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For an alternative point of view, I highly recommend that people read http://www.truthcoin.info/blog/pow-cheapest/ http://www.truthcoin.info/blog/pow-cheapest/.

For an alternative point of view, I highly recommend that people read http://www.truthcoin.info/blog/pow-cheapest/ http://www.truthcoin.info/blog/pow-cheapest/. One issue that proof of stake proponents often ignore is that proof of stake has its own costs that are roughly equivalent to the dollar cost of PoW. The issue is that you need to lock up money for PoS in order to mine it. That has a cost as you are forgoing interest on lending that money to an actually productive enterprise that is creating value. The net result is that funding and investment becomes more scarce because private investment is "crowded out" by people simply staking their Ethereum. This is the same harm caused by too much government debt "crowding out" private investment. Also, if the PoS staking rewards are too low, you are vulnerable to the exact same 51% attacks as PoW. So it's very unsure how this would significantly reduce fees unless you are also significantly increasing your vulnerability to attack. (Now, there are caveats about the fungibility and the ease of renting PoW miners vs renting PoS tokens, but many of the same principles apply).

nowarninglabel 8y ago
Not everyone wants to lend their money (I say this as someone who runs a crowdfunding loan site). Most cryptocurrency today is just being hodl'd by folks, not put into active investments. There are also not a lot of good, trustworthy investments available to those who want to lend directly in crypto, though I'm sure we'll get more and more as time goes on.
AlexCoventry 8y ago
> read http://www.truthcoin.info/blog/pow-cheapest/ http://www.truthcoin.info/blog/pow-cheapest/. Modern PoS protocols prevent stake grinding with per-verifier VRFs and multi-round verification procedures.
- keymone 8y ago
  The complexity involved in making PoS “work” just increases the attack surface and enables political games around which workaround to implement next. And political games are decided by money, which is exactly what brings MR=MC, just like in PoW. So why bother and not use simplest possible system that guarantees security using the ultimate currency - energy?
  - AlexCoventry 8y ago
    Why bother with baroque consensus algorithms at all, and not just use USD? Because new systems with new properties will enable new capabilities.
    - keymone 8y ago
      PoS is closer to fiat than PoW. PoS is more complex and relies on trust. There is nothing “baroque” about PoW, it’s simplest, cheapest and most reliable of them all.
covemarkets 8y ago
"The issue is that you need to lock up money for PoS in order to mine it. That has a cost as you are forgoing interest on lending that money to an actually productive enterprise that is creating value. The net result is that funding and investment becomes more scarce because private investment is "crowded out" by people simply staking their Ethereum. This is the same harm caused by too much government debt "crowding out" private investment" This is zero sum thinking. Yes, people will lock up money, which could have been invested elsewhere. But you have to take into account the activity that happens on the chain as a result of POS, which itself will be productive presumably. Thus the capital locked up in POS will be invested productively - because the activities enabled by POS themselves will be productive. Of course, if there is nothing new that you can do as a result of POS - meaning, without POS you can already do all those things, then indeed there is no reason for POS. But the idea here ( which could be right or wrong ) is that POS will enable decentralized computation that would not happen otherwise. EDIT: to downvoter: you can't say that locking up coins detracts from productive investment without evaluating what the chain ends up doing as a result of switching to POS. I mean, if you think that nothing useful will happen on a POS chain, that's a valid argument, but that's a different argument than simply worrying about locked up coins
- covemarkets 8y ago
  curious, what the downvoters are disagreeing with specifically in this comment.
saurik 8y ago
> One issue that proof of stake proponents often ignore is that proof of stake has its own costs that are roughly equivalent to the dollar cost of PoW. > Also, if the PoS staking rewards are too low, you are vulnerable to the exact same 51% attacks as PoW. "We all theoretically agree that I could have burned the most oil today (and in so doing, I will not be able to do something I could otherwise have done as my funds are locked up, which feels like a waste)" is a way way way way better scenario than "I guess we will all have to burn a bunch of oil to make sure I'm right (and in so doing we destroy our habitat, which more than feels like a waste)"... it really doesn't matter if it provides a better result than proof-of-work as long as it doesn't provide a worse one and has fewer externalities (if nothing else, as the people willing to play this game at all will have a selection bias for people who don't think the environment is important; we are already at the point where 1% of humanity's CO2 impact is from cryptocurrency mining, which is insane: "the economy is moving 1% slower as we are locking up capital in silly ways" is roughly harmless in comparison).
- gruez 8y ago
  >"We all theoretically agree that I could have burned the most oil today [...]" is a way way way way better scenario than "I guess we will all have to burn a bunch of oil to make sure I'm right [...]" note this argument only works if the costs of burning oil (habitat destruction) is being externalized. thus, this is more of a problem with externalization than a pos vs pow issue.
  - topmonk 8y ago
    The realization of that sort of idealism is so far fetched it doesn't change the argument. Sure, you could possibly get the USA to create laws to stop externalizing the costs of co2 production, but everyone, everywhere? Including the most corrupt, war torn, and penniless places in the world? And what about the deep state? They once sold cocaine to us citizens in order to raise money for black ops. Would they think twice about mining PoW?
    - cabalamat 8y ago
xwvvvvwx 8y ago
> The issue is that you need to lock up money for PoS in order to mine it. That has a cost as you are forgoing interest on lending that money to an actually productive enterprise that is creating value. You do realize that stakers in PoS earn interest (paid for through inflation) on their locked collateral?
- improv32 8y ago
  As I understand it, they earn a larger share of the money supply, as interest. But not actual economic profit stemming from some productive wealth-creating investment. Except insofar as their support of the coin itself enables ecomonic activity.
  - covemarkets 8y ago
    right, that's the main point. Why switch to POS at all? Suppose for a second ETH POS solution works as advertised. really fast and scalable. Then, there will be economic activity as a result of that speed and scalability, that would not have happened otherwise. At least that's the idea - may not ultimately work out.
  - kiriakasis 8y ago
    > productive wealth-creating investment like hashing blocks? If you believe this is a critique of PoS then it must also be a critique of PoW
EGreg 8y ago
By the way (as someone who thinks PoS has serious problems) even if Proof of Stake had the same dollar cost, it wouldn’t have the same energy cost. That matters significantly, now.
mirekrusin 8y ago
So you’re saying it’s the same but better for environment and faster, with the same dollar cost?
tim333 8y ago
>The issue is that you need to lock up money for PoS in order to mine it. Not really fiat money. You have to stake the coin in question but presumably you'd be holding that anyway. I don't see any real world costs that compare to the spend on electricity and GPUs you get with proof of work.

nowarninglabel 8y ago

Not everyone wants to lend their money (I say this as someone who runs a crowdfunding loan site). Most cryptocurrency today is just being hodl'd by folks, not put into active investments. There are also not a lot of good, trustworthy investments available to those who want to lend directly in crypto, though I'm sure we'll get more and more as time goes on.

AlexCoventry 8y ago

> read http://www.truthcoin.info/blog/pow-cheapest/ http://www.truthcoin.info/blog/pow-cheapest/. Modern PoS protocols prevent stake grinding with per-verifier VRFs and multi-round verification procedures.

keymone 8y ago
The complexity involved in making PoS “work” just increases the attack surface and enables political games around which workaround to implement next. And political games are decided by money, which is exactly what brings MR=MC, just like in PoW. So why bother and not use simplest possible system that guarantees security using the ultimate currency - energy?
- AlexCoventry 8y ago
  Why bother with baroque consensus algorithms at all, and not just use USD? Because new systems with new properties will enable new capabilities.
  - keymone 8y ago
    PoS is closer to fiat than PoW. PoS is more complex and relies on trust. There is nothing “baroque” about PoW, it’s simplest, cheapest and most reliable of them all.

covemarkets 8y ago

"The issue is that you need to lock up money for PoS in order to mine it. That has a cost as you are forgoing interest on lending that money to an actually productive enterprise that is creating value. The net result is that funding and investment becomes more scarce because private investment is "crowded out" by people simply staking their Ethereum. This is the same harm caused by too much government debt "crowding out" private investment" This is zero sum thinking. Yes, people will lock up money, which could have been invested elsewhere. But you have to take into account the activity that happens on the chain as a result of POS, which itself will be productive presumably. Thus the capital locked up in POS will be invested productively - because the activities enabled by POS themselves will be productive. Of course, if there is nothing new that you can do as a result of POS - meaning, without POS you can already do all those things, then indeed there is no reason for POS. But the idea here ( which could be right or wrong ) is that POS will enable decentralized computation that would not happen otherwise. EDIT: to downvoter: you can't say that locking up coins detracts from productive investment without evaluating what the chain ends up doing as a result of switching to POS. I mean, if you think that nothing useful will happen on a POS chain, that's a valid argument, but that's a different argument than simply worrying about locked up coins

covemarkets 8y ago
curious, what the downvoters are disagreeing with specifically in this comment.

saurik 8y ago

> One issue that proof of stake proponents often ignore is that proof of stake has its own costs that are roughly equivalent to the dollar cost of PoW. > Also, if the PoS staking rewards are too low, you are vulnerable to the exact same 51% attacks as PoW. "We all theoretically agree that I could have burned the most oil today (and in so doing, I will not be able to do something I could otherwise have done as my funds are locked up, which feels like a waste)" is a way way way way better scenario than "I guess we will all have to burn a bunch of oil to make sure I'm right (and in so doing we destroy our habitat, which more than feels like a waste)"... it really doesn't matter if it provides a better result than proof-of-work as long as it doesn't provide a worse one and has fewer externalities (if nothing else, as the people willing to play this game at all will have a selection bias for people who don't think the environment is important; we are already at the point where 1% of humanity's CO2 impact is from cryptocurrency mining, which is insane: "the economy is moving 1% slower as we are locking up capital in silly ways" is roughly harmless in comparison).

gruez 8y ago
>"We all theoretically agree that I could have burned the most oil today [...]" is a way way way way better scenario than "I guess we will all have to burn a bunch of oil to make sure I'm right [...]" note this argument only works if the costs of burning oil (habitat destruction) is being externalized. thus, this is more of a problem with externalization than a pos vs pow issue.
- topmonk 8y ago
  The realization of that sort of idealism is so far fetched it doesn't change the argument. Sure, you could possibly get the USA to create laws to stop externalizing the costs of co2 production, but everyone, everywhere? Including the most corrupt, war torn, and penniless places in the world? And what about the deep state? They once sold cocaine to us citizens in order to raise money for black ops. Would they think twice about mining PoW?
  - cabalamat 8y ago

xwvvvvwx 8y ago

> The issue is that you need to lock up money for PoS in order to mine it. That has a cost as you are forgoing interest on lending that money to an actually productive enterprise that is creating value. You do realize that stakers in PoS earn interest (paid for through inflation) on their locked collateral?

improv32 8y ago
As I understand it, they earn a larger share of the money supply, as interest. But not actual economic profit stemming from some productive wealth-creating investment. Except insofar as their support of the coin itself enables ecomonic activity.
- covemarkets 8y ago
  right, that's the main point. Why switch to POS at all? Suppose for a second ETH POS solution works as advertised. really fast and scalable. Then, there will be economic activity as a result of that speed and scalability, that would not have happened otherwise. At least that's the idea - may not ultimately work out.
- kiriakasis 8y ago
  > productive wealth-creating investment like hashing blocks? If you believe this is a critique of PoS then it must also be a critique of PoW

EGreg 8y ago

By the way (as someone who thinks PoS has serious problems) even if Proof of Stake had the same dollar cost, it wouldn’t have the same energy cost. That matters significantly, now.

mirekrusin 8y ago

So you’re saying it’s the same but better for environment and faster, with the same dollar cost?

tim333 8y ago

>The issue is that you need to lock up money for PoS in order to mine it. Not really fiat money. You have to stake the coin in question but presumably you'd be holding that anyway. I don't see any real world costs that compare to the spend on electricity and GPUs you get with proof of work.