Matt Howitt Ethereum Mini-episode - 9:12:22, 4.14 PM
9:21PM Sep 12, +0000
Speakers:
Ashley Coffey
Matt Howitt
Jaiye
Keywords:
aetherium
people
network
proof
stake
merge
transactions
run
matt
interesting
race
theory
episode
money
nodes
specialized hardware
longer
blockchain
little bit
deflationary
Hello, and welcome to a another episode of Coffee and code, this is going to be a little bit of a different episode that you might be used to. This is a nice little mini sewed about the upcoming Aetherium merge. That's going to be happening in just a few days, three days, 12 hours and 33 minutes from when this episode was recorded. But my friend Matt White here wants to give a nice little overview of what this is, why it's happening and how it can affect you. You may be familiar with Matt Howard, he was in a previous episode just a few episodes ago to 36 Labs, definitely check that episode out. It's a great listen. But without further ado, welcome back to coffee and code Matt Howard.
Thank you, Ashley. Thank you for having me on. I'm so excited to be able to come on here and talk about the merge
the merge. Yes, yeah. So for everyone listening, Matt, how it is awesome. He's based out of Austin, Texas, a co founded 236 Labs. I'll put that in the show notes here. But I'm so stoked because Matt, how it texted me about this and was asked me if I had an episode coming out about it. And I said, No, but let's do one. So here we are. So let's just go ahead and dive in here. Matt. Let's just start here. What the heck is the merge? Can you give us a nice high level overview of what it is?
Certainly. So the merge is a theorems move from proof of work to proof of stake. And I'll get into what that is here in a minute. But since 2020, a theory has been doing a blockchain validation using a consensus method called Proof of Work and all all that fancy talk just means that the way that the miners are validating transactions on the blockchain are those fancy mining hardware that you see the physical mining computers, the specialized hardware, and now everything's moving to more of a software, more eco friendly
sort of approach. interest of
Yeah, it's, it's gonna, it's going to be a game changer. So it's going to be significantly less energy intense, your the barrier to entry is going to be significantly lower as well. And kind of the best way to describe it is there's there's two ways. So proof of work is imagine people lined up at a race, everybody's on the starting line, the firing pistol goes off, everybody's running to the finish line, and only one person finishes the race. Of course, that's how typical races are run. during that entire race. Everybody is expending energy, and all that energy goes to waste because only one person can win. With proof of stake, things are done a little different. And it doesn't really make sense if you're actually running a race. But in proof of stake, all the people are lined up on the starting line. And whenever the gun goes off, instead of everybody running at once, they all vote on one person to run. And that person is the one that finishes the race. And those people that also helped that person helped vote for that person to run actually get a little prize as well. So it's significantly more efficient, it's actually going to use point zero 5% less energy than what proof of work currently does. So everything that you hear in the news about Aetherium, where it takes up the entire energy consumption of Switzerland. Yeah, that's all going to be changed.
That's huge. That's a big deal for sustainability. Yeah,
yeah. So it'll be interesting to see what a lot of the people that have sunk a lot of money into these specialized mining operations out of like, you know, Iceland, and Norway and stuff like that, to have entire rooms, you know, those are no longer actually going to be effective. As far as mining,
this version of Aetherium.
Interesting, and I'm actually looking at a graphic right now, of proof of work and proof of stake. And I'm gonna link this in the show notes was great graphic from aetherium.org of the arrows. And it's basically a long arrow, half of the arrow is the proof of work, like you mentioned, and the other half of the proof of steak and there's a line drawn in between of like, here's the merge. And here's where the beacon chain starts. And here's where the sharding so interesting.
Yeah, exactly. So you mentioned a couple interesting things there. So the beacon chain, it's, it started back in 2020. And it's actually another chain running alongside of Aetherium. So while everybody has been doing proof of work Aetherium for the last two years, they've been kind of on the side, where almost imagining like a staging area where they're testing things, people are already staking their Aetherium to validate these transactions. And, and then the merge is actually whenever you bring those two together. So some people liken it to like, replacing a jet engine midflight, because it'll be inside of one of those transactions so suddenly go live. But you know, they've been testing it, there's multiple test nets that they've run it through. And it'll be interesting, if we're comparing it also to like y2k sort of stuff where you know, is this project going to work properly, things like that. And from somebody that works on this stuff every day, from what we've seen, there's nothing that we need to do from a technical perspective, that will, you know, require us to make any updates to our current software that we have. So same thing with what you have in your wallet, Aetherium wise, if you are holding Aetherium, don't send it to somebody like on Discord that say, Hey, you know, eath 2.0, send it to this address, like you don't have to do anything, which is another great
part about this whole process.
Wow, that's pretty great. And I'm curious, this is probably a question that audience members have as well, will this make cheaper gas fees?
So not currently, that's, that's a misconception a lot of people think, or at least hoping that will make gas fees less expensive, those fees will actually go to the validators. So proof of stake gets its name from people actually sticking Aetherium on the network. So how that works is you have to put up some kind of collateral to participate in the validation of these transactions, in order to ensure that you're going to act honestly. And it's pretty cool because they don't really have anything like this currently for proof of work, but it'll be able to easily penalize bad actors. So say, for example, you and I are both validating transactions on the blockchain, on the blockchain. So you become a node validator. And what you do is you have to stake 32 Aetherium. And all that really means is, you take 32 eath, which right now is like 8080, to 100,000, depending on what time of the day you check, you know, not a small chunk of change, you have to stake that on the network. And that allows you to say whether or not these transactions are valid. So if you for some reason wanted to come in and do something nefarious in the network, like sneak a transaction in that might maybe send you a little bit of extra crypto or something, it will know if you're doing that, and you'll actually get deducted from your pool. So like the staked amount that you have, or even kicked out of the network. So it's significantly more secure in that aspect. And some people are talking about whenever there's crypto, there's this thing called a 51% attack. So if you wanted to sway the network in one direction or another, say, again, if I'm a bad actor, and I want to pass all these transactions that would maybe benefit me in a way that you know, was to take money away from somebody else, I would have to have currently 51% of the hash power of proof of work network. So what that means is I would need a bunch of really big computers, I'd have to spend a lot of money and build these mining rigs that without mine out hash out, solve the puzzle, outrun the race, for all these other people currently participating in the network, at least 51%. Wow, for proof of stake. It's not too far off from that. But you have to have as much state, you have to have at least 1% more states than everybody else in network. And currently, this amount of Aetherium staked in the network is in the billions. So you would have to have, say, I think like around $11 billion to manipulate this, you know, Goliath of the network,
let me just reach into my money bag and pull out my billions of cash. That's wild.
Yeah. So going back to your original question, will it make the model and make it cheaper? Not necessarily. The fees actually go to those validators. Whenever you pay that, a little goes to the validator, some of them go to the other people participating that are attesting to the validation. So again, going back to that race analogy, whenever I run the race, and I go through the finish line, everybody else that chose that I got to win the race. They're all attesting that I won the race. And that's kind of how they, they're a little extra boost as far as validation goes. So that goes to the people that are you know, doing the actual transactions and stuff. And then a little bit of a theory Yun comes, is created. So I win the race, I get a little bit of a theory from the network that's just magically pretty much magically appears from the theory network, I get those transaction fees. But the interesting thing about that is the amount of the theory and that's coming out of those blocks is getting decreased each time. So there's this thing called a triple having, which is where the amount over time it's going to be over a long period of time years. The rewards will slowly and slowly get deducted. So, you know, two goes to one does a one half, etc. And so far down the line. And what's cool about that is is it makes it Etherium. Actually, a deflationary
a deflationary, what's the word? I'm trying to think of? asset?
There we go. Yeah, interesting. Wow. Well, you brought up something really interesting. Speaking of races. My next question is, will this make Aetherium? Faster?
Yeah, so it'll it so it will a little bit. Currently block times are between 12 or in between 13 and 14 seconds. And this will actually make the block time more predictable every 12 seconds. So you could probably make, you know, think of that being faster. As far as predictability goes. But there's something a little further down the line, which you mentioned earlier called sharding.
Yeah, well, yeah, for everyone listening s h, a, r, d, I N G, D as in dog.
sharding is actually that's another huge thing, another milestone coming up that we'll probably have to talk about. It's going to be a whole nother podcast, I'm sure. But it's going to turn Aetherium essentially into a one lane highway into a multi Lane interstate.
Yeah, I didn't
research on that. But it will be should make things a little bit quicker. And currently, as far as solutions go for making things faster if you're going to rely more on data layer two solutions,
to like polygon, and things like that, that
make a theory and faster using it more of like a platform.
Interesting, I love the analogies that you're using, because that makes perfect sense. And I hope for people listening, they're able to conceptualize this in a different way by kind of visualizing what it means. I'm, I'm really curious, after all of this, how does this impact the price of Aetherium?
Yeah, so kind of all these things combined, you know, the staking the triple having making it a deflationary asset.
It's, you know, not not an
advice as far as investments go. But it's, it'll be interesting to see should make it go up, you would think over time, because it's going to become less and less. But there's going to be less of it in the market, because people will be staking so less of it actually being able to trade hands. And in fact, that's going to be deflationary. With this triple having no, I would think they would make it a more scarce asset. Advice?
Oh, of course, of course. So, with all of this happening in such a short amount of time, just to like in a few days, why is all of this exciting? Tell me why you're excited about it?
Yeah. So you would think, you know, people would be excited about going being faster, or cheaper, which it's not. So why is it exciting? You're right. So I'm excited about it. Because more people are going to be able to participate in the network, you're no longer going to need that specialized hardware. To mine these blocks, you're going to need a little bit of technical knowledge. As far as setting up the validator nodes. So it'll be a software based sort of thing. In theory, you could run it on just about anything, you do even run it on a Raspberry Pi way, a little little computer. Yeah, yeah, a little baby computer, the easy little contract. The trick is, you need to have almost 100% uptime. So if you have it running on a Raspberry Pi, and your cat comes by and knocks out the cord, and if your node goes down, you're gonna get financially penalized which oh, gosh, would not be great. There are services out there that do all this for you. They'll set up the nodes and you just essentially drop it your your stake and then they take a little cut from it. So more more people are going to be able to participate in the network and going back also to the less energy intense and more eco friendly the point zero 5% The amount that it is currently taking up now as far as energy goes. So I think that'll really, hopefully turn around the perception of Aetherium. And web three, in general, if you talk to somebody on the street that might not know a lot about web three, or Aetherium, they, they're going to hear the things about it being, you know, behalf of the environment, and using a full electricity. So that's all thankfully, hopefully going to turn around.
Which is really exciting. Honestly, it's a it's a promising thing and technology, right? You know, I'm a firm believer that we're standing on the fourth industrial revolution stops currently, and I think this is a good step in the right direction, especially on the sustainability side, I remember back in like, what was it 2000 And something 15. People were buying that solution to be able to, you know, mine, yeah, at their homes. And that's just like such a sunk cost. And it's nice to see that anyone can have access, it's lowering the barrier to entry, just like the internet did for so many things.
Yeah, you could even theorize that it's making it even more decentralized. Because if, you know, say, in the future, if we were sticking with proof of work, well, you know, I can't just make an a graphics card at home, like Nvidia can to mine these things. So there's eventually going to be these oligarchs of like software and hardware, that control who gets to build these mining rigs, and when that no longer is gonna exist. So it's going to
hopefully open it up a little bit.
I have a very specific question, because I've just had this kind of burning feeling throughout our conversation. And it kind of relates back to our previous podcast episode. But do you feel like this is the next step towards a Dao decentralized autonomous organization?
So like Aetherium,
turning into a Dow
Yeah. Well, Mundo basically this concept of becoming more sustainable and kind of switching a process to be more efficient. Yeah.
Yeah, I could totally see that just the way of thinking
in general, kind of like the Etherion ethos, if you will. Just the like the fairness and security in
this could be a proof of concept for that. In the future.
Yeah. I can totally see that. Yeah, hopefully, it's, it's more fair, every society that we're moving towards.
Absolutely. And there's one thing that I want to ask that's typically a common misconception about the merge, is that when withdrawals are enabled, stakers will all exit at once. So can you tell us if that's true or false? Yeah, so
I've heard that too. And from what I understand is this period where people aren't going to be able to necessarily do like a bank run on the, on the network, withdraw all of their safeties that want to see, they're gonna roll it out to where it will be in phases, if you did that whole thing. But yeah, they another cool thing about that is to is, the less people stay. So say, for some reason that a lot of people do exit, it'll actually make the reporting the higher, so it will incentivize more people. Mm hmm. So the more people that are using it currently, the lower the rewards get, and that's part of the tangible way that actually chooses who validates those nodes. Okay? If there's a combination of how much you have stake, how long you've been staking for, and a little bit of randomness to it. So that same person each time, but it kind of has this weighted sort of balance that chooses people so the less less people they're there to participate in it, the more likely you are to get more rewards. So that's kind of how it incentivizes people to come back and answer your question, no, people aren't going to be able to pull everything out immediately. I don't know if everybody
knew that or not. Whenever I looked into it, I was like, oh, you know, I'll have to do is just stick my my 32 e's until
until the merch goes live. And then I pull it back out. But yeah, there's gonna be this period where we'll, we'll tighten some things up and then a lot of people will slowly start removing work.
Interesting. Lots of things happening, especially this month as the federal rate and raise interest rates again, and yeah, what a time to be alive, right? Yeah. Well, this has been a great combo Stacia Martin. I'm curious, what are some good resources are some websites that you would recommend for further reading? Yeah,
the Etherium organization website, that's a great one, I can give you a couple of drops in the show notes as well. Coin telegraph is a great one as well.
Awesome, awesome. We'll
definitely put those in the show notes. And I feel like we need to do another one of these episodes. Matt, whenever, you know, the next thing happens. So you're a resident subject matter expert on on all things, you know, a cerium and mining. But is there anything else that you wanted to leave us with before we depart?
I mean, go get steaks. There's other programs out there where you can go, and you don't have to have 32 Aetherium. To participate in the network, you can get how much how little you can put into it. But there's some protocols where you can pool your money together with other people and start getting some of that passive income and participating in the network and,
you know, be part of the future of money. So trying to get out there. Yeah,
that's good advice. And, again, this is not financial advice. But I think that's a good opportunity. It's just everything's changing so much. So I feel like knowing what we knew, what we is no longer going to be the same way of thinking. And a lot of regards in a lot of respect. But, Matt, this has been a great conversation. And I just want to thank you so much for coming on. And thank you into 36 labs for for being our resident subject matter experts. But thank you so much, and I'll definitely have you back on the show again.
Thank you. Thank you for having me. I look forward to it.