#9: Adversaries, Actors and Amendments
This newsletter is supported by Chorus One, an operator of validating nodes and staking services on Proof-of-Stake networks.
Opinions & Observations
A new series by Aparna Krishnan from the Mechanism Labs team on adversaries in consensus protocols. This first post starts with an explanation of how actions nodes on the network take that deviate from the expected behavior can potentially break a consensus protocol. Aparna describes liveness (halting of the protocol) and safety failures (inconsistent outcomes that require external intervention) and then goes into the progression of types of adversaries that were considered in the history of consensus protocols:
- Crash faults: No malicious nodes, nodes may be offline
- Passive adversaries: Nodes trying to impersonate honest nodes
- Byzantine adversaries: Malicious nodes that act arbitrarily
- Economic adversaries: Nodes that respond to economic incentives (the blockchain context)
Price Volatility and Staking Economics
An important topic to consider when thinking about rewards from staking cryptoassets is the price volatility of this emerging asset class. Stakers are exposed to massive fluctuations in the value (in fiat terms) depending on the market situation. The influence of this volatility on the security of a Proof-of-Stake blockchain needs to be considered, Eric Conner summarizes his thoughts on this in a tweet thread:
It is likely that over time various derivatives will emerge that enable validators (and delegators) to receive a steady (fiat-denominated) rate of return mitigating the risk of a declining staking token price. In the current market, stakers are making a long-term bet on the price of the underlying asset.
If you want to learn how we at Chorus One are thinking about validator economics in a Proof-of-Stake system, check out this blog post we co-authored with the Cosmos team in May explaining the rationale behind their economic model.
The third part of the “Staking Ecosystem” series on the Chorus One blog covering the actors that can be expected in a PoS network.
TL;DR: there are many different parties holding a staking token that may participate in staking through various channels such as wallets, exchanges, custodians or staking marketplaces. The graphic below shows who could get involved, including their choice to participate in staking by running validation infrastructure or by delegating to staking providers.
News & Updates
TOP 5 PROJECTS BUILDING ON COSMOS — My overview of five of the most promising projects that will be part of the Cosmos Network on the Chorus One blog. The post shortly introduces each project (IRISnet, Sentinel, Agreements Network, FOAM and TruStory) and then covers how they will integrate with the Cosmos Network and which advantages made them chose Cosmos over other platforms for their applications.
LIVEPEER MERKLE MINE AFTERMATH — Another analysis covering the outcome of the Livepeer Merkle Mine. Viktor Bunin argues that the distribution mechanism was less effective in achieving a wide distribution of tokens than praised by taking a closer look at the data.
TEZOS AMENDMENT PROCESS — A detailed rundown of the Tezos on-chain governance implementation. The process will in total take 32 cycles (~3 months) with multiple token voting rounds from choosing the best proposal over testing it to potentially activating it on the mainnet. The post also covers details such as quorums required and potential tweaks and extensions.
CODIFYING GOVERNANCE — Vlad Zamfir and Gavin Wood debate blockchain governance on the Zeroknowledge Podcast. The discussion mainly revolves around whether governance processes can or should be codified.
TEZOS UPGRADE—Last week the Tezos blockchain halted for a brief period due to a bug following a double-baking incident. The problem was fixed quickly with a critical protocol upgrade that required a community effort of core developers and bakers. As part of this fix, a minimum transaction fee is now required to deter transaction and account creation spam.
DOUBLE-BAKING— A series by staking provider Cryptium Labs explaining slashing (double-baking) in the Tezos protocol covering why this feature exists, how it can happen, and what validators (bakers) can do to mitigate risks.
GAIA-9002 LAUNCH — After some bugs postponing the launch of the Cosmos Game of Stakes competition were discovered in the last testnet, the gaia-9002 testnet was launched today following a bug fixing sprint. If all issues were resolved, Game of Stakes will be able to begin early next week.