author | ConsenSys
Compile | Wu Blockchain about blockchain
original:
https://consensys.io/blog/comment-letter-to-sec-on-eth-etf-approval-pos
Abstract: The U.S. Securities and Exchange Commission ( SEC ) recently sought comments on whether to approve an Ethereum ETF application, seeking information on whether Ethereum Proof of Stake (PoS) raises "unique concerns" about fraud and manipulation that the agency should consider. We submitted a comment letter in response, explaining why such concerns are completely unfounded. In fact, Ethereum's PoS implementation meets or even exceeds the security of Bitcoin Proof of Work (PoW), which is the basis for Bitcoin-based ETFs that have been approved by the SEC for trading.
On March 8, 2024, the SEC issued a request for public comments on Nasdaq’s pending rule change application to list the iShares Ethereum Trust, which is intended to reflect the price of Ethereum. The SEC sought comments on six issues, including:
The arguments made by the Exchange in support of listing the Shares for trading are strikingly similar to those made in the Proposal in support of listing spot Bitcoin Exchange Traded Products (“Bitcoin ETPs”) for trading…Do specific features of Ethereum and its ecosystem, including its proof-of-stake consensus mechanism and concentration of control or influence by a small number of individuals or entities, raise unique concerns about Ethereum’s susceptibility to fraud and manipulation?
Today, we responded to the SEC’s request for comment in the form of a public comment letter, explaining that Ethereum PoS has strong built-in anti-fraud and anti-manipulation mechanisms that are more difficult to tamper with than BTC’s PoW consensus model. Here are some highlights:
● Faster block confirmation times. With the transition to PoS, Ethereum now relies on a provable transaction finality model, meaning blocks are finalized in a shorter timeframe than under PoW - once a block is confirmed, it is like being engraved in stone and cannot be changed or undone.
● Distributed and randomized validation process prevents control by large stakeholders. Ethereum PoS relies on a separation of duties between block validators: proposers and attestors. This division of labor acts as a check on errors and manipulation. The model prevents bad actors from predicting who the proposers and attestors of new blocks will be. Even in this unlikely scenario, the damage that could be done is limited to the few blocks that have not yet been finalized.
● Total cost of attack. In blockchain security, there is a concept called "Byzantine Fault Tolerance" (BFT), which is a metric that represents the minimum proportion of network validators that need to work honestly to guarantee the integrity of the system. Researchers found that the cost of attacking the Ethereum network by breaking BFT is significantly higher than that of Bitcoin, thus reducing the likelihood of the network being compromised.
● Slashing penalties. Ethereum punishes validators by deducting their stake for violating the protocol rules, a process called “slashing.” Slashing is both a penalty and a deterrent. Unlike PoW, which relies primarily on the high cost of equipment and electricity to deter attacks, PoS combines this upfront staking cost with the ongoing risk of financial penalties.
● Improve security while bringing environmental benefits. Ethereum's PoS is more environmentally friendly than BTC's PoW. Based on current rate estimates, Bitcoin's estimated annual energy consumption is 30,000 times that of Ethereum.
These security protections provided by the Ethereum PoS model are further strengthened by:
● Ethereum’s decentralized community. Ethereum’s active and large developer community, larger than Bitcoin’s, and the diversity of its software clients make the network more difficult to penetrate.
● Ethereum’s transparency. Anyone can participate in Ethereum development, and development work — like the Ethereum blockchain itself — is completely public. This openness enables comprehensive monitoring of network activity, further protecting the protocol from malicious actors.
We urge the SEC to recognize the advanced security safeguards inherent in Ethereum’s design, which not only meet, but exceed, the exemplary security and resiliency safeguards relied upon by previous SEC-approved Bitcoin-based ETPs.
Our mission is to bring the next billion users to web3. We further this mission through public advocacy on this important topic. Our comment letter is a step toward driving progress and providing relevant and useful information to the public. As always, we look forward to an ongoing, constructive dialogue with the SEC and its staff.
