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There is a deeper problem with PoS, which is about where the value of the staked token comes from in the first place. PoW ties this to the burning of real-world

There is a deeper problem with PoS, which is about where the value of the staked token comes from in the first place. PoW ties this to the burning of real-world value, specifically electricity which is about as close to distilled economic value as you can get. Ethereum is trying to bootstrap value with PoW and then switch, but I have strong doubts that this is a sustainable solution.

DennisP 6y ago
Coin value is not based on electricity usage in PoW. Due to difficulty adjustment, electricity usage is an effect of coin value, not a cause. If coin value goes up, mining becomes more profitable, more miners jump in, and electricity usage goes up. If coin value drops, the opposite happens.
- jkhdigital 6y ago
  Coin value is a social phenomenon anyway, so it’s kind of meaningless to assign cause and effect. My point was that electricity usage in PoW provides an external metric for assigning exchange value to the coin which is not self-referential, unlike in PoS.
mratsim 6y ago
It's the same when currencies around the world stopped using the gold standard and became floating across each other. I'd say the value of currencies is that you have to pay your taxes in one that is legal tender. In that case, the value of Eth is that you have to pay transaction fees in Eth. You decided how valuable those transactions are.
- jkhdigital 6y ago
  Governments have a monopoly on issuing fiat currencies, but for PoS cryptocurrencies there is no enforced scarcity—any DApp that can run on Ethereum can easily run on any of an infinite number of Ethereum clones, so why bother using the expensive congested network?
  - mratsim 6y ago
    I think you have the chain of causality wrong. The Ethereum network is congested because it has users. Ethereum has the critical mass and first mover advantage. The clones need to be sufficiently attractive (10x ?) to break that hold, it's not a technical problem but an economic, marketing and educational one. Scarcity is unrelated to network congestion or usage.
- imtringued 6y ago
  When you sell your Bitcoin for Ethereum you have to pay taxes in dollars. The specific value is dependent on the ability to exchange it for goods and services but the fact that it will remain valuable (but not how valuable) in the future is secured by taxation. Who knows what is going to happen with Bitcoin? It may get replaced by Ethereum entirely.

DennisP 6y ago

Coin value is not based on electricity usage in PoW. Due to difficulty adjustment, electricity usage is an effect of coin value, not a cause. If coin value goes up, mining becomes more profitable, more miners jump in, and electricity usage goes up. If coin value drops, the opposite happens.

jkhdigital 6y ago
Coin value is a social phenomenon anyway, so it’s kind of meaningless to assign cause and effect. My point was that electricity usage in PoW provides an external metric for assigning exchange value to the coin which is not self-referential, unlike in PoS.

mratsim 6y ago

It's the same when currencies around the world stopped using the gold standard and became floating across each other. I'd say the value of currencies is that you have to pay your taxes in one that is legal tender. In that case, the value of Eth is that you have to pay transaction fees in Eth. You decided how valuable those transactions are.

jkhdigital 6y ago
Governments have a monopoly on issuing fiat currencies, but for PoS cryptocurrencies there is no enforced scarcity—any DApp that can run on Ethereum can easily run on any of an infinite number of Ethereum clones, so why bother using the expensive congested network?
- mratsim 6y ago
  I think you have the chain of causality wrong. The Ethereum network is congested because it has users. Ethereum has the critical mass and first mover advantage. The clones need to be sufficiently attractive (10x ?) to break that hold, it's not a technical problem but an economic, marketing and educational one. Scarcity is unrelated to network congestion or usage.
imtringued 6y ago
When you sell your Bitcoin for Ethereum you have to pay taxes in dollars. The specific value is dependent on the ability to exchange it for goods and services but the fact that it will remain valuable (but not how valuable) in the future is secured by taxation. Who knows what is going to happen with Bitcoin? It may get replaced by Ethereum entirely.