Proof-of-Work

Kadena CEO Stuart Popejoy on blockchain design: Proof-of-work is a feature, not a flaw

The former JPMorgan executive shared how he learned to love crypto and why the Kadena blockchain is not letting go its firm embrace of proof-of-work.

When taking its blockchain public, “there was an adjustment period where we had to learn to love crypto,” Kadena founder and CEO Stuart Popejoy said. The admission sounded more like a technical adjustment than a surge of emotion on his lips, but he added, “The people who participate in your ecosystem really are your network and that is obviously not a very enterprise-y thing, that’s very grassroots.” 

The merits of private blockchains remain a matter of debate, but Kadena transitioned from a private JPMorgan blockchain in 2016 to a public spinoff in 2020, taking Popejoy, formerly a JPMorgan executive, with it.

“There was some innovation in private blockchain for a second, and that kind of represents us.” However, “there was this idea that we needed something […] that could serve business-scale needs, and that’s how we arrived at our version of a public blockchain,” Popejoy said in an interview with Cointelegraph, adding:

“This stuff is never going to take off if it can’t handle industrial loads.”

Kadena has horizontal scaling as a feature. “We focused on safe smart contracts and scalability as a safety thing, in the sense of risk management, like if you have to wait a day for your Bitcoin transaction go through,” when the system is backed up, Popejoy said.

Popejoy mentioned Bitcoin frequently. He said:

“We were very thrilled by the fundamental design of Bitcoin.”

“We believe that the real problem with proof of work is not that it uses energy, it’s that it uses energy inefficiently,” he added. “Bitcoin: there’s all this energy being used and it’s not improving the system. It’s the same slow system it was 15 years ago.”

Related: The blockchain trilemma: Can it ever be tackled?

Like Bitcoin, Kadena uses a proof-of-work consensus mechanism, “but it scales it so that we actually have horizontal scaling for proof of work,” Popejoy said. “We like to say, and it’s true, because I know how this stuff actually works, we could settle the entire U.S. stock market today, daily, on Kadena.”

Not everyone sees that speed as a benefit, but Popejoy pointed out that clawbacks can be programmed into smart contracts and security tokens.

Kadena currently has 20 chains running in parallel, but more chains would use the same amount of energy.

The real issue with proof-of-work is the distribution of money. “Proof of stake produces money and then it uses ownership of money to determine who runs the system,” Popejoy said. Proof-of-work “is the fairest distribution for getting coins into people’s hands.”

Is GPU mining profitable after the Ethereum Merge?

The Ethereum merge is the upgrade from proof-of-work to proof-of-stake as a way of validating block transactions on the network.

What is the future of GPU mining?

The future of GPU mining depends upon miners’ willingness to continue mining alternative GPU mineable cryptocurrencies. 

Mining, the foundation of PoW cryptocurrencies, may continue to flourish, given that energy costs are low for GPU miners. Moreover, the application of graphics processing units beyond mining, including graphics designing, gaming and video editing, make them ideal for fixed capital investment. 

Also, when one blockchain migrates to alternative consensus algorithms, GPU miners can utilize their rigs to mine other cryptocurrencies. This implies that GPU miners can continue using their mining rigs during events like the Merge, unlike application-specific integrated circuit (ASIC) miners, as ASICs cannot be repurposed to mine alternative cryptocurrencies. 

On the contrary, compared to GPUs, ASICs are more energy-efficient and offer a higher hash rate, inducing miners to switch to application-specific integrated circuit equipment. However, the cost of setting up an ASIC mining rig makes it unattractive to solo miners.

Above all, the equipment a miner chooses should be supported by the blockchain on which they will be mining cryptocurrencies. Other factors determining mining profitability include electricity costs, block reward, hash rate and cryptocurrency price that a miner is looking to mine, which must be taken into consideration before buying GPUs, CPUs, ASICs or any other mining equipment.

Can miners migrate to the PoS version of Ethereum?

Miners may change their business model to proof-of-stake consensus. 

It is difficult for Ethereum supporters to abandon the chain due to the Merge and the possibility that it could render mining on Ethereum ineffective. However, decentralized finance (DeFi) staking has gained the interest of such people because of higher payouts, as fees that were formerly paid by the blockchain to miners will shift to validators.

More technical upgrades, revisions and forks will follow the Merge, according to Ethereum cofounder Vitalik Buterin. For instance, Ethereum Foundation intends to introduce and refine sharding and rollups on the blockchain, which will positively impact transaction speed and gas fees. 

Additionally, Ethereum core developers hope to simplify data storage on the blockchain with the Purge and the Verge. The Purge is a technical improvement that will reduce storage space for storing Ether on a hard disk. This will eliminate the need for nodes to keep transaction history and simplify the Ethereum protocol.

Another concept called the Verge, which is an implementation of Verkle Trees as a sort of mathematical proof, will allow any Ethereum user to become a network validator, as they won’t need extensive disk storage to keep vast amounts of block data. 

Large-scale miners may adopt a data-focused strategy and engage in high-performance computing. For example, GPU miners could gain from Web3 protocols like Livepeer and Render if they can pool resources. Nonetheless, a considerable concern is still in the air of imminent Ether (ETH) selling pressure.

An Ethereum GPU miner can invest more in what they already have and explore other emerging technologies like artificial intelligence (AI), cloud computing and others. Furthermore, the GPUs can be repurposed for cloud computing without necessarily having to add more investment. For example, Hut 8 Mining, which has over 180 GPUs, is already refurbishing its Ethereum data center for machine learning, AI and engineering purposes.

What are the alternative options for Ethereum miners?

The Merge forced miners to shift to alternative GPU mineable cryptocurrencies, a newly forked version or dump or sell their equipment at a low price.

Shift to alternative GPU mineable cryptocurrencies

One of the direct effects of the Merge includes miners turning to the Ethereum fork, Ethereum Classic (ETC), to keep utilizing their equipment. For instance, the blockchain fork’s hash rate increased the day after the Merge. The hash rate describes the computation power needed to approve a transaction on the blockchain through a proof-of-work consensus mechanism. 

As Ethereum Classic blockchain still practices the PoW method for mining, Canada-based Hive blockchain (crypto mining giant) disclosed its plans to mine other proof-of-work cryptocurrencies like ETC, Dogecoin (DOGE) and Litecoin (LTC), among others. However, shifting to a PoW blockchain may undermine the environmental benefits that the PoS version offers.

Ethereum miners can switch to a newly forked version

A Chinese miner who resists Ethereum Network’s shift to proof-of-stake forked Ethereum to preserve the proof-of-work consensus method. The newly forked version is called the EthereumPOW (ETHW), which hopes to accommodate GPU miners in the future.

The trade of tokens reflecting a proof-of-work fork of Ethereum is supported by cryptocurrency exchanges like Poloniex and BitMEX as well as the Tron blockchain.  

Some of the GPU miners may quit the game

Returning to past revenue figures that were provided on Ethereum is difficult. Those chances are low with stablecoin chains or any other PoW blockchain. Overflow of hash rate to alternative GPU mineable coins is also a threat to the mining venture. 

It is challenging to earn previous rewards that were offered on Ethereum, due to which miners started shifting to alternative GPU-mineable coins. However, the increased hash rate means a hike in mining difficulty, causing miners to get rid of GPU miners. 

Hive blockchain agrees that only miners with efficient equipment will succeed in the long run for this reason. As a result, many miners may sell their GPUs if the difficulty of alternate chains keeps increasing.

On the other hand, the selling may not occur since a dumping effect will result from an increasing supply of GPU capability compared to a decrease in demand. Therefore, the likely outcomes of such a scenario can be a vast majority of miners either dumping or selling their equipment at low prices. However, as crypto mining places a lot of strain on the GPU hardware, gamers and even film editors might not be optimistic about buying the machines.

What are the pros and cons of GPU mining?

Using a GPU for mining offers both benefits like scalability and faster processing but with drawbacks such as complex setup processes, maintenance and electricity cost.

GPU mining is inherently more powerful than central processing unit (CPU) mining, as graphical processing units can handle the same calculations faster. In addition, the system’s power can be enhanced by using extra graphic cards, making GPU mining a scalable alternative to CPU mining.

The more advanced GPUs come with gaming, video editing and machine learning support, giving them the versatility to speed up various applications outside of typical graphics rendering. For instance, graphical processing units can render 2D and 3D graphics, allowing gamers to play at larger resolutions.

Similarly, since GPUs have a staggering amount of computational power, they can significantly speed up applications like image recognition that benefit from their highly parallel architecture. In computing, GPU parallel processing refers to the simultaneous execution of numerous calculations or processes.

Nonetheless, the process of setting up a GPU mining rig is quite complex, which involves downloading and configuring software that supports GPU mining, signing up for a mining pool, and creating a worker (mining device’s name that serves as the login for mining software).

Moreover, unexpected errors can cause defects in the equipment, which poses a financial burden on the miner. Also, the cost of electricity may not be covered by the reward (amount of cryptocurrency) earned in return for providing computing power.

What does the Ethereum Merge mean for Ethereum mining and GPU miners?

Ethereum upgraded from proof-of-work to proof-of-stake, meaning miners will be out of work, and their equipment will be useless.

GPU miners are individuals that validate transaction blocks by using specialized graphics cards to solve challenging mathematical challenges. Miners use graphic cards because they can quickly and repeatedly divide and process tasks that need a lot of energy and resources. 

However, Ethereum’s prolonged plan to reduce energy consumption by 99% by phasing out cryptocurrency mining was completed on Sept. 15, raising concerns about existing mining equipment. For instance, it may result in an accumulation of e-waste brought on by increased useless mining rigs, which could trigger another climate emergency, ultimately offsetting the advantages of the switch to the proof-of-stake (PoS) consensus mechanism.

Unlike proof-of-work (PoW), where several computers act as nodes and validate a single block, randomly selected validators create new blocks in PoS. In the long term, this renders thousands of graphical processing unit (GPU) rigs useless, making Ethereum mining less economical than it has previously been.

Could Bitcoin have launched in the 1990s — Or was it waiting for Satoshi?

With the Internet, elliptic curve cryptography, even Merkle trees and PoW protocols all present, Bitcoin was “technically possible” in 1994.

This year, Oct. 31 marked the 14th anniversary of the issuance of one of this century’s most consequential white papers — Satoshi Nakamoto’s “Bitcoin: A Peer-to-Peer Electronic Cash System.” Its 2008 publication set off a “revolution in finance” and “heralded a new era for money, one that did not derive its value from governmental edict but rather from technological proficiency and ingenuity,” as NYDIG celebrated in its Nov. 4 newsletter.

Many aren’t aware, though, that Satoshi’s nine-page white paper was met with some skepticism initially, even among the cypherpunk community where it first surfaced. This reluctance may be understandable since earlier attempts to create a cryptocurrency failed — David Chaum’s Digicash effort in the 1990s, for example — nor at first glance did it appear that Satoshi was bringing anything new to the table in terms of technology.

“It was technically possible to develop Bitcoin in 1994,” Jan Lansky, head of the department of computer science and mathematics at the Czech Republic’s University of Finance and Administration, told Cointelegraph, explaining that Bitcoin is based on three technical improvements that were available at that time: Merkle trees (1979), blockchain data structure (Haber and Stornetta, 1991) and proof of work (1993).

Peter Vessenes, co-founder and chief cryptographer at Lamina1 — a layer-1 blockchain — basically agreed: “We definitely could have been mining Bitcoin” in the early 1990s, at least from a technical perspective, he told Cointelegraph. The necessary cryptography was in hand:

“Bitcoin’s elliptic curve technology is mid-1980s technology. Bitcoin doesn’t need any in-band encryption like SSL; the data is unencrypted and easy to transfer.” 

Satoshi sometimes gets credit for establishing the proof-of-work (PoW) protocol used by Bitcoin and other blockchain networks (though no longer Ethereum ) to secure digital ledgers, but here too, he had antecedents. “Cynthia Dwork and Moni Naor suggested the idea of proof of work to combat spam in 1992,” added Vessenes.

PoW, which is also effective in thwarting Sybil attacks, establishes a high economic price for making any changes to the digital ledger. As explained in a 2017 paper on Bitcoin’s origins by Arvind Narayanan and Jeremy Clark, “In Dwork and Naor’s design, email recipients would process only those emails that were accompanied by proof that the sender had performed a moderate amount of computational work — hence, ‘proof of work.’” As the researchers further noted:

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“Computing the proof would take perhaps a few seconds on a regular computer. Thus, it would pose no difficulty for regular users, but a spammer wishing to send a million emails would require several weeks, using equivalent hardware.”

Elsewhere, “Ralph Merkle invented Merkle trees in the late 1980s — so we had hashing functions that were secure for the times,” Vessenes added.

So, why then did Satoshi succeed while others foundered? Was the world simply not ready for a decentralized digital currency earlier? Were there still technical limitations, like accessible computer power? Or maybe Bitcoin’s true constituency hadn’t yet come of age — a new generation distrustful of centralized authority, especially in light of the Great Recession of 2008?

Establishing ‘trustless’ systems

David Chaum has been called “perhaps the most influential person in the cryptocurrency space.” His 1982 doctoral dissertation, Computer Systems Established, Maintained, and Trusted by Mutually Suspicious Groups, anticipated many of the elements that were to eventually find their way into the Bitcoin network. It also presented the key challenge to be solved, that is:

“The problem of establishing and maintaining computer systems that can be trusted by those who don’t necessarily trust one another.”

Indeed, an academic exploration of blockchain technologies’s origins by four University of Maryland researchers lauded “the 1979 work of David Chaum, whose vault system embodies many of the elements of blockchains.”

In an interview with Cointelegraph last week, Chaum was asked if Bitcoin really could have been launched 15 years earlier, as some contend. He agreed with the U. of Maryland researchers that all the key blockchain elements were already present in his 1982 dissertation — with one key exception: Satoshi’s consensus mechanism:

 “The specifics of the [i.e., Satoshi’s] consensus algorithm is unlike, as far as I know, those in the literature on consensus algorithms.”

When pressed for specifics, Chaum was reluctant to say much more other than that the 2008 white paper described a “somewhat ad hoc… crude mechanism” that actually “could be made to work — more or less.”

In a recently published book, University of Oxford social scientist Vili Lehdonvirta also focuses on the uniqueness of that consensus mechanism. Satoshi rotated the cryptocurrency’s record-keepers/validators — better known today as “miners” — roughly every 10 minutes.

Then “the next randomly appointed administrator would take over, double check the previous block of records, and append their own block to it, forming a chain of blocks,” Lehdonvirta writes in Cloud Empires.

The reason for rotating miners, in Lehdonvirta’s telling, was to prevent the system’s administrators from becoming too entrenched and, thus, to avoid the corruption that inevitably comes with a concentration of power.

Even though PoW protocols were well known at this point, the specifics of Satoshi’s algorithm “really came out of nowhere… it wasn’t anticipated,” Chaum told Cointelegraph.

‘Three fundamental breakthroughs’

Vinay Gupta, founder and CEO of startup Mattereum, who also helped to launch Ethereum in 2015 as its release coordinator, agreed that most of Bitcoin’s key components were available for the taking when Satoshi came along, though he differs on some of the chronology. “The parts themselves were simply not ready until at least 2001,” he told Cointelegraph.

“Bitcoin is a combination of three fundamental breakthroughs on top of public key cryptography — Merkle trees, proof-of-work and distributed hash tables,” all developed before Satoshi, said Gupta. There were no problems with network hardware and computer power in the 1990s either. “It’s the core algorithms that were the slow part […]. We just didn’t have all the core building blocks for Bitcoin until 2001. The cryptography was first, and the extremely clever networking layer was last.”

Garrick Hileman, a visiting fellow at the London School of Economics, also cited a later date for Bitcoin’s technical feasibility:

“I’m not sure the early 1990s is a strong claim as some of the prior work referenced in Satoshi’s white paper — e.g. Adam Back’s hashcash/proof of work algorithm — were developed and/or published in the late 1990s or thereafter.” 

Awaiting a favorable social climate

What about non-technical factors? Maybe Bitcoin was waiting for a demographic cohort that had grown up with computers/cell phones and distrusted banks and centralized finance generally? Did BTC require a new social-economic consciousness to flourish?

Alex Tapscott, a member of the Millennial generation, writes in his book Financial Services Revolution:

“For many of my generation, 2008 began a lost decade of structural unemployment, sluggish growth, political instability and a corrosion of trust and confidence in many of our institutions. The financial crisis exposed the avarice, malfeasance and plain incompetence that had driven the economy to the brink of collapse and had some asking, ‘How deep did the rot go?’”

In a 2020 interview with Cointelegraph, Tapscott was asked if Bitcoin could have happened without the financial upheaval of 2008. Given the “historically high unemployment rates in countries like Spain, Greece and Italy, there’s not much question that the ensuing lack of trust in institutions led many to view decentralized systems like blockchain more favorably,” he answered.

Lansky seemed to agree. There was no social need or demand for a decentralized payments solution in the 1990s “because we did not have enough experience with the fact that centralized solutions do not work,” he told Cointelegraph.

“Bitcoin was undeniably a cultural product of its times,” added Vessenes. “We wouldn’t have a decentralized push without this DNA of mistrust of central government technology controls.”

Pulling it all together

Overall, one can go back and forth arguing about who contributed what and when. Most agree, though, that most of the pieces were in place by 2008, and Satoshi’s real gift may have been how he was able to pull it all together — in just nine pages. “No single part of Bitcoin’s fundamental mechanics is new,” Gupta reiterated. “The genius is in the combination of these existing three components — Merkle trees, hash cash and distributed hash tables for the networking into a fundamentally new whole.”

But sometimes, the historical environment has to be propitious too. Chaum’s project failed “because there was not enough interest in this service” at the time, among other reasons, according to Lansky. Satoshi Nakamoto, by comparison, had perfect timing. “He came up with Bitcoin in 2008, when the classical financial system was failing,” and the founder’s vanishing from the scene in 2010 “only strengthened Bitcoin, because the development was taken over by its community.”

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It should be remembered, too, that technological progress is almost always a collaborative effort. While Satoshi’s system seems “radically different from most other payment systems today,” Narayanan and Clark wrote, “these ideas are quite old, dating back to David Chaum, the father of digital cash.”

Satoshi clearly had forerunners — Chaum, Merkle, Dwork, Naor, Haber, Stornetta and Back, among others. Said Gupta: “Credit where credit is due: Satoshi stood on the shoulders of giants.”

What is Humanode human-powered blockchain?

Humanode is the decentralized crypto-biometric network based on 1 human = 1 node = 1 vote ethos that brings Sybil resistance to the crypto space.

The future of blockchain and biometrics merge

The merge of blockchain and biometrics has cogent potential. A new emerging ecosystem based on it is here to improve human life as such.

The current crypto paradigm is dominated by power- and capital-based schemes. Appearing as an alternative, Sybil-resistant human-based protocols allow reorienting the systems away from such technocratic and oligopolistic narratives, providing true decentralization and democracy.

Infrastructures based on human biometrics combined with blockchain are capable of creating innovative decentralized human-based digital verification layers and stable financial networks that rely on the existence of human life itself. 

Biometric-based blockchain projects formalize a new framework for a prosperous and regenerative world, each in its own unique way. Some of them specialize in identity verification for blockchain services, some of them provide solutions for metaverse authentication, and some are interested in improving things like universal basic income (UBI). Be that as it may, they accelerate a new possible human future where inevitable uniqueness and equality are the main powers.

Humanode features

Humanode embraces a number of exclusive features that help the project achieve its goals.

First and foremost, Humanode provides biometric Sybil resistance. With ensured decentralized biometric identification based on liveness detection, the network is owned and operated by real unique humans. 

Humanode accelerates the spread of equality since each user can only create one identity, meaning that they can only launch one node and hence has a single vote. This means truly equal co-ownership of the network with equal distribution of power and fees among users.

Also, Humanode leverages self-sovereign and decentralized identity (DID) to give users full control over their digital personal data. All data is decentralized, encrypted and kept fully and securely on-chain. 

Pseudonymity means that Humanode users can freely interact with the network without having to reveal their identity but only by proving they are real human beings. Furthermore, there will be no more concerns about data privacy, as Humanode uses crypto-biometrics to protect biometric data that never leaves users’ devices.

The need for a common device such as a smartphone or a PC to launch a human node means broader accessibility and fast and user-friendly biometric authentication brings usability to the system. Being a Substrate-based platform, Humanode is also interoperable with the broader Ethereum ecosystem making it accessible to thousands of passionate developers.

Moreover, Humanode’s crypto-biometric processing scheme alongside 1 human = 1 vote DAO infrastructure is easy to integrate through the direct Application Programming Interface (API), bringing Sybil resistance, decentralization and more advantages to any chain. 

And, last but not least, Humanode introduces a cost-based fee system that denominates transaction fees in United States dollar, based on the actual use of resources. Pegging the USD value not only ensures that Humanode’s (HMND) volatility does not affect resource costs, but also provides a more intuitive user experience

What is crypto-biometrics and how does it work?

Crypto-biometrics is a mix of innovative advanced technologies, which includes blockchain, encryption, cybersecurity, zero-knowledge proofs, biometrics and liveness detection.

To meet the security and privacy requirements of protecting particularly sensitive personal biometric data in a globally distributed system that runs on nodes connected to thousands of human beings, simply encoding the biometric information is not enough.  

Humanode utilizes crypto-biometric identification mechanisms that are based on a combination of various technologies and exist at the intersection of the disciplines such as mathematics, information security, cybersecurity, biometrics, liveness detection, zk proofs, homomorphic encryption and, of course, blockchain.

To become a human node, users need to prove that they are real living human beings and not deep fakes, photos, masks or something else. To do so, users go through live video-based 3D face scans and liveness detection. During this process, the 3D face mapping vector of the neural network is converted to numerical values and encrypted. After that, the public and private keys are created and, at that point, users can launch their nodes. 

For registered Humanode users, once they log in after biometric identity verification, the 1 to n search and matching operation happens in an encrypted space. And, because it is zk-based, the only piece of information that is searched for and is given out is whether the user is registered.

 

How does Humanode work?

Humanode is a project that gracefully combines different technological stacks including blockchain and biometrics. 

Humanode tech encompasses a bunch of layers such as a blockchain layer represented by a Substrate module: a biometric authorization module based on cryptographically secure neural networks for the private classification of three-dimensional (3D) templates of users’ faces, a private liveness detection mechanism for identifying real human beings, a Vortex decentralized autonomous organization (DAO) and a monetary algorithm named Fath, where monetary supply reacts to real value growth and emission is proportional.

Let’s look at them in more detail.

Substrate framework

Humanode is a layer-1 blockchain whose architecture lies on the Substrate open-source framework that allows the quick development of highly customized blockchains. Substrate, the brainchild of the Parity team, provides interoperability within the Polkadot and Kusama ecosystems as well as an environment for the creation and deployment of general-purpose or specialized blockchain networks with remarkably varied parameters and sound capabilities. Being a Substrate-based chain, Humanode benefits from it and from the high throughput and scalability inherent to the Polkadot ecosystem. 

Consensus agnostic protocol 

One of the interesting features of Humanode is consensus agnosticism, which is the ability to change the network’s consensus mechanism if the Humanode DAO approves it. It derives from the necessity for constant research on the most suitable consensus for a leaderless system with equal validation power of nodes. Different consensus mechanisms have numerous pros and cons which constantly change. A swappable consensus mechanism allows the system to evolve and not be limited by a single unchangeable framework. 

EVM-compatible smart-contract layer

On top of that, Humanode is Ethereum-compatible. Due to an Ethereum Virtual Machine (EVM) pallet, Humanode can use existing Ethereum development tools and take advantage of smart contracts development, supported by several popular languages including Solidity and WebAssembly. On the other hand, Humanode can provide private biometric processing and Sybil-resistance to numerous Ethereum-based decentralized applications (DApps) including decentralized finance (DeFi) and play-to-earn (GameFi) projects, NFT solutions, DAOs, metaverses and others.

Private biometric search and matching 

As for Humanode’s biometrics stack, it seems like the privacy and security of biometric data have been among the most critical aspects of the project. 

Due to the private classification of images of users’ faces, the system guarantees the images’ privacy, performing all operations without the users’ biometrics data having to leave the device. The only device needed to pass biometric authentication is a smartphone with a camera. Once users scan their faces, they become human nodes. The whole process is private and secure. All the Humanode system cares about is if the user is a unique human being, if they are registered and if they are alive. 

Decentralized liveness detection

A technique that ensures that the biometric sample is submitted from a real live person, a substantial security feature that mitigates the vulnerability of biometric systems to spoofing attacks, is called liveness detection. Biometric liveness refers to the use of computer vision technology to detect the actual presence of a living user rather than a representation such as a photograph or a mask, video or screen, a fake silicon fingerprint or other spoof artifacts. 

Biometrics accuracy grew tremendously in the last decade. Currently, the possibility of a match between two different people is 1 to 125,000,000, and the possibility of spoofing an identity without a real human in front of the camera is 1 to 80,000. And, these numbers are constantly improving.

For its first version of the crypto-biometric identification solution, which utilizes secure enclaves for some portions of the process, Humanode integrates FaceTec’s face biometrics and liveness detection. Humanode’s first testnet was launched in January 2021 and the official testnet 1 with liveness detection and the updated technical stack was launched in September 2021. Since then, there have been additional testnets deployed with more than 10,000 people becoming human nodes.

Vortex DAO

Currently, there are three types of nodes in the Humanode ecosystem. First, human nodes who have passed biometric authentication and received a fraction of the network transaction fees. Then, there are delegators: nodes that opt to delegate their voting power to so-called governors. Governors are nodes that participate in Humanode’s governance and must meet certain governing requirements. 

Each of these node types forms an important part of Humanode’s governance DAO named Vortex. Unlike other projects, which allow nodes to accumulate voting power based on how much capital they have or delegate, the Humanode platform ensures that all nodes are equal in terms of validation and voting power, bringing true equality between peers in a decentralized environment.

Fath monetary algorithm and rebalancing system

Humanode implements the Fath hypothesis as the basis for the circulation of HMND Humanode token (HMND). Fath is a monetary algorithm with a proportional distribution of issued tokens. It is an alternative to modern fiat credit-cycle financial networks and capital-based public blockchains.

What problems does Humanode solve?

Humanode brings decentralization, Sybil resistance and innovative governance models to the blockchain industry using biometric technology.

In its very foundations, the Humanode project aims to bring accessibility, inclusivity and innovation in the tech and crypto spaces and economics as a whole. The project is an alternative to the majority of blockchain networks that are based on consensus algorithms such as proof-of-work (PoW) and proof-of-stake (PoS) that currently dominate the field. 

It is known that PoW and PoS are decentralized technologically but not power-wise, granting voting rights and rewards in proportion to users’ economic investments in an activity or resource, stake or computational power, leading to capital-based oligopolies and mining pools. 

In contrast to PoW and PoS, Humanode utilizes facial recognition biometrics with the combination of proof-of-uniqueness and proof-of-existence — efficient tools capable of creating a decentralized protocol to counter malicious attacks on online platforms. The most spread attacks on peer-to-peer networks are Sybil attacks with the utilization of multiple fake virtual identities or, in the case of cryptocurrencies, nodes. 

The Humanode system is designed to check and ensure that every person in the network is unique and has a singular identity. Human nodes are created through crypto-biometric authentication which is a combination of cryptographically secure matching and liveness detection mechanisms verifying the uniqueness and existence of real human beings.

Bringing equality and Sybil resistance to the system, Humanode design guarantees every individual the same amount of voting power and rewards, creating a democratic and fair peer-to-peer structure.

What is Humanode?

Humanode is the first human-powered crypto-biometric network, where 1 human = 1 node = 1 vote.

Humanode is a new-age decentralized crypto-biometric network that integrates pioneering cryptography with private biometrics and blockchain technology. The project aims to create a strong and sustainable decentralized system that is grounded on the existence of unique human beings.

The Humanode project was conceived by the co-founders of Paradigm research institute in 2017. They were one of the many who were optimistic about the Web 3 potential but, at the same time, were stumped by the fact that mining cartels and validator oligopolies seemed to dominate the crypto market. By using human biometrics as the stake, the founders of Humanode saw the possibility of creating a truly decentralized network of equals.

Humanode enables a range of new use cases while solving problems with existing ones. 

With Humanode enabling the pseudonymous biometric DIDs tied to various online services, many spheres stand to benefit from such as insurance, financial services that involve credit score, trading, marketplaces, yield farming and many others including airdrops, healthcare, metaverse authentication and nonfungible token (NFT) ownership.

 

14 years since the Bitcoin white paper: Why it matters

Cointelegraph asked Bitcoiners at the Plan B conference in Lugano why the white paper matters now more than ever.

Happy white paper day, Bitcoin. It’s been 14 years since Satoshi Nakamoto first sent an email to the Cypherpunk mailing list with the subject line, “Bitcoin P2P e-cash Paper.” The email included a link to the white paper, an outline of what would soon become a one trillion-dollar market. 

The first sentence of the email has become iconic among the Bitcoin community:

“I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”

Over the past 14 years, Bitcoin (BTC) has morphed from a hobbyist pastime into a globally recognized brand. Bitcoin has been adopted as legal tender in regions of the global south such as El Salvador and the Central African Republic. It is used by freedom fighters and campaigners while being a tool for financial emancipation and economic empowerment worldwide.

The speculative fervor that Bitcoin became known for still lingers while Bitcoin’s reputation as being a tool for illicit activities clings on, despite the fact that the United States dollars remains a far more effective tool for hiding financial activity. 

In 2022, Bitcoin has evolved into so much more. Cointelegraph spoke to Bitcoin OGs, enthusiasts and newbies during the Plan B Conference in Lugano, Switzerland, to investigate what the white paper means to the world.

Doing its ₿it for good 

For world-renowned charities such as Save the Children, the white paper and the subsequent creation of Bitcoin have benefited the organization. Antonia Roupell, Web3 lead at Save the Children, told Cointelegraph that the organization recognizes “Bitcoin’s potential to be a force for good and a force for financial inclusion,” adding:

“On Bitcoin’s 14th anniversary, and at a time of increasingly global financial inequality, the phrase ‘bitcoin is for anyone’ really resonates.”

Roupell explained that Save the Children US was the first iNGO to accept Bitcoin in 2013, stating, “Since then, we’ve raised almost 75 BTC thanks to generous donations to our relief efforts supporting children impacted by conflict in places like Afghanistan and Ukraine as well as families impacted by climate disasters such as Hurricane Ian in Florida.”

Crisis zones have underscored the resiliency and effectiveness of Bitcoin. In the first 48 hours of the Ukraine war, for example, the Ukraine government received $7.5 million in Bitcoin.

The speed at which Bitcoin hit government wallet addresses inspired the United Nations International Computing Centre (UNICC) to take crypto donations seriously, UNICC Director Sameer Chauhan explained in a Cointelegraph interview at the World Economic Forum in Davos. USD, British pounds, euros and government-issued money were much slower to trickle in to support the Ukrainian defense than Bitcoin. 

Decentralization and empowerment

For Bitcoin Gandalf, a marketer for Braiins — a Bitcoin mining tools company — the white paper and the subsequent pseudonymous network guarantee a basic level of privacy. Gandalf, who chose to obfuscate his name and face on the internet, told Cointelegraph:

“With the increased surveillance propagated by the state and huge centralized tech companies that control the majority of information distribution, it’s more important than ever that we have decentralized alternatives that guarantee us basic freedoms.”

Bitcoin is a permissionless network that anyone can use. It does not discriminate. Even for those without an internet connection, thanks to innovations in mobile network technology, Bitcoin can be sent like a text. Bitcoin’s mantra of being a “freedom technology” has bloomed across its 14-year history. 

During the Plan B conference in Lugano, Switzerland, “Freedom” was a central theme. Julian Assange’s family hosted talks about his incarceration for exposing military secrets, while speakers from Togo to Lebanon shed light on “Bitcoin the tool for financial freedom.” A drone show emblazoned the night sky with the cliché, bringing the Bitcoin and blockchain conference to a close:

Several announcements at the conference in Switzerland underscored the Bitcoin community’s commitment to freedom. Paolo Ardoino, chief technology officer of Tether, introduced Pear Credit, a peer-to-peer credit software that could undermine the proliferation of centralized authorities (or blockchains) that issue credit and tokens. Founded by Tether, Holepunch and Synonym, Pear Credit should “put control of the economy back in the hands of the people.”

In an exclusive interview with Cointelegraph, Ardoino explained the thinking behind Pear Credit, stating, “Everything that is not Bitcoin is credit. Everything that is not Bitcoin is inherently centralized.” His team has built a peer-to-peer service that offers the ability to issue credit — without a blockchain or product and without endless monetization.

In the spirit of the Bitcoin white paper, Pear Credit is “just open source libraries,” Ardoino commented. Pear Credit focuses on “scalability and privacy” and favors freedom to build open-sourced technology over chasing profits.

Gandalf said that the Bitcoin white paper “marked the beginning of the resistance to this trend” of centralizing power. Tech companies increasingly exploit customer data and online behaviors. Bitcoin, by contrast, is the largest demonstration of a peer-to-peer and privacy-centric network that continues to inspire projects that could undermine centralization.

Why do you care about the white paper?

John Carvalho, CEO of Synonym and contributor to Pear Credit, called for calm and introspection on the anniversary of the white paper. Carvalho, who also announced the creation of a new Bitcoin wallet app, Bitkit, during the conference, told Cointelegraph that even some of Satoshi Nakamoto’s biggest fans “will admit that he got some things wrong and how he thought things would play out. Even in the code.” 

In a possible nod to the Bitcoin fanaticism and adulation for Nakamoto that sometimes transcends the space, Carvalho explained that even though Bitcoin continues to grow in importance due to greater levels of adoption, users and the amount of people trying to copy Bitcoin. “For me, and I think for most people, your Bitcoin birthday isn’t when Bitcoin was invented, it’s when you discovered Bitcoin.”

“I’d rather associate it with when you bought your first Bitcoin or when you had your own ‘eureka’ moment.”

Ultimately, while Nakamoto’s email on Oct. 31, 2008, marked the first brick in the foundations of the Bitcoin blockchain, it’s the developers, the builders, the node runners, the miners and the Bitcoin buyers that have kept the idea alive. 

Bitcoin is indeed an effective form of remittance; it’s a spark that could ignite a path toward greater online freedoms, and it’s a meaningful shift away from centralized powers. But, Bitcoin is also a long line of code that millions of people worldwide choose to follow and contribute to every day.

Raise a glass to Satoshi, sure, but also take the time to reflect on your own Bitcoin journey. When’s your Bitcoin Birthday, anon?

The Merge brings down Ethereum’s network power consumption by over 99.9%

Before the Merge upgrade, in 2022, the energy consumption of Ethereum ranged between 46.31 terawatt hour (TWh) per year to 93.98 TWh per year.

The Merge, which is considered one of the most significant blockchain upgrades on Ethereum to date, brought down the network’s energy consumption by 99.9% immediately.

On Sept. 15, the Ethereum blockchain migrated from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism in an effort to transition into a green blockchain. What followed was an immediate and steep drop in total energy consumption of the Ethereum network.

The Ethereum Energy Consumption Index. Source: digiconomist.net

Before the Merge upgrade, in 2022, the energy consumption of Ethereum ranged between 46.31 terawatt hour (TWh) per year to 93.98 TWh per year. The lowest energy consumption for Ethereum was recorded on Dec. 26, 2019, at 4.75 TWh per year.

The estimated annual energy consumption in TWh/yr for various industries. Source: ethereum.org

Starting from Sept. 15, the day of the Ethereum Merge, Ethereum’s energy dropped down by over 99.9% and continues to maintain low energy usage. As a result, the network’s carbon footprint currently stands at 0.1 million tonnes of CO2 (MtCO2) per year.

When translated to single Ethereum transactions, the electrical consumption is as low as 0.03-kilowatt hour (kWh) and the carbon footprint stands at 0.01 kgCO2, which, according to digiconomist, is equivalent to the energy used when watching two hours of YouTube.

Related: Ethereum sets record ETH short liquidations, wiping out $500 billion in 2 days

Despite the celebrations around Ethereum’s transition to PoS, community members raised concerns related to the blockchain’s centralization and higher regulatory scrutiny.

The centralization aspect became evident right after the Merge, as 46.15% of the nodes for storing data, processing transactions and adding new blockchain blocks could be attributed to just two addresses.

While Ethereum proponents claim that anyone with 32 Ether (ETH) can become a validator, it is important to note that 32 ETH, or around $41,416, is not a small amount for a newbie or common trader.

Ethereum at the center of centralization debate as SEC lays claim

Ethereum’s transition to PoS was celebrated as a key upgrade. However, a month after the move, centralization concerns are mounting high.

Ethereum went through a key network upgrade on Sept. 15, shifting from its proof-of-work (PoW) mining consensus to a proof-of-stake (PoS) one. The key upgrade is dubbed the Merge. 

The Merge was slated as a critical change for the Ethereum network that would make it more energy efficient, with later improvements to scalability and decentralization to come.

A little over a month later, however, some industry observers fear the PoS transition has pushed Ethereum toward more centralization and higher regulatory scrutiny.

The Merge replaced the way transactions were verified on the Ethereum network. Instead of miners putting in their computational power to verify a transition, validators now pledge Ether (ETH) tokens to verify those transactions. The issue with this system is that validators with a higher number of Ether have a larger say, given they have a larger percentage of validator nodes or staked ETH.

To become a validator on the Ethereum network, one must stake a minimum of 32 ETH. Thus, whales and big crypto exchanges have staked millions of ETH to have a larger portion of the validator nodes.

Current staking activities look very centralized, with the leading liquid staking protocol Lido and leading centralized exchanges such as Coinbase, Kraken and Binance accounting for over 60% of the staked ETH.

RA Wilson, chief technology officer of crypto and carbon credits exchange 1GCX, told Cointelegraph that the Merge has enabled large holders of Ether to gain mass control of the network, making it significantly more centralized and certainly less secure and explained:

“Many ETH holders stake their crypto on centralized exchanges such as Coinbase, which allows these platforms to become dominant holders on the network, contributing to stakeholder centralization.”

The centralization aspect was quite evident right after the Merge, as 46.15% of the nodes for storing data, processing transactions and adding new blockchain blocks could be attributed to just two addresses.

Arcane Crypto analyst Vetle Lunde told Cointelegraph that while the PoS transition was important for Ethereum’s long-term goals of energy efficiency and scalability, one should be aware of the trade-offs:

“The largest validators being exchanges represent a potential long-term risk. Exchanges already find themselves in a difficult regulatory landscape, and precautionary rejections of transactions may conflict with one important core principle in the crypto ethos, censorship resistance.”

While Ethereum proponents claim that anyone with 32 ETH can become a validator, it is important to note that 32 ETH, or around $41,416, is not a small amount for a newbie or common trader, added to the fact that the lock-in period is quite long. 

Slava Demchuk, CEO of Web3 complaint platform PureFi, told Cointelegraph that the centralization and complexities involved in staking would make centralized entities like Coinbase more powerful:

“Most people will be staking with custodians (such as Coinbase) due to the simplicity and the fact that they don’t have 32ETH. This way, large companies will have a majority share of the network, making it more centralized. It means that entities with more ETH will have more control.”

The fear of regulatory scrutiny

Earlier in 2018, the SEC claimed that Ether is not a security, owing to its decentralized development and expansion over time. However, that may change with the move to PoS, which has complicated the relationship between the Ethereum blockchain and regulators.

Gary Gensler, Chair of the United States Securities and Exchange Commission (SEC), testified before the Senate Banking Committee on the day of the Merge, stating that revenue from “expectation of profit to be derived from the efforts of others” would include proof-of-stake digital assets.

Gensler also mentioned that staking from large centralized exchanges looks “very similar” to lending, calling out high-yield products that caused the recent crypto market meltdown and lumping these products into the financial instruments under the scrutiny of the SEC.

Furthermore, in an SEC lawsuit filed just a week after the Merge, the SEC claimed jurisdiction over the Ethereum network as the majority of nodes are concentrated in the United States.

While the SEC’s claims raised some eyebrows and with many criticizing the regulator for its approach, some believe Ethereum has had it coming, as Gensler has already stated that moving to PoS could trigger securities laws. Ruadhan, the lead developer of PoW-based mining token developer Seasonal Tokens, told Cointelegraph:

“The argument that many of the validators are located in the U.S. is weak because it’s not even a majority. However, this move does show an intent to regulate, and it would cause a major disruption to the economy if Ethereum were to be classified as a security. Centralized exchanges would need to de-list Ethereum. The world economy is currently very vulnerable, and Ethereum’s market cap is so large that an event like this could have spillover effects and even cause an economic crisis.”

Ruadhan predicted that if Ethereum was classified as a security, then it would be much more heavily regulated regardless of how centralized it is: “If there are very few block proposers, all concentrated in the United States, then they can be forced to censor transactions that violate U.S. sanctions, which would mean that Ethereum’s censorship resistance is lost.”

Kenneth Goodwin, director of regulatory and institutional affairs at Blockchain Intelligence Group, told Cointelegraph that the move to PoS has certainly provided the SEC with leverage to oversee validators and even the nodes themselves as long as they are connected with a U.S. person, entity or jurisdiction. However, there is an irony to the situation. Goodwin explained:

“The irony here is that this could be one of the networks in consideration for the U.S. central bank digital currency given its central nature of it. On the flip side, there would be more regulatory oversight that may include creating a system of registration for validators and Ether protocol-based projects. Nevertheless, it seems as though the SEC is seeking to classify Ethereum as a security.”

Jae Yang, CEO and co-founder of noncustodial crypto exchange Tacen, told Cointelegraph that centralization could become a concern for Ethereum if regulators move to impose Anti-Money Laundering (AML) regulations on staking. 

“Centralization will be a concern if the FinCEN or other regulators impose Know Your Customer, AML or other AML compliance requirements on users simply staking ether. Though a long shot at this point, there is a risk that centralized validators omit certain transactions, establishing themselves as the third-party intermediary on decision-making that goes against the very guiding principles of the decentralized financial system,” he explained.

Long-term impact of PoS transition

Despite concerns of over-centralization and regulatory scrutiny, industry observers are confident that the Ethereum blockchain will overcome these short-term issues and continue to play a key role in developing the ecosystem in the long term.

Okcoin chief operating officer Jason Lau advocated for an expanded view of the transition. He told Cointelegraph:

“When we think about the centralization vs decentralization debate, we need to look at the long-term. Open blockchains require a high level of decentralization to ensure censorship resistance, openness and security, so any shift towards more centralization would be worth keeping an eye on. The community is well aware of the importance of encouraging and ensuring a diverse set of participants, and we will see how this plays out over time.”

Wilson noted that the network may become slightly more decentralized over the course of the next 6–8 months, as lock-up periods on Ethereum begin to expire and holders will be able to withdraw their staked tokens.

And while node and validator centralization is a valid concern, Chen Zhuling, co-founder and CEO of noncustodial staking service provider RockX, noted PoW mining on Ethereum was as centralized as validators of the current PoS-based network.

Chen told Cointelegraph that in the PoW era, “Three mining pools dominated the Ethereum network’s hashrate. You could hardly compete with other miners to verify blocks if you didn’t possess an immense amount of computing power, requiring expensive, energy-guzzling mining rigs.”

Chen also advocated for a long-term view of the PoS transition as currently, tokens are mostly controlled by large foundations for the sake of security and on the goodwill assumption that they wouldn’t do anything to corrupt the network.

Demchuk was quick to point out that centralization in staking does not mean it will be easy for a large malicious group of stakers to potentially take control of the Ethereum network, as “there is an additional protective measure. ‘Bad’ validators will get slashed, meaning that their ‘stake’ can get confiscated.”

Ethereum might have transitioned to a PoS network, but a majority of scalability and other features will only arrive after the completion of the final phase, expected by the end of 2024.

Going ahead, it will be interesting to see how Ethereum overcomes the centralization of validators and addresses the growing regulatory concerns facing the network.

Apples and oranges? How the Ethereum Merge could affect Bitcoin

While the Ethereum Merge failed to move Bitcoin from a price standpoint, the industry believes we have yet to see the effects of its shift from PoW to PoS.

It’s been a month since Ethereum said goodbye to an essential feature its blockchain shared with Bitcoin (BTC). Called the Ethereum Merge, the long-hyped upgrade was widely celebrated, with the blockchain ecosystem. However, for the mainstream audience or even for the average trader, it felt more like a Star Wars Day celebrated by sci-fi geeks than an early Christmas.

As the Ethereum Merge occurred on Sept. 15, the most extensive blockchain ecosystem parted ways with the proof-of-work (PoW), the energy-hungry consensus mechanism that makes Bitcoin tick. The Ethereum blockchain now works on a more eco-friendly proof-of-stake (PoS) mechanism that doesn’t require any mining activities, leaving thousands of miners worldwide scratching their heads.

Price-wise, Bitcoin is yet to take a hit from the fundamental shift of its closest competitor. A whole month has passed since the Ethereum Merge, and the BTC price is still stuck between $18,000 and $20,000.

However, the overarching mainstream narrative of “Bitcoin should contribute to the world, not destroy it by depleting energy resources” is rekindled with Ethereum’s significant switch to a system that keeps blockchain alive with minimal resource consumption.

Ethereum avoided a dead end

Cointelegraph reached out to industry insiders to get a clearer picture of the Ethereum Merge’s impact on Bitcoin. 

“PoW was a dead end for Ethereum,” says Tansel Kaya, a lecturer at Kadir Has University and the CEO of blockchain developer Mindstone, “Because an Ethereum network that doesn’t scale can not live up to its promise.”

However, the Bitcoin community is not happy with the way its biggest price competitor took, according to Kaya. The BTC community often criticizes PoS for being vulnerable to censorship, he remarked, adding:

“If what [Bitcoin maximalists] say is true, Ethereum will either turn into a docile fintech network that is censored by governments, or a centralized structure like EOS, controlled by wealthy investors.”

Speaking to Cointelegraph, Gregory Rogers, CEO and founder of crypto-based gifting platform Graceful.io, noted that the Merge solidified the two distinct blockchains’ positions in the market. “Ethereum remains the transaction chain of choice with its increased speed and reduced fees,” Rogers said, adding, “Bitcoin is now the store of value of choice. They were already headed in this direction, but the Merge simply clarifies it.” 

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From a price point, though, multichain marketplace UnicusOne founder and CEO Tashish Raisinghani believes that Bitcoin price will take a hit. “The crypto industry had a hard time because of macro-level challenges which resulted in the current bear market,” he said, adding that the Merge would make Ethereum more sustainable compared to Bitcoin, “Which hasn’t yet been able to recover from the Chinese mining crackdown in 2021.”

PoW is unrivaled in network security

Addressing the energy side of the argument, John Belizaire, CEO of eco-focused data center company Soluna Computing, told Cointelegraph that even though Ethereum’s switch to PoS could save energy, “It will also undermine the core decentralization aspect of cryptocurrency.” 

Although Bitcoin’s PoW consensus mechanism is energy-intensive, it is also fundamental to the blockchain and “is the best choice for any cryptocurrency that prioritizes network security.”

Co-locating flexible crypto mining centers with renewable energy plants can help stabilize the electric grid, solve renewables’ wasted energy issue, and provide an abundant source of cheap energy to crypto miners, Belizaire added.

The Merge united crypto miners

Bitmain also brought down the prices of Antminers, its flagship crypto mining units, to help miners get back into profits, he added:

Despite the Merge, Ether (ETH) miners won’t simply forgo PoW mining just because Ethereum Classic (ETC) is not minted via mining anymore, according to Anndy Lian, author of the book NFT: From Zero to Hero. Lian told Cointelegraph that the EthereumPoW (ETHW) project — the result of a hard fork after the Merge — is working hard and the miner community is more united than ever. 

“These various factors helped the miners offset their operating costs in this bear market, keeping them alive.” 

Joseph Bradley, the head of business development for Web3 service provider Heirloom, likened Bitcoin to “a global risk asset that is correlated to TradFi markets.” Bradley told Cointelegraph that, although Ether may be traded similarly, it still has neither the market depth nor the size that Bitcoin has. “Do we expect the world to become more or less chaotic in the coming years?” he asks rhetorically, answering: 

“Most people would lean towards more chaotic. Security will matter during this time. Bitcoin will become even more important. Expensive energy will create innovation with miners — They will most likely move toward positioning Bitcoin mining as an extension of the electrical grid itself.”

Bitcoin and Ethereum: “Apples and oranges”

Not everyone agrees that the Ethereum Merge will have an impact on Bitcoin, though. Martin Hiesboeck, head of research at crypto exchange Uphold, dismissed a direct comparison between Ethereum and Bitcoin as “apples and oranges.” 

Hiesboeck told Cointelegraph that Ethereum is basically a “company controlled by venture capitalists,” that’s why the transition to proof-of-stake aims to improve its economic and environmental credentials:

“Bitcoin doesn’t need to do that. Bitcoin is not a brand. Bitcoin is a computer network. Its output represents money. Nobody owns it. There is no brand. No CEO.” 

Khaleelulla Baig, the founder and CEO of crypto investment platform Koinbasket, supported Hiesboeck’s argument, telling Cointelegraph that the Merge won’t have any meaningful impact on Bitcoin as these assets serve different purposes. 

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Bitcoin’s purpose is “to prove itself as a superior store of value to fiat currencies,” according to Baig. The PoW mechanism goes well with the purpose of Bitcoin, “As it helps the network maintain the scarcity of 21 million BTC via its difficulty adjustment rate,” he added.

Bitcoin as a PoW and Ethereum as a PoS network are making significant contributions to the crypto-asset ecosystem by competing with their best features. Tansel Kaya summarizes: “Having two distinct approaches rather than one is more suitable for the spirit of decentralization.”

Cardano founder points out flaws in Ethereum and Bitcoin

Charles Hoskinson, the founder of Cardano, shares his critical views on the two leading cryptocurrencies in an exclusive Cointelegraph interview.

Cardano founder Charles Hoskinson has been pointing out the flaws affecting the Ethereum protocol following its latest upgrade.

A major issue, according to Hoskinson, is the locking mechanism that prevents investors from withdrawing their staked Ether (ETH) from the Beacon Chain until the completion of the next upgrade. 

“Ethereum is the Hotel California of cryptocurrencies. You can check in, but you can’t check out,” said Hoskinson in a recent Cointelegraph interview.

According to Hoskison, this mechanism heavily impacts ETH’s liquidity and could eventually spark a liquidity crisis.

“You’ll have less and less Ether trading in the marketplace,” he explained. “And then what will ultimately happen is you’ll have a liquidity crisis where a lot of volatility comes in.”

Cardano’s founder is also critical of the proof-of-work mining system that powers Bitcoin (BTC), which he sees as wasteful and unnecessary in the long run.

While Hoskinson acknowledged the importance of proof-of-work in the process of creating new BTC, he doesn’t believe it’s effective when BTC is used as a financial instrument. According to Hoskinson, once BTC is mined, it could be moved onto a different, less energy-consuming blockchain in the form of wrapped assets:

“That other network could use it for stablecoins, it could use it for DeFi lending, it could use it for payments. Anything you want.”

To learn about Hoskinson’s thesis on Bitcoin and Ethereum, watch the full interview on our YouTube channel, and don’t forget to subscribe!

After Ethereum Merge, GPU prices may stabilize with dipping demand

The prices of many popular GPUs, such as Nvidia’s RTX3080, have dropped by nearly 60% over the last 90 days across some parts of the globe.

Ethereum’s long-awaited transition to a proof-of-stake (PoS) consensus mechanism kicked off on Sept. 15, thus finally putting its long-standing transaction woes in the rearview mirror. To this point, the network is now capable of processing anywhere between 20,000–100,000 transactions per second (tps) as opposed to its previous rate of just 30 tps. 

Furthermore, the Merge also saw the Ethereum network become up to 99.9% more energy efficient as compared to its previous iteration, thus allaying fears of its excessive energy consumption, a criticism that still lingers quite heavily in relation to Bitcoin (BTC).

Amid these developments, however, a question that has continued to pique the interest of many crypto enthusiasts: “What happens to the graphics processing unit market now that the transition has concluded?”

It is worth noting that following the Merge, the blockchain transitioned from its energy-intensive proof-of-work (PoW) mechanism to a PoS framework. As a result, miners that used to process transactions and produce blocks were replaced by ecosystem participants who can now stake their Ether (ETH) holdings to become network validators. As a result, Ethereum-centric graphics processing unit (GPU) mining has been entirely eliminated from the picture.

The numbers don’t lie

After the conclusion of the upgrade, the value of numerous sought-after GPUs has dropped quite drastically. For example, reports indicate that the value of Nvidia’s highly popular RTX 3080 has dipped from $1,118 to approximately $700 (over the last three-month stretch) within China. Similarly, the price of GPUs manufactured by firms like MSI has dropped by $280 since late July.

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To get a better idea of whether these price drops could have been influenced by the hype surrounding the Ethereum Merge, Cointelegraph reached out to Crypto White, the pseudonymous chief technical officer for ZK.Work — a mining platform for zero-knowledge proofs. He pointed out that before the Merge, ETH had a total of 860 TH/s hashing power, of which less than 200TH/s went to Ethereum Classic (ETC) and ETHW, a PoW fork of ETH that went live after the upgrade, alongside other mining projects, while 660TH/s was shut down temporarily.

Alluding to ETC’s above-shown hash rate chart, White noted that the incoming hashing power seems to have been exiting the network gradually since mid-Sept i.e., the time of the Merge. In this regard, it is speculated that the price of ETC did not rise as expected, with the influx of this computing power leading several miners to shut down their operations permanently. White added:

“This shows that the cryptocurrency mining market has a huge number of idle GPUs and the revenue from traditional mining cannot support their running costs, so they are shutting down and facing the choice of waiting for new mining opportunities or selling them second-hand.”

He further claimed that many used NVIDIA 30 series GPUs have recently entered the secondary market for sale, decreasing the price of GPUs even more. However, as potentially lucrative minable coins continue to enter the market in the near term, White believes that these GPUs may once again find utility. 

What lies ahead for the GPU market?

As is evident by now, the Ethereum Merge has served as a major technical and industrial upgrade for the cryptocurrency mining sector as a whole. Providing his take on the matter, Ilman Shazhaev, founder and CEO for blockchain gaming metaverse Farcana, told Cointelegraph that despite this apparent setback, the GPU industry is now an evergreen niche, especially with the continued emergence of different PoW protocols with each passing day:

“Despite the transition, there is no reduction in the number of protocols that needs GPUs, and this will help sustain the demand for these devices in the near future. Also, with the gradual embrace of metaverse-centric innovations, the demand for GPUs, which are a key component of most gaming consoles, will be sustained.”

In White’s opinion, GPUs will not become much cheaper anytime soon, with their prices most likely having stabilized around their current rates. In fact, he believes that the price changes we are witnessing now had “already been factored” in before the Merge, adding that to build momentum for the launch of their upcoming GPUs, manufacturers like Nvidia had already started clearing out their inventories sometime ago. He said:

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“I believe the price of used GPUs will slowly decline, and low-end GPUs will probably go extinct from the market altogether. On the other hand, I believe demand for high-end GPUs will increase.”

Lastly, it should be noted that, in a scenario where there are no tokens to mine, it stands to reason that GPU prediction rates will also be affected, with most manufacturers most likely reverting back to their “order-based production” processes since the mining boom of the last few years had led to massive stockpiling.

ETH price action lackluster despite efficiency increase 

As noted previously, with the conclusion of the Merge, Ethereum’s energy consumption has gone down by a staggering 99.9%, resulting in a 0.2% reduction in global power consumption. Despite these significant developments, however, ETH’s price action has been extremely poor, almost unexpected in the eyes of many.

As can be seen from the chart above, since Sept. 16, the altcoin has slipped from $1,630 to its current price point of $1,330, showcasing a loss of approximately. 22%. In this regard, experts believe that this lack of positive price momentum could be due to upward movements having already been priced into the currency’s value a couple of weeks before the upgrade.

Thus, even though the Ethereum network has gotten rid of GPU mining completely, some sections of miners may still attempt to keep their cash-cow running, as is made evident by the fact that several proposals to copy the Ethereum blockchain, such as ETHW — while retaining mining capabilities — have gained some traction. That being said, while it is quite easy to develop such a token, it is extremely hard to convince people to use it. Therefore, it will be interesting to see how the future of Ethereum’s various PoW hard forks and the GPU market continues to unfold from here on out.