Dialogue with Qiu Xiaodong from Starfire Mining Pool: Interpretation and Impact of Ethereum 2.0 Progress

As the launch date of Ethereum 2.0 approaches, the deposits in the staking contract have reached the launch threshold, which means Ethereum 2.0 is about to enter the genesis launch phase.

Recently, the sixteenth session of the Catcher Academy, hosted by Chain Catcher, invited Qiu Xiaodong, the business head of Spark Pool, to give a thematic presentation on "Interpreting the Significance and Concerns of Ethereum 2.0."

Spark Pool is a world-class ETH mining pool service platform that has grown into a top-tier mining pool globally, thanks to its good community reputation, stable pool services, and fair distribution.

During the event, Qiu Xiaodong shared a wealth of insights with community users regarding the transition of Ethereum 2.0's consensus mechanism, deployment phases, risks, and industry changes. The full text is organized below, hoping to inspire readers.

Chain Catcher: As a top global public chain project, Ethereum 2.0 is expected to enter the genesis launch phase in early December. What issues need to be addressed before the launch? What is the current progress?

Qiu Xiaodong: The issues to be addressed before the launch can be divided into two aspects. On one hand, there is the preparation of infrastructure, such as the development and improvement of multiple clients; on the other hand, it is about building participants' confidence, as the deposit contract requires 520,000 ETH (16,384 validators) to launch.

Now that the deposits in the deposit contract have reached the launch threshold, it shows that many people have confidence in Eth2.0. The current progress is that everyone is quietly waiting for December 1st to see if the beacon chain goes live smoothly.

Chain Catcher: Ethereum has developed a thriving DeFi ecosystem. What significant impacts will the launch of 2.0 have on this ecosystem? How will it affect the user experience for ordinary users and developers?

Qiu Xiaodong: Currently, the launch of phase 0 of 2.0 will not have any impact on the DeFi ecosystem. All applications are still occurring on the 1.0 chain, so ordinary users and developers do not need to consider 2.0 for now. Additionally, the final form of 2.0 is still changing, and there is no clear answer yet, so I cannot provide a more specific analysis.

The funds have already grown into a large-scale DeFi industry, and it is not appropriate to make drastic moves to migrate projects to another chain. A small change can affect the whole system, and I believe DeFi developers will not act so aggressively without considering user interests. Currently, the initial phase of the beacon chain going live will not have a significant impact on the user experience for DeFi users.

Chain Catcher: For ETH 2.0 to function like a mainnet, a long transition period is required. What are the stages of deployment, and can you briefly discuss the corresponding content and difficulty?

Qiu Xiaodong: The Ethereum Foundation's latest answer divides it into the following stages:

➤ PoS (Beacon Chain) --- "Phase 0"

➤ Light Clients --- "Phase 0.5"

➤ Data Sharding --- "Phase 1"

➤ Merging eth1 and eth2 --- "Phase 1.5"

➤ Sharded Execution (i.e., each shard has execution capabilities) --- "Phase 2"

Phase 0.5 is likely to be achieved in 2021, and ideally, phase 1 may also be realized in 2021. In terms of development difficulty, Phase 0.5 has the lowest technical difficulty; Phase 2 is expected to have the highest technical difficulty due to issues related to cross-shard execution. A milestone that ordinary users may be concerned about is when PoS ETH will open for transfer; this feature will not be later than the realization of Phase 1.5.

Currently, the specific forms of Phase 1 and Phase 1.5 are still under discussion and have not been finalized. The choices involved relate to the usability of Eth2.0 and the compatibility of the long-term roadmap. For the specific difficulties of each phase, I recommend reading a recent sharing article by the foundation about the latest progress of ETH2.0, which will provide much more detail than my response. Link

https://mp.weixin.qq.com/s/EoEKzpwOlBit7zzdtr5SjA.

Chain Catcher: Upgrading to Ethereum 2.0 is a significant transformation, akin to changing the tires of an airplane on the runway. The PoW and PoS mechanisms are fundamentally different consensus mechanisms. Why has Ethereum firmly chosen to transition to PoS rather than pursuing deeper scaling? How does Ethereum's PoS mechanism differ from those of other public chains?

Qiu Xiaodong: The Ethereum white paper established the goal of transitioning to PoS during its future tranquil phase, which is commendable for its adherence to its original intention. Currently, the deep scaling of the PoW chain in the ETH1.0 phase can indeed significantly increase ETH's TPS, and many teams are working on this. The Ethereum Foundation has not denied this direction, and everything is still being prepared and developed intensively. It can be said that the Ethereum Foundation is working on both fronts.

Other public chains' PoS mechanisms differ significantly from Ethereum's in design. There are DPoS models that involve direct token staking, which increases centralization risk as users lose ownership of their tokens, and there are BPoS models like Cosmos, where users delegate voting while holding their private keys. Each has its own design, but it is still unproven whether these PoS mechanisms are truly decentralized.

Currently, major PoS nodes are still dominated by centralized exchanges and early capital participants in crowdfunding. From the perspective of validators, many other PoS projects have validators composed of a group of professionals, with a limited number of validators and a high capital threshold to become a block-producing validator, making it difficult for ordinary people to participate; they can only delegate their tokens to validators.

In Ethereum's PoS, there is no concept of delegation; one must stake 32 ETH to become a validator. This lowers the capital threshold for validating nodes, helping to decentralize the nodes and making it easier for ordinary people to participate directly in network consensus. Furthermore, transitioning to PoS is itself a way for Ethereum to seek "deeper scaling"; choosing PoS does not preclude deep scaling. The sharding system is designed to address scalability issues.

Chain Catcher: How do you view the "capital supremacy" perspective in the PoS mechanism?

Qiu Xiaodong: Whether PoS or PoW, both are forms of "anti-witch mechanisms," designed to prevent a single user from pretending to be the majority by duplicating identities.

In other words, this mechanism requires you to incur costs when participating in consensus. If it does not require you to incur costs, the mechanism becomes ineffective and insecure. Therefore, there is no anti-witch mechanism that does not involve capital or require you to invest resources. Ultimately, PoW mining is also capital-centric; it just depends on how high the cost and difficulty of seizing consensus are. Currently, it is still quite difficult for large PoW projects to achieve double-spending attacks.

Chain Catcher: The Phase 0 of Ethereum 2.0 will be launched, and staking will be an area of interest for everyone. How should investors obtain rewards through staking? What risks are involved?

Qiu Xiaodong: Investors have two ways to obtain rewards through staking: one is to run their own 2.0 node and stake 32 ETH to participate in the 2.0 network consensus to earn rewards. The prerequisite here is that you have 32 ETH and the ability to run and maintain a 2.0 node.

The risks include: if the network communication conditions of the personal node fail, causing the node to go offline, it may lead to the loss of the user's deposit. Additionally, managing private keys yourself carries risks of theft or loss.

The second way to obtain rewards through staking is to find a reliable third-party staking service provider, entrusting them with your ETH to run the node for you. Service providers are often more technically proficient and do not have the 32 ETH threshold restriction.

The risks include: your funds are entrusted to others, so be wary of the risk of third parties running away; since the development of 2.0 is a long-term process, when your funds can be retrieved is uncertain, and can the service provider survive until then? The provider may also face network penalties for their own reasons.

Chain Catcher: Currently, Ethereum mining still uses GPU mining machines, but with the upgrade of Ethereum, the current mining machines will be gradually phased out. What is the mainstream view of the Ethereum mining community regarding the upgrade to Ethereum 2.0? What preparations need to be made?

Qiu Xiaodong: The Ethereum mining community can be subdivided into many types. I will first discuss two major categories: holding miners and sell-to-mine miners.

Holding miners are those who have mined ETH with GPUs and only cash out the electricity costs, while holding onto the rest. As time goes by, they accumulate more ETH and are very much looking forward to the arrival of PoS, believing that their ETH can appreciate while enjoying the dividends of network progress and feeling deeply involved in network construction. This group of miners tends to have more machines and has been mining for a longer time, possibly having already recouped their costs.

The other type, sell-to-mine miners, focuses on the investment return ratio of purchasing GPU mining machines to mine ETH, rather than the price of the coin. They are more concerned with whether they can continue to use their mining machines to mine ETH under ETH 2.0, and whether their investment's payback period can be adjusted. Currently, the latter group is the mainstream.

Regarding the second question, for PoW miners, those interested in staking ETH to earn mining rewards can pay attention to it, but an annualized return of around 20% may not be appealing to GPU miners.

What I do is serve miners while advising them not to directly deposit coins into the 2.0 deposit contract without understanding how to participate in the 2.0 network, to avoid unexpected losses.

Chain Catcher: There are still many pessimistic voices in the Ethereum community regarding 2.0. Do you think there might be a hard fork or even a community split in Ethereum's future? Why did the deposit contract for Ethereum 2.0 progress slowly at first, but suddenly accelerate as the deadline approached?

Qiu Xiaodong: We have always been monitoring the research progress of Eth2.0 and the trends of the entire ecosystem. So far, I have not heard of anyone expressing a desire to split Ethereum. Nevertheless, we believe that transitioning to Eth2.0 is not a minor adjustment but involves significant underlying changes, which will inevitably impact the entire ecosystem. Therefore, the community needs more informed communication, which is undoubtedly necessary.

The acceleration seen as the deadline approaches is easily understandable. From a rational perspective, depositing money too early means losing some interest, so it is better to wait until close to the deadline to deposit. Given Ethereum's years of development and the dispersion and addition of holding users, reaching a consensus to have over 500,000 coins participating in staking is still achievable.

Chain Catcher: Spark Pool is already a top-tier mining pool globally. Where do your advantages lie? How will the upgrade to Ethereum 2.0 affect you?

Qiu Xiaodong: Our team originated from Ethfans, a group of Ethereum enthusiasts, and is one of the earliest teams engaged in promoting the Ethereum community in China. We have done a lot of translation work on cutting-edge Ethereum technology articles and event analyses. Our long-term optimism about the Ethereum ecosystem led us to establish Spark Pool. Since 2016, we have made significant technical developments and accumulations, which is why we differ from other mining pools in that we focus solely on ETH mining. We do not mine other popular coins and are not a team that started from mining. In addition to providing mining pool interfaces, mining, and revenue distribution services, we have also incubated the FlintOS system for secure and convenient cluster management of miners' machines and deep optimization of GPU BIOS, gradually building our market reputation.

We adhere to the principles of fairness, justice, and transparency, charging a uniform PPS+1% fee model for clients with one or two mining machines and those with thousands of machines. The mining pool insists on self-research and continuous optimization of servers to reduce uncle block rates and improve block packaging rates, thereby increasing client profits. In summary, focusing on technology and avoiding tricks will always yield market feedback.

We are a blockchain development company, not a mining company. We believe that the future explosion of mining lies in the growth of blockchain technology. Therefore, conducting solid technical research to provide miners with real profit distribution and correct cognitive guidance is our key to success.

https://www.etherchain.org/miner This is the distribution map of Ethereum's total network hash rate; everyone can take a look at the global hash rate rankings. The upgrade to 2.0 will certainly have some impact on us, such as the current high volume of client inquiries. Overall, there are still not many changes to ETH's 1.0 chain. However, the true realization of 2.0 still has a long way to go, and our team will continue to develop and build the ecosystem on ETH2.0. Our mining pool's slogan is "Guardians of the Value Network," and we will continue to protect this value network of Ethereum.

Chain Catcher: After the full implementation of Ethereum 2.0 in the coming years, what changes do you think will occur in the industry? Will the public chain wars come to a phased end?

Qiu Xiaodong: As I mentioned earlier, it is still too early to say that the full implementation of Ethereum 2.0 is imminent; this is not something that can be completed in a year or two. What will happen in two years? There will definitely be multiple public chains coexisting. Whether they will be strong competitors to Ethereum or good friends will depend not only on how Ethereum performs but also on the progress of these other public chains. The outcome of this question cannot be influenced by Ethereum alone.