. So once you have an extension of it, that's not the original proof of steak anymore. It's just another one. It's based on the original concept, added a bunch of extensions to make it kind of more secure to the classical attacks that you would know, but then it's not the original proof of stake anymore. So means it's changing the behavior of the network, of the people. It changes the economics in it and it's actually kind of pushing you to do more good than looking to for like a million here, a million there. Yes, that will happen but slowly it's getting contained and isolated and kicked out of there as a side effect. >> Yeah, and it's important to remember that this is all a big experiment. >> Sure, yeah, that's the best way to put it. Yeah in 2014 I remember there are all these new coins that came out that they advertised or proof of work until block X. So you would mine it, you'd mine a ton of the supply so it would create equal distribution and then once we equally distributed the currency, now we switch to proof of stake. So we don't have just a few people who are super rich holding a lot of the supply and really gaining from this system and not really giving back at all. >> That's another other policy to make, means you define the rules in a way that once yes, you got all this stake now, yes, you can do damage. But at the same time this will be kind of a double-edged sword. Once you start doing that, your stake goes down and just confirmed you are going to lose. So the interest is to actually get more stake in order to ensure stability and gain a little bit more. So you want it or not, you've become one of the pillars of the platform. So that's also one of the policies baked into what these patches doing. So it is based on proof of stake but it's not the original one. The original one will be left in history as how it behaves, the stake concept. You have more, then you can say more about the transaction but with latest developments, all this security and psychological issues are getting patched up with technical Innovations, and they are not the original one. They still keep the concept of it, but they have a lot of bulletproof built into them. >> Yeah. >> Yeah.
