Minimal? My understanding is someone was able to pull ETH out at near zero DAI. Nothing the contract didn't allow, but unforseen use of it which caused some people who had invested that ETH to essentially lose their life savings!
It's more complicated. Their collateral ratio has dropped below the liquidation level of 150%. So at best they would only get a fraction of their collateral back (any liquidation has a discount and a 13% penalty) - fundamentally they lost because their speculative bet didn't pay off. So yes, they lost more than they should, but describing it like they lost everything because of the liquidation problem alone is misleading.
The "attack" was trivial in that there was only one bid at an auction - not enough people liquidating undercollateralized positions, but now so many people are looking at this it's never going to repeat again. It's an obvious risk only in hindsight.
>So now it just needs a little help from miners to actively exclude all other bidders.
A mining cartel that censors transactions is indeed a real risk. Fortunately, ethereum is switching to PoS where even an average person with a smartphone could realistically generate several blocks a day, as opposed to multiple megawatt (or even giga) mining farms, so it's only a temporary issue.
>My understanding is that in this case there were other bidders but they were drowned out by the winning bidder paying much more gas.
Most likely lack of liquidity and/or gas pricing misconfiguration. Even at an ultra-high 600 gwei (during the peak congestion, the market rate was ~200 gwei) the total fee was less than $10. Simply put: not enough people running liquidation bots.
> average person with a smartphone could realistically generate several blocks a day,
I seem to recall the proposed staking minimum being around $200,000...
Eth's administrators must have a kink for kidnapping.
It's far from clear that "PoS" can result in a system which is both secure and decentralized: https://download.wpsoftware.net/bitcoin/pos.pdf ... the limited academic work attempting to demonstrate such things have done things like assume that users were using a lossless ordered reliable broadcast medium (which is equivalent to assuming they were communicating over a consensus system). While the history of ethereum has demonstrated that in spite of claims to the contrary in their investment prospectus strong decentralization isn't a feature of the system, there are still many practical challenges even achieving faux-decentralization with PoS. Practically speaking this challenge is demonstrated by the fact that ETH's operators have continually pushed back their promised migration to PoS. Moreover, as was recently demonstrated with "steem" PoS can also easily be abused to rig outcomes just like that above concern with mining.
So I think its far from clear that this is a temporary issue. Instead, to me it looks like PoS has turned into a never-arriving panacea being used to excuse all sorts of serious flaws in the ethereum ecosystem in addition to ethereum itself.
Stake grinding is an obsolete attack (solved by randao, in the future strengthened with VDF asics).
The second argument that weak subjectivity is somehow unsafe is at odds with reality: it assumes some far away hermit that runs an old node after 10 years of hibernation, with no ability to communicate with others otherwise. In reality, crypto is a technology for resource allocation among humans also participating in that specific system, which means the only constraint is to make the bonding period sufficiently long that manual decisions are feasible and not overly costly. A system that requires a node to run for few minutes every few months to follow the same chain fulfills those conditions.
>Moreover, as was recently demonstrated with "steem" PoS
No, steem has DPoS, which is very different in practice. It has inherent centralization because there are only 21 witnesses, as opposed to potentially millions. It has stake delegation baked in the protocol which ensures all witnesses are public figures that know each other, which makes a cartel the expected outcome. Nodes are by design heavy which makes outside verification very hard.
Eth2 has to support up to millions of nodes at once. It has pro-decentralization penalties - penalties grow if others are misbehaving at the same time - which means if most of the network is on aws and it goes down, they start to lose their stake very fast, as opposed to random home node going offline in an uncorrelated manner for (most likely) no penalty at all. Same goes for slashing incidents due to contradictory voting.
The system is verifiable externally and can be randomly sampled, because it's stateless and state root is part of the consensus. This also means a block that tries to do something against the rules automatically functions as a fraud proof given only its parent's block header. It's not possible to design a system that's more easily verifiable: all it takes is one person somewhere to observe incorrect behavior to alert the others.
There are going to be centralized staking services, but they are inherently going to charge some fees, and given how light one staking node is going to be and the correlation penalties, most likely they aren't going to be a significant portion of the network.
>never-arriving
It turns out it's not easy to design a system with all these characteristics. PoW is an easy and a temporary hack solution, but that's all it is. Mining (at least sha256) is now fully centralized in China.
If a PoW network ever became really important - not as a speculative toy mainly for rich Westerners, but as something used by countries like Iran to evade sanctions on a massive scale - mining would became fully regulated with enforced kyc on every transaction. It's trivial to do, there's no way to hide those mining farms.
PoS can fully function on tor or other anonymizing network.
"An Ohio man was arrested for his operation of Helix, a Darknet-based cryptocurrency laundering service.
In the three-count indictment unsealed Feb. 11 in the District of Columbia, Larry Harmon, 36, of Akron, Ohio, was charged with money laundering conspiracy, operating an unlicensed money transmitting business and conducting money transmission without a D.C. license.
According to the indictment, Harmon operated Helix from 2014 to 2017. Helix functioned as a bitcoin “mixer” or “tumbler,” allowing customers, for a fee, to send bitcoin to designated recipients in a manner that was designed to conceal the source or owner of the bitcoin. Helix was linked to and associated with “Grams,” a Darknet search engine also run by Harmon. Harmon advertised Helix to customers on the Darknet as a way to conceal transactions from law enforcement."
Right. For some reason I misread your previous comment as miners, not mixers. But now I don't fully understand why you brought mixers up, mining is a different activity.
Maybe I'm missing something, but I suspect the odds of building a non-gameable system for people whose primary interest is speculative gaming are not going to be good.
If there really are people that literally put their entire life savings into a single, unproven vessel then they almost certainly did so because they were gambling it would make them (an order of magnitude+) more money than a more reliable stable alternative. They won’t find much pity.
No one lost 100% They lost their collateral and got to keep the loan the took out against it.
If I stake $2000 of Ethereum, and in return get $1500 in a stablecoin, when my $2000 in collateral gets liquidated I still have 75% of that in the loan I took out and can walk away.
The people with the 100% loss story are being deceptive
There was nothing unexpected here. Users traded their eth X days ago for dai, with the full intention of adjusting their liquidity characteristics
What happened here simply precluded the possibility of the reverse trade when the loan became under collateralized, this was not unclear to anyone involved
I don't know if it's true, but my impression is that the same people who got really into complicated crypto trades also got into complicated option trades once it became accessible via app.
I dont think it was an unforeseen use. People that execute these smart contract dark patterns knew for a long time and didnt steer public discussions that way.
The very foreseen problem was that people dont show up to governance decision in crypto. Yes you can use a blockchain for voting but nobody shows up.
The real problem is that there are no alert protocols built into wallets and client side defi apps.
Now people are discussing it.
The bigger gamble was whether liquidation and auction could occur fast enough to prevent emergency shutdown. They did, one person showed up to the auction and bid $0.
System worked.
Everyone with dollar signs now is going to research that and bid $1 until the order book is populated and it never happens again.
Software updates to overfit for this possibility would be worse.
> but your comments sound like "we have a proof of concept that this issue could be solved, therefore it is solved".
What? No. This is about more people showing up to a foreclosure auction because they heard about the guy that bid $0 by being the only person at the foreclosure auction, and flipped a property for $4mm.
And then you have an actual market.
The auction house itself doesn't need to be patched. The auction process doesn't need to be patched. If the auction house has sympathy for the people that got foreclosed on then they can do whatever they want to compensate them from their own pocket, they can automatically do that in case a reserve bid isn't met, but the fact that the auction occurred in a timely fashion is proper behavior.
I just feel like it's a typical libertarian comment that markets solve things because they will probably react eventually. It's not wrong to expect the feedback, but in the meantime, havoc that affects people occurs. That legitimately can affect peoples' opinion of a process.
The problem with marginalizing it to "libertarian" means that you imagine that it is a future ideal reality for libertarians that doesn't already exist, while you simultaneously don't even entertain the argument presented. Cognitively negligent.
If the auction didn't happen, then there would be a software problem to fix and a criticism of trusting MakerDao and "decentralized finance" smart contracts. If the auction did happen, and only 1 person showed up and bid as low as possible, there isn't a problem.
I was on the MakerDao video conference, and people suggested software tweaks such as a minimum, and people pointed out that it wouldn't make much of a difference for the person that got liquidated and if the market actually was moving faster (like it was at the time) an arbitrary - but software hardcoded - minimum would have disrupted the auction anyway.
The only thing that happened here is nobody showed up to the auction. Now you and thousands of other people know that there is an opportunity to be the only one at a auction, and non-existing UI prevents a crowd from being notified and showing up. And yet, if you want the opportunity to make millions, you'll figure it out, and so will other people, and you will start to outbid each other.
Black swans happen once a decade or so: dotcom bust, 9/11, GFC, now coronavirus. If the crypto can't deal with it, it's not much of an investment or a store of value.
Well the solution is to have some sort of emergency fund which activates in black swan events to rebalance the portfolio. It's just something to factor in. Adds some costs to operations but only fractions of a percent.
Quite the opposite actually. At least to me it means that institutions actually have been holding crypto reserves, which I'd say gives it a fair amount of legitimacy.
Crypto didn't sell off in a vacuum this time, it sold off with the market at a time when it should be selling off.
I know what you're thinking, but that's not the case. Right now, same as in 2008, institutions are liquidating "store of value" assets to open up more liquidity. That $1.5T in fed repo? Well the fed doesn't take BTC as collateral. And since they don't nobody else is right now. Same with gold. Cash and T-bills are king, so liquidate everything else.
Really this shows that crypto is at least starting to be folded into the main financial world. It actually for once has some degree of beta.
