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Can someone explain why proof-of-stake is not inherently monopolistic? It seems like a system where the more of a currency you possess, the more you can obtain,

Can someone explain why proof-of-stake is not inherently monopolistic? It seems like a system where the more of a currency you possess, the more you can obtain, which is obviously unstable, right?

shagbag 7y ago
You could say the same about any interest or income producing asset. USD, real estate, etc.
- api 7y ago
  I think there may be a difference of degree here. Combine an interest based monetary system with a high rate of deflation and you will have the fastest most boring game of Monopoly ever.
narush 7y ago
In current Proof-of-work (PoW) blockchains, the more mining hardware you have, the more coins you get, and the more mining hardware you can buy. In this sense, the same exact monopolistic structure you mention exists in both PoW and Proof-of-stake (PoS) blockchains. However, (PoS) is a lot less monopolistic than PoW for other reasons: 1. Massively reduced economies of scale. Pretty much all POW mining happens in mining farms for a reason: it's a lot cheaper, per unit of revenue, to move all your mining to one big warehouse. This makes it pretty much impossible for a normal person to contribute to PoW in any meaningful way -- good luck running a competitive mining farm out of your house. In PoS, however, 10x more coins will get you exactly 10x more rewards, and costs don't fall at all, leading to less economies of scale, and so less pressure towards a monopoly. 2. Ability for the protocol to apply punishments as well as rewards. In PoW, because the miners aren't tied to any address, there is no real mechanism for punishing them. In PoS, because the "mining power" (aka coins) is in the protocol, bad behavior can be punished. This has two benefits from the perspective of monopolistic market structure. First, it makes it so 51% attacks are costly in protocol. If evidence is shown that you 51% attacked, your coins can be "slashed," or taken away. Notably, in PoW, a 51% attack is free to the attacker if successful. Second, collective punishments can be applied to miners (validators in PoS language). This makes it so miners can be punished if they censor other miners -- again leading to less centralization/monopoly pressure. Please do disagree (or make me clarify) with anything that seems stupid/unclear/incorrect in the above. I'd love to engage more!
- driverdan 7y ago
  PoS incentivizes hoarding. There is no such incentive with PoW.
- nosuchthing 7y ago
  So an Oligarchy that's less monopolistic? Where do the coins come from? Has there been any other mechanisms for minting other than minting the supply from day 1, or burning computational capital/energy in the form of PoW mining?
  - narush 7y ago
    PoW is currently an oligarchy, for what it's worth. I was using the term monopolistic in a lose sense (i.e. tending towards large players controling the market [i.e. "centralizing"]). In most PoS protocols, coins come from either PoW mining before a transition to PoS, or from an initial coin offering. Neither are great solutions IMO, but PoW doesn't really distribute coins very well either.
- trianglesphere 7y ago
  While proof of stake does have a lot of advantages over PoW, it cannot handle more than 1/3 of the voiting power acting incorrectly. This is a well known hard bound on BFT algorithms. In terms of implementing PoS, most BFT algos have traditionally scaled poorly (HotStuff which is linear in communication costs relative to the number of nodes/validators is very recent). In addition, going offline for validators, even accidentally, hurts the network and slashing PoS schemes often have uptime requirements. Validators also need to have the infra to be hidden and not DDOS'd. tl;dr, Proof of stake is still decently centralized, but a lot of work is being done to scale it.
  - narush 7y ago
    The 1/3 bound is for general byzantine behavior. If you're willing to get more specific about the type of behavior you want to tolerate, the bounds are more flexible[1] (this link is from the HotStuff people, actually!). For example, a node could tolerate no more than "20% Byzantine faults and 30% alive-but-corrupt faults" In turn, this allows different clients to make different assumptions (one huge advantage PoW has over traditional BFT protocols). Also, w.r.t. linear communication, CBC Casper[2] has the ability to come to consensus on a blockchain with, in the limit (and in the optimal case), a single message per block that is finalized. It uses essentially the same form of pipelining that HotStuff does, but to the extreme (at at the cost of a much longer time for blocks to be finalized). Full disclosure: I work on CBC Casper, so take what I'm saying with a grain of salt. [1] https://dahliamalkhi.wordpress.com/2019/04/24/flexible-byzantine-fault-tolerance/ https://dahliamalkhi.wordpress.com/2019/04/24/flexible-byzan... [2] https://github.com/cbc-casper/cbc-casper-paper/blob/master/cbc-casper-paper-draft.pdf https://github.com/cbc-casper/cbc-casper-paper/blob/master/c...

Can someone explain why proof-of-stake is not inherently monopolistic? It seems like a system where the more of a currency you possess, the more you can obtain, which is obviously unstable, right?

shagbag 7y ago

You could say the same about any interest or income producing asset. USD, real estate, etc.

api 7y ago
I think there may be a difference of degree here. Combine an interest based monetary system with a high rate of deflation and you will have the fastest most boring game of Monopoly ever.

narush 7y ago

In current Proof-of-work (PoW) blockchains, the more mining hardware you have, the more coins you get, and the more mining hardware you can buy. In this sense, the same exact monopolistic structure you mention exists in both PoW and Proof-of-stake (PoS) blockchains. However, (PoS) is a lot less monopolistic than PoW for other reasons: 1. Massively reduced economies of scale. Pretty much all POW mining happens in mining farms for a reason: it's a lot cheaper, per unit of revenue, to move all your mining to one big warehouse. This makes it pretty much impossible for a normal person to contribute to PoW in any meaningful way -- good luck running a competitive mining farm out of your house. In PoS, however, 10x more coins will get you exactly 10x more rewards, and costs don't fall at all, leading to less economies of scale, and so less pressure towards a monopoly. 2. Ability for the protocol to apply punishments as well as rewards. In PoW, because the miners aren't tied to any address, there is no real mechanism for punishing them. In PoS, because the "mining power" (aka coins) is in the protocol, bad behavior can be punished. This has two benefits from the perspective of monopolistic market structure. First, it makes it so 51% attacks are costly in protocol. If evidence is shown that you 51% attacked, your coins can be "slashed," or taken away. Notably, in PoW, a 51% attack is free to the attacker if successful. Second, collective punishments can be applied to miners (validators in PoS language). This makes it so miners can be punished if they censor other miners -- again leading to less centralization/monopoly pressure. Please do disagree (or make me clarify) with anything that seems stupid/unclear/incorrect in the above. I'd love to engage more!

driverdan 7y ago
PoS incentivizes hoarding. There is no such incentive with PoW.
nosuchthing 7y ago
So an Oligarchy that's less monopolistic? Where do the coins come from? Has there been any other mechanisms for minting other than minting the supply from day 1, or burning computational capital/energy in the form of PoW mining?
- narush 7y ago
  PoW is currently an oligarchy, for what it's worth. I was using the term monopolistic in a lose sense (i.e. tending towards large players controling the market [i.e. "centralizing"]). In most PoS protocols, coins come from either PoW mining before a transition to PoS, or from an initial coin offering. Neither are great solutions IMO, but PoW doesn't really distribute coins very well either.
trianglesphere 7y ago
While proof of stake does have a lot of advantages over PoW, it cannot handle more than 1/3 of the voiting power acting incorrectly. This is a well known hard bound on BFT algorithms. In terms of implementing PoS, most BFT algos have traditionally scaled poorly (HotStuff which is linear in communication costs relative to the number of nodes/validators is very recent). In addition, going offline for validators, even accidentally, hurts the network and slashing PoS schemes often have uptime requirements. Validators also need to have the infra to be hidden and not DDOS'd. tl;dr, Proof of stake is still decently centralized, but a lot of work is being done to scale it.
- narush 7y ago
  The 1/3 bound is for general byzantine behavior. If you're willing to get more specific about the type of behavior you want to tolerate, the bounds are more flexible[1] (this link is from the HotStuff people, actually!). For example, a node could tolerate no more than "20% Byzantine faults and 30% alive-but-corrupt faults" In turn, this allows different clients to make different assumptions (one huge advantage PoW has over traditional BFT protocols). Also, w.r.t. linear communication, CBC Casper[2] has the ability to come to consensus on a blockchain with, in the limit (and in the optimal case), a single message per block that is finalized. It uses essentially the same form of pipelining that HotStuff does, but to the extreme (at at the cost of a much longer time for blocks to be finalized). Full disclosure: I work on CBC Casper, so take what I'm saying with a grain of salt. [1] https://dahliamalkhi.wordpress.com/2019/04/24/flexible-byzantine-fault-tolerance/ https://dahliamalkhi.wordpress.com/2019/04/24/flexible-byzan... [2] https://github.com/cbc-casper/cbc-casper-paper/blob/master/cbc-casper-paper-draft.pdf https://github.com/cbc-casper/cbc-casper-paper/blob/master/c...