Ethereum will eventually move to Proof-of-Stake algorithm. I guess it is a very basic question, but how the mining pools are supposed to work in that case (if at all)?
[Ethereum] Will there be mining pools with the Proof-of-Stake
mining-poolsproof-of-stake
Related Solutions
The fundamental flaw of Proof of Work (PoW) is that the costs of attacking the system are equal to what is spent to run the system. High security thus can only be achieved at high operating costs. The idea is that the honest participants just outspend the dishonest.
This is already today highly inefficient, but it does work for Bitcoin. As soon as the block subsidiary starts reaching zero, the ratio between the Market Capitalization and the costs of attacking Bitcoin becomes critical. Details are presented here.
Why Proof of Stake?
- Costs
Proof of Stake (PoS) promises to solve this problem. An honest validator is expected to have very low costs, compared to the costs an attacker would incur.
- Less Censorship
Another problem Casper tries to solve is to disincentivize censorship. The PoW schema of Bitcoin is, more or less, a zero sum game. This means, if a miner loses a block (it does not get included in the main chain/ it gets censored), all other miners benefit from their loss. PoS for Ethereum will not be a zero sum game but instead a coordination game, where the rewards for everyone are highest, if every participant can include their blocks.
- Scalability
Finally some scalability problems can be addressed more easily with PoS.
The friendly Ghost
Casper is a security-deposit based economic consensus protocol. This means that nodes, so called bonded validators, have to place a security deposit, an action called bonding, in order to serve the consensus by producing blocks.
In Casper style proof of stake anyone can participate in block production by posting a bond. After posting a bond you have an opportunity to bet on which block will be included next. The incentives are such that you make money by betting with the eventual consensus and lose money by betting against the consensus. Any crypto-graphically provable misbehavior results in the forfeit of the bond.
An analogy can be made to proof of work where each miner is betting with their hash power on which block will be accepted. If they bet wrong then any block they produce will be orphaned causing them to lose money.
This protocol has several nice properties:
- Anyone can participate
- Consensus can be reached in a timely manner
- It quickly converges on an irreversible consensus
- It is free of politics
Casper in non-economic terms
Casper is an eventually-consistent blockchain-based consensus protocol. It favours availability over consistency, see the CAP theorem. It is always available, and consistent whenever possible. It is robust to unpredictable message delivery times because nodes come to consensus via re-organization of transactions, after delayed messages are eventually received. It has an eventual fault tolerance of 50%, in the sense that a fork created by >50% correct nodes scores higher than any fork created by the remaining potentially-faulty validators. Notably, though, clients cannot be certain that any given fork created with 51% participation won’t be reverted because they cannot know whether some of these nodes are Byzantine. Clients therefore only consider a block as finalized if it has the participation of a supermajority of validators or bonded stake.
Best Answer
There may well be multisig stake pools which allow multiple parties to stake their Eth but there will not be mining pools in the sense of contributing processing power to a pool.