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The initial windfall can only be spent once. The important difference between distributed finance and traditional finance is that the former has no gatekeepers

The initial windfall can only be spent once. The important difference between distributed finance and traditional finance is that the former has no gatekeepers that provide their controllers with recurring economic rent. Both mining and staking are competitive industries that require productive activity by their participants. A central bank can extract 2-10% of the money supply's worth of economic rent every year in perpetuity, and the beneficiaries of regulatory barriers to entry can extract similarly enormous amounts of economic rent on a recurring basis (e.g. the Big Three auditing firms have profit margins of up to 50%, thanks in large part to regulatory barriers to competing with them) and public choice theory tells us that this economic rent will be disproportionately distributed to the political and professional elite who control government budgets, manage banks, navigate the regulatory process, and most importantly of all, know the right people to pull the right strings.

Goladus 9y ago
> Both mining and staking are competitive industries that require productive activity by their participants. Validators also charge rent for their services, which especially in the case of miners, is a staggeringly inefficient use of electricity.
- CryptoPunk 9y ago
  Of course they charge for their service, but 'economic rent' is a term used in economics to denote value generated by other economic participants and extracted by a non-producing party. Miners are producing most of the value they are capturing. The portion of their earnings that is 'economic rent' is not nearly as large as that of the beneficiaries of the traditional monetary and financial system.
0wing 9y ago
Every system deserves critique and improvements. Mining and staking algorithms have so far been measurably distributed disproportionately to a tiny minority of users. PoS is ironically manipulative in its own way, where an exchange or early adopter who controls a large sum will simply exponentially accumulate the newly minted coins. For a algorithmic solution in software to persist beyond a fad like beanie babies or baseball cards, it necessitates a model which puts all users on equal footing for access, work, and production.
- CryptoPunk 9y ago
  A small minority doing the mining does not imply rent seeking. Specialization through division of labour would produce the same result. In any case I'm not saying they are perfect or that they permit zero rent seeking. What I'm arguing is that for reasons I've articulated, the current crop of cryptoeconomic platforms are much less rent-seeking than traditional financial platforms and systems. Therefore, all other things being held equal, meaning that if we're only comparing on the grounds of how much rent-seeking they permit, I believe it is likely that it would improve public welfare if they supplanted the current monetary and financial system.

Goladus 9y ago

> Both mining and staking are competitive industries that require productive activity by their participants. Validators also charge rent for their services, which especially in the case of miners, is a staggeringly inefficient use of electricity.

CryptoPunk 9y ago
Of course they charge for their service, but 'economic rent' is a term used in economics to denote value generated by other economic participants and extracted by a non-producing party. Miners are producing most of the value they are capturing. The portion of their earnings that is 'economic rent' is not nearly as large as that of the beneficiaries of the traditional monetary and financial system.

0wing 9y ago

Every system deserves critique and improvements. Mining and staking algorithms have so far been measurably distributed disproportionately to a tiny minority of users. PoS is ironically manipulative in its own way, where an exchange or early adopter who controls a large sum will simply exponentially accumulate the newly minted coins. For a algorithmic solution in software to persist beyond a fad like beanie babies or baseball cards, it necessitates a model which puts all users on equal footing for access, work, and production.

CryptoPunk 9y ago
A small minority doing the mining does not imply rent seeking. Specialization through division of labour would produce the same result. In any case I'm not saying they are perfect or that they permit zero rent seeking. What I'm arguing is that for reasons I've articulated, the current crop of cryptoeconomic platforms are much less rent-seeking than traditional financial platforms and systems. Therefore, all other things being held equal, meaning that if we're only comparing on the grounds of how much rent-seeking they permit, I believe it is likely that it would improve public welfare if they supplanted the current monetary and financial system.