Monopolies and Proof of Stake with Karl Floersh

Decentralized applications might someday offer alternatives to modern monopolies. Uber, Airbnb, Facebook, Amazon—all of these services could be recreated on a decentralized stack of technologies like Ethereum, IPFS, and Golem. Fully decentralized services could be more transparent, cheaper, and more efficient.

But let’s be realistic. Today, even the simplest applications of fully decentralized blockchains don’t work as well as we need them to. Cryptokitties offered a glimpse into how a simple viral application can limit the throughput of Ethereum. And don’t forget that these technologies are in some ways still subject to centralization in their current form. Miners form the decentralized consensus layer—and that mining activity is physically centralized in large server farms.

The decentralized future is possible. In order to get there, we need to make progress on the low-level tools that such a world will be built upon. This is the realization that today’s guest Karl Floersh had. Karl is a researcher for the Ethereum Foundation. He was initially excited about the prospect of decentralized apps—such as a decentralized Uber. But as he looked more closely at the space, he realized how early we are, and how much work there is to be done on foundational technologies.

Proof of Stake is the central topic of discussion in today’s conversation with Karl. Proof of Stake is a consensus mechanism that is an alternative to Proof of Work. In Proof of Work, miners race to validate blocks of transactions. This results in duplicated effort and perhaps wasted energy. In Proof of Stake, validators are chosen to approve transactions. These validators lock up an amount of currency that they are willing to “stake.” If a validator acts badly, the validator will lose their entire stake.

This mechanism could be more efficient—and we will explain why that is in this episode. If Proof of Stake works, it could lead to a faster, truly decentralized Ethereum blockchain. That’s a remarkable potential outcome.

Transcript

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