4 ms·

I'm not saying that proof-of-stake is bad, but it does change the way the network functions, because it locks capital and therefore affects the velocity of mone

by beaner 6y ago

I'm not saying that proof-of-stake is bad, but it does change the way the network functions, because it locks capital and therefore affects the velocity of money in the network. It also changes the distribution of mined coin. Whereas currently it takes an equal mining cost to reap an equal reward, proof-of-stake rewards those who already have enough to stake. This is essentially a recreation of the inflation system we have in the fiat world, where printed money first goes to the government, who can spend it at its current value, eventually having it entropy out to other users through spending, at reduced purchasing power. This makes the rich richer, and increases inequality of savings in the network. So it's not exactly the same refrigerator, so to speak.

viraptor 6y ago
> proof-of-stake rewards those who already have enough to stake As opposed to people who have money buying mining hardware to make more money that can be invested into mining hardware?
- beaner 6y ago
  Yes, that's how most businesses work. You start with a capital investment, often times through a loan, and through smart management, make a profit on the margin, that you can choose to reinvest to stay competitive. Proof-of-stake is completely unlike this. People who "have" are not required to exchange any effort to reap new reward. They retain purchasing power while the "have-nots" lose purchasing power. I dunno if I struck a nerve with you with these points about proof of stake or something. I'm not completely against it - I think it should be tried, and Ethereum is a great network to try it with. But I also don't think it's completely perfect. I also think proof-of-work is very defensible and likely to succeed in unexpected ways.
  - viraptor 6y ago
    I wouldn't say it's completely unlike. I don't think renting out some mining hardware for near-guaranteed return is any different in effort. It's about the same as putting money in an investment fund. PoW, PoS, and other investments practically end up with: until you withdraw the money you can invest your existing wealth to get returns, without real effort.
    - beaner 6y ago
      Proof-of-stake requires the majority of what is mined has to be sold on the open market. This redistributes mined coin to any user anywhere, rich or poor. If you mine and do not sell, you perpetually consume and fail in short order. Proof-of-stake doesn't require this natural, market-driven redistribution. It exchanges it for an inflationary process that further separates the rich and the poor. They're fundamentally different.
      - rglullis 6y ago
        You are completely ignoring second-order effects for these systems. You can quite easily turn resources obtained from a PoW system into a PoS financial system and have the worst of both worlds. Do you want an example? > If you mine and do not sell, you perpetually consume and fail in short order. With ETH you can mine ETH, lock in a MakerDAO vault and pay your operations with very low-interest DAI and use that to finance all your operational costs. As long as your profit from mining is higher than the interest from minting DAI (which is very easy to do), you can mine forever without ever giving up the original ETH. Your only limitation would be in how many people would be willing to buy all the DAI you will be minting. This is no different than a PoS system, except that it still has to bear all the PoW costs and externalities.
        beaner 6y ago
        > You are completely ignoring second-order effects for these systems Which ones? I don't believe I am, they're just not the point being discussed here.
        rglullis 6y ago
        > they're just not the point being discussed here. In other words, you are ignoring (not paying attention, leaving aside) an aspect that should be considered. (You asked for a good-faith conversation, but after these types of replies it gets hard to take you seriously. The quote "It is hard to get a man to understand something when his salary depends on not understanding it" becomes more and more apt with each response you give.)
  - pa7x1 6y ago
    This is a very poor analysis. What matters for the "haves" and "have nots", to keep using your terminology, are the entry costs. That's what separates the ability to become a "have" or "have not". Entry costs in PoS are significantly lower; you just need a consumer-grade computer, broadband and the electricity to power a consumer-grade computer (i.e. of the order of 100 W). In PoW, you need specialized equipment (ASICs), larger amounts of energy (of the order of 1000s W) and broadband, this equipment will also need be renewed every few years. The minimum stake of 32 ETH (in the case of Ethereum) can be avoided by using pooled mining, so that's not a true barrier of entry. Being a validator still requires effort, you need to set-up and maintain the infrastructure and guarantee sufficient availability (higher than 2/3 of the time) to avoid being penalized. As with any economic activity where there is ample competition in the end the profit margins will be quite thin, so presenting this as free-money for the "haves" is just dishonest. If staking rewards are too high, more people will be tempted to stake, reducing the staking rewards, if they get too low some people will be disincentivized to stake and stop doing so, raising the rewards. This will tend to balance around just marginally profitable. This also happens in PoW mining. Main difference being that due to the low entry costs in PoS this economic activity is accessible to a much larger amount of people.
    - beaner 6y ago
      Thank you for the insight! I wasn't being dishonest. I was actually unaware that staking rewards were variable based on the amount staked, such that more ETH staked means fewer rewards per ETH staked. It makes sense, guess I just didn't think about it. I might have thoughts on it but I'd need to process first.
      - pa7x1 6y ago
        My apologies if I came in too hard. You can find here a graph showing the staking rewards vs total staked ETH. https://i.redd.it/ml5qngtlsbx51.jpg https://i.redd.it/ml5qngtlsbx51.jpg
rglullis 6y ago
> proof-of-stake rewards those who already have enough to stake. Don't forget, those that do not have enough to stake can pool their resources together. P.s: tell me where in the world you can open a bank (not a bank account, but an actual bank which can receive deposits from Central Banks) with only 10-20k USD. P.P.s: There is growing talk about existing central banks that are considering issuing their own blockchain version of their currencies, bypass large banks and have money go directly to people through controlled accounts. It would be basically be a Government-sanctioned version of Tether/USDC/EURS.
- beaner 6y ago
  > Don't forget that do not have enough to stake can pool their resources together. That's great! And makes a lot of sense. However, it still requires locking capital. Those who do not have a lot of money, spend a much higher percentage of their money, and therefore need it to be liquid. So though pooling may reduce the effect of inflationary rich-poor inequality increases, I don't think it would eliminate it.
  - rglullis 6y ago
    > I don't think it would eliminate it. Well, duh. No system will ever be perfect and there will always be costs associated with BFT systems. The question is knowing how these systems compare with one another and what kind of trade-offs are there. It is impossible to dispute that the costs of keeping a PoS-based system is overall lower than the current state-of-the-art, yet you try to knock PoS while ignoring all the analog issues with PoW? Your cognitive dissonance is showing.
    - beaner 6y ago
      I'd like to continue engaging in good-faith conversation, not start exchanging barbs with undertones of acrimony.
nickik 6y ago
> therefore affects the velocity of money in the network That is very questionable.

by beaner 6y ago

viraptor 6y ago

> proof-of-stake rewards those who already have enough to stake As opposed to people who have money buying mining hardware to make more money that can be invested into mining hardware?

beaner 6y ago
Yes, that's how most businesses work. You start with a capital investment, often times through a loan, and through smart management, make a profit on the margin, that you can choose to reinvest to stay competitive. Proof-of-stake is completely unlike this. People who "have" are not required to exchange any effort to reap new reward. They retain purchasing power while the "have-nots" lose purchasing power. I dunno if I struck a nerve with you with these points about proof of stake or something. I'm not completely against it - I think it should be tried, and Ethereum is a great network to try it with. But I also don't think it's completely perfect. I also think proof-of-work is very defensible and likely to succeed in unexpected ways.
- viraptor 6y ago
  I wouldn't say it's completely unlike. I don't think renting out some mining hardware for near-guaranteed return is any different in effort. It's about the same as putting money in an investment fund. PoW, PoS, and other investments practically end up with: until you withdraw the money you can invest your existing wealth to get returns, without real effort.
  - beaner 6y ago
    Proof-of-stake requires the majority of what is mined has to be sold on the open market. This redistributes mined coin to any user anywhere, rich or poor. If you mine and do not sell, you perpetually consume and fail in short order. Proof-of-stake doesn't require this natural, market-driven redistribution. It exchanges it for an inflationary process that further separates the rich and the poor. They're fundamentally different.
    - rglullis 6y ago
      You are completely ignoring second-order effects for these systems. You can quite easily turn resources obtained from a PoW system into a PoS financial system and have the worst of both worlds. Do you want an example? > If you mine and do not sell, you perpetually consume and fail in short order. With ETH you can mine ETH, lock in a MakerDAO vault and pay your operations with very low-interest DAI and use that to finance all your operational costs. As long as your profit from mining is higher than the interest from minting DAI (which is very easy to do), you can mine forever without ever giving up the original ETH. Your only limitation would be in how many people would be willing to buy all the DAI you will be minting. This is no different than a PoS system, except that it still has to bear all the PoW costs and externalities.
      - beaner 6y ago
        > You are completely ignoring second-order effects for these systems Which ones? I don't believe I am, they're just not the point being discussed here.
        rglullis 6y ago
        > they're just not the point being discussed here. In other words, you are ignoring (not paying attention, leaving aside) an aspect that should be considered. (You asked for a good-faith conversation, but after these types of replies it gets hard to take you seriously. The quote "It is hard to get a man to understand something when his salary depends on not understanding it" becomes more and more apt with each response you give.)
- pa7x1 6y ago
  This is a very poor analysis. What matters for the "haves" and "have nots", to keep using your terminology, are the entry costs. That's what separates the ability to become a "have" or "have not". Entry costs in PoS are significantly lower; you just need a consumer-grade computer, broadband and the electricity to power a consumer-grade computer (i.e. of the order of 100 W). In PoW, you need specialized equipment (ASICs), larger amounts of energy (of the order of 1000s W) and broadband, this equipment will also need be renewed every few years. The minimum stake of 32 ETH (in the case of Ethereum) can be avoided by using pooled mining, so that's not a true barrier of entry. Being a validator still requires effort, you need to set-up and maintain the infrastructure and guarantee sufficient availability (higher than 2/3 of the time) to avoid being penalized. As with any economic activity where there is ample competition in the end the profit margins will be quite thin, so presenting this as free-money for the "haves" is just dishonest. If staking rewards are too high, more people will be tempted to stake, reducing the staking rewards, if they get too low some people will be disincentivized to stake and stop doing so, raising the rewards. This will tend to balance around just marginally profitable. This also happens in PoW mining. Main difference being that due to the low entry costs in PoS this economic activity is accessible to a much larger amount of people.
  - beaner 6y ago
    Thank you for the insight! I wasn't being dishonest. I was actually unaware that staking rewards were variable based on the amount staked, such that more ETH staked means fewer rewards per ETH staked. It makes sense, guess I just didn't think about it. I might have thoughts on it but I'd need to process first.
    - pa7x1 6y ago
      My apologies if I came in too hard. You can find here a graph showing the staking rewards vs total staked ETH. https://i.redd.it/ml5qngtlsbx51.jpg https://i.redd.it/ml5qngtlsbx51.jpg

rglullis 6y ago

> proof-of-stake rewards those who already have enough to stake. Don't forget, those that do not have enough to stake can pool their resources together. P.s: tell me where in the world you can open a bank (not a bank account, but an actual bank which can receive deposits from Central Banks) with only 10-20k USD. P.P.s: There is growing talk about existing central banks that are considering issuing their own blockchain version of their currencies, bypass large banks and have money go directly to people through controlled accounts. It would be basically be a Government-sanctioned version of Tether/USDC/EURS.

beaner 6y ago
> Don't forget that do not have enough to stake can pool their resources together. That's great! And makes a lot of sense. However, it still requires locking capital. Those who do not have a lot of money, spend a much higher percentage of their money, and therefore need it to be liquid. So though pooling may reduce the effect of inflationary rich-poor inequality increases, I don't think it would eliminate it.
- rglullis 6y ago
  > I don't think it would eliminate it. Well, duh. No system will ever be perfect and there will always be costs associated with BFT systems. The question is knowing how these systems compare with one another and what kind of trade-offs are there. It is impossible to dispute that the costs of keeping a PoS-based system is overall lower than the current state-of-the-art, yet you try to knock PoS while ignoring all the analog issues with PoW? Your cognitive dissonance is showing.
  - beaner 6y ago
    I'd like to continue engaging in good-faith conversation, not start exchanging barbs with undertones of acrimony.

nickik 6y ago

> therefore affects the velocity of money in the network That is very questionable.