The latest data of ETH 2.0 shows that the number of pledges has been close to 2.3 million, and the annual interest rate has dropped from the initial 21.6% to the current 10.4%. As the price of ETH continues to soar, the cost of participants' input is also getting higher.
However, judging from the past 2020, the concept of DeFi, DAO, and NFT has exploded this year, and it has also promoted the development of more public chains and projects. The fundamental logic of their outbreak lies in the PoS consensus mechanism, due to the diversified expansion of pledge led to the outbreak of DeFi.
Although the ecology has grown and people have gained through pledges such as liquidity mining, I would like to illustrate its flaws in terms of the actual scenario of PoS.
The POS mechanism itself is a joint-stock company, and everyone can hold it, but the people who hold the final meeting are those who hold a relatively large share. They can participate in the governance vote to decide whether the proposal is passed, and the small shareholders have to choose their trusted major shareholders , Pledge your own shares and wait for the income.
It itself is a better solution for retail investors who cannot participate in the PoW mining model, but it is also an indicator that evaluates whether the node is competent based on the number of pledges, and then determines whether to continue to provide services. This situation will inevitably lead to vicious competition, and the node party receives tokens from the secondary market instead of continuously working through technical means. When the currency price drops, this becomes the most painful point of the node party.
First problem
From the Ethereum 2.0 pledge analysis chart that everyone is paying attention to, it can be seen that the higher the pledge amount, the lower the profit. As the price of the currency continues to rise, the cost of participants is getting higher and higher, and the later the gains become less. When the price of the currency drops, the investors who enter the market later will even reach a situation where the profit and loss are imbalanced. In fact, looking at it in detail, all liquid mining is just an upgraded version of deduction. No matter how it is modified, such a factor cannot be changed.
Second Major Problem
Many people’s voting rights are meaningless. If you encounter a few big money holders, they will decide the final voting proposal and become the object of node contention. It is just the amount of funds that determines whether the ranking is reliable. For example, we can see that after Unsiwap issued coins in September 2020, its governance token, UNI, is still held by some big players. Even if the liquidity mining is cancelled, the big holders of UNI can still control the governance plan.
Third major problem
Traffic attracts users. This is the main strategy of companies. It has also become the main operation method under the blockchain PoS mechanism in the current era. Nodes with a large number of coin-holding addresses can do activities for the mass distribution of tokens, but most of them are just attracting people caused the tokens to be sold in a short period of time. The airdrops of UNI and 1inch just confirmed the pain points under the PoS mechanism. After the airdrop, the number of people willing to vote and mine at the node accounted for relatively few people, but a large number of sell-off led to a decline in the price of the currency, causing dissatisfaction among miners.
These are the main problems of the PoS consensus mechanism, but I have to admit that at this stage, it is the best mechanism model that will allow Ethereum to transform from PoW to PoS.
