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I am curious why people don't talk much about the "rich get richer" aspect of proof of stake. Most say "proof of work also is rich get richer scheme" to justify

I am curious why people don't talk much about the "rich get richer" aspect of proof of stake. Most say "proof of work also is rich get richer scheme" to justify this, but in my opinion they are completely different because proof of work involves efforts that exist in the atom world (need to buy all the mining pools) whereas proof of stake involves purely digital efforts therefore the scale can be completely different. Am I missing something? Or is this people just being optimistic?

aoeusnth1 9y ago
I don't see this as a problem, because proof of stake must compete with other mechanisms to convert time*capital into more capital, and it has diminishing returns. If PoS has higher risk-adjusted returns than other investments, it will become more crowded until this is no longer the case. PoS provides real value - the maintenance of a blockchain - so it makes sense to reward the capital required for such maintenance accordingly.
- nosuchthing 9y ago
  If the coin supply is inflated at some % of current account balance, or old coins decay then large PoS holders are incentivized to reinvest into the economy. Only online nodes provide value to blockchains. In a PoS blockchain an online node with 100,000 credits is generating equal value to a node with .03 credits.
  - aoeusnth1 9y ago
    I don't buy the idea that all votes in PoS should be considered with equal weight. Otherwise it seems pretty easy to DOS the network with a ton of low-weight votes, get 51% of the network, and do whatever you want. The capital-weighted PoS system prevents this because if you want 51% to the network to be able to do abusive things, you have to risk devaluing your enormous PoS investment by destroying trust in the Ethereum network. I don't understand your first point, could you clarify?
    - cocktailpeanuts 9y ago
      > if you want 51% to the network to be able to do abusive things, you have to risk devaluing your enormous PoS investment by destroying trust in the Ethereum network. I have a hypothetical scenario I'm curious about. Let's say the Bitcoin network becomes so valuable that a huge chunk of the world economy depends on it, believing that it can't be manipulated. Most people would rather play nice with this than sabotage the network, but since the whole point of this consensus mechanism is assuming the worst case, let's say there's an entity (it could be a terrorist group or a nation) whose interest is to mess this up regardless of how much money they lose as a consequence. This is an unlikely event but I think it's possible in some special cases that we can't foresee at the moment (just like nobody could predict that people will come up with ASICS for mining, or like people would form a pool to mine things) The only condition required is: 1. Get a hold of enough money to terrorize the network 2. Be at a position where you indirectly can gain more by losing all your money that's worth 51% of the network. In this case, this entity can decide to attack the network without any consequences due to the pseudonymous nature of the blockchain. People will see this happen in daylight but won't be able to easily figure out who this was if this was based on proof of stake, because all you need to do this is to secure your fund in the bitcoin network. However if Bitcoin was using proof of work, you will have to buy whole bunch of mining rigs (or build them yourself in some secret bunker) which is much more traceable than if you simply used money for this terrorism. I'm not making up some convoluted scenario just to troll, I'm genuinely curious how this will work out and hope to be proven wrong because I also want to live in a world where proof of stake works.
      - XorNot 9y ago
        DDoS'ing mining power would be more effective. You don't need to outcompete miners, just ensure they are slowed in their ability to push blocks to the network.
        cocktailpeanuts 9y ago
        I'm not talking about effectiveness. I also think it's more effective to attack PoW than PoS, but my point is there may be cases where the attacker's top priority is not effectiveness. Traceability is one such example, but there can be many other cases. Proof of work is pretty straight forward because the vulnerabilities are mostly technical issues, whereas proof of stake I think can have a lot of social vulnerabilities. I bring this up because I feel like every discussion about blockchain security seems to mention "effectiveness" but the world is not perfect and there are plenty of cases where certain parties act in unintuitive manners.
apo 9y ago
If the rich are more likely to get a block, they are more likely to collect the reward for the block. Every block they get, the richer they become. The richer they become, the more likely they are to collect the reward for a block. https://cointelegraph.com/news/the-inevitable-failure-of-proof-of-stake-blockchains-and-why-a-new-algorithm-is-needed https://cointelegraph.com/news/the-inevitable-failure-of-pro... The author works out the math and it doesn't look that bad, especially compared to some proof-of-work centralization scenarios: If that is the case, this user should control 50% of the stake in about 1,015 years and 90% of the stake in 1,275 years. In reality, it is probably less because not everyone stakes but that gives a rough idea about how long NXT can potentially last.
paulmd 9y ago
People are fine with the rich getting richer as long as they're the rich. Something something "temporarily embarrassed millionaire".
joshschreuder 9y ago
Doesn't the same apply to fiat economics? For example, if you have a lot of money, you can lock some of that in a term deposit for a set period of time with basically guaranteed income. The richer you are, the smaller percentage of your net worth that investment likely is, so the rich get richer, with little risk to their total net worth. Are you expecting some sort of magical system where people with less at stake earn more than those with more at stake?

aoeusnth1 9y ago

I don't see this as a problem, because proof of stake must compete with other mechanisms to convert time*capital into more capital, and it has diminishing returns. If PoS has higher risk-adjusted returns than other investments, it will become more crowded until this is no longer the case. PoS provides real value - the maintenance of a blockchain - so it makes sense to reward the capital required for such maintenance accordingly.

nosuchthing 9y ago
If the coin supply is inflated at some % of current account balance, or old coins decay then large PoS holders are incentivized to reinvest into the economy. Only online nodes provide value to blockchains. In a PoS blockchain an online node with 100,000 credits is generating equal value to a node with .03 credits.
- aoeusnth1 9y ago
  I don't buy the idea that all votes in PoS should be considered with equal weight. Otherwise it seems pretty easy to DOS the network with a ton of low-weight votes, get 51% of the network, and do whatever you want. The capital-weighted PoS system prevents this because if you want 51% to the network to be able to do abusive things, you have to risk devaluing your enormous PoS investment by destroying trust in the Ethereum network. I don't understand your first point, could you clarify?
  - cocktailpeanuts 9y ago
    > if you want 51% to the network to be able to do abusive things, you have to risk devaluing your enormous PoS investment by destroying trust in the Ethereum network. I have a hypothetical scenario I'm curious about. Let's say the Bitcoin network becomes so valuable that a huge chunk of the world economy depends on it, believing that it can't be manipulated. Most people would rather play nice with this than sabotage the network, but since the whole point of this consensus mechanism is assuming the worst case, let's say there's an entity (it could be a terrorist group or a nation) whose interest is to mess this up regardless of how much money they lose as a consequence. This is an unlikely event but I think it's possible in some special cases that we can't foresee at the moment (just like nobody could predict that people will come up with ASICS for mining, or like people would form a pool to mine things) The only condition required is: 1. Get a hold of enough money to terrorize the network 2. Be at a position where you indirectly can gain more by losing all your money that's worth 51% of the network. In this case, this entity can decide to attack the network without any consequences due to the pseudonymous nature of the blockchain. People will see this happen in daylight but won't be able to easily figure out who this was if this was based on proof of stake, because all you need to do this is to secure your fund in the bitcoin network. However if Bitcoin was using proof of work, you will have to buy whole bunch of mining rigs (or build them yourself in some secret bunker) which is much more traceable than if you simply used money for this terrorism. I'm not making up some convoluted scenario just to troll, I'm genuinely curious how this will work out and hope to be proven wrong because I also want to live in a world where proof of stake works.
    - XorNot 9y ago
      DDoS'ing mining power would be more effective. You don't need to outcompete miners, just ensure they are slowed in their ability to push blocks to the network.
      - cocktailpeanuts 9y ago
        I'm not talking about effectiveness. I also think it's more effective to attack PoW than PoS, but my point is there may be cases where the attacker's top priority is not effectiveness. Traceability is one such example, but there can be many other cases. Proof of work is pretty straight forward because the vulnerabilities are mostly technical issues, whereas proof of stake I think can have a lot of social vulnerabilities. I bring this up because I feel like every discussion about blockchain security seems to mention "effectiveness" but the world is not perfect and there are plenty of cases where certain parties act in unintuitive manners.

apo 9y ago

If the rich are more likely to get a block, they are more likely to collect the reward for the block. Every block they get, the richer they become. The richer they become, the more likely they are to collect the reward for a block. https://cointelegraph.com/news/the-inevitable-failure-of-proof-of-stake-blockchains-and-why-a-new-algorithm-is-needed https://cointelegraph.com/news/the-inevitable-failure-of-pro... The author works out the math and it doesn't look that bad, especially compared to some proof-of-work centralization scenarios: If that is the case, this user should control 50% of the stake in about 1,015 years and 90% of the stake in 1,275 years. In reality, it is probably less because not everyone stakes but that gives a rough idea about how long NXT can potentially last.

paulmd 9y ago

People are fine with the rich getting richer as long as they're the rich. Something something "temporarily embarrassed millionaire".

joshschreuder 9y ago

Doesn't the same apply to fiat economics? For example, if you have a lot of money, you can lock some of that in a term deposit for a set period of time with basically guaranteed income. The richer you are, the smaller percentage of your net worth that investment likely is, so the rich get richer, with little risk to their total net worth. Are you expecting some sort of magical system where people with less at stake earn more than those with more at stake?