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> This is often claimed to be an advantage of PoS: you can't get an extra increase in rate of profits by being richer (beyond the linear increase you'd expect).

> This is often claimed to be an advantage of PoS: you can't get an extra increase in rate of profits by being richer (beyond the linear increase you'd expect). With PoW on the other hand, the richest have the best access to the most innovative technology and so you get superlinear profits the richer you are. And yet, anyone who buys these proof-of-stake coins now, years after they were launched, suffers from having a cost basis orders of magnitude higher than that of the early investors. Yeah, they’re all superficially earning “the same staking ROI”. But in relative terms, the earliest investors are mopping the floor with the later investors, because the earliest investors can stake orders of magnitude more coins. The earliest stakers become by far the biggest miners. They’re given an outsized influence over the network, and it’s sadly telling — and a bit unsurprising — that early PoS investors astroturf their coin by focusing on irrelevant minutia, e.g. “open access to staking ROI”, or whataboutism, e.g. “but what about ASIC miner distribution”. That is a classic Red Herring. “Rate of profits” doesn’t matter more to fairness than, say, premining half or more of the outstanding supply of a given coin to give early investors absurd ROI advantages. “Fair access to yield” doesn’t matter more to fairness than exclusive pre-ICOs rounds which only prestigious investors have access to.

22c 5y ago
> But in relative terms, the earliest investors are mopping the floor with the later investors, because the earliest investors can stake orders of magnitude more coins. PoS networks are typically not going to be minting coins in perpetuity. Most PoS networks aim to reach a "zero issuance" state where the network can sustain itself on TX fees alone. It's also typically in a networks interest to decentralise TX verification as much as possible (in contrast to banking, which tends lean towards the opposite). Ideally a PoS network will reach a steady-state where TX verification is profitable enough that people will be willing do it for TX fees alone, but efficient enough that you can be market competitive regardless of how you choose to run your validator nodes (ie. costs should not be prohibitively high as to prevent geographical distribution). There will always be rich and poor people - PoS networks don't aim to solve that - but the question will be is a rich person able to participate in the network more efficiently than a poor person.
- atweiden 5y ago
  > Most PoS networks aim to reach a "zero issuance" state where the network can sustain itself on TX fees alone. Whether ICO investors are stakemining coins issued through inflation or transaction fees doesn’t matter — they’re still mining orders of magnitude more coins, at the end of the day. Their artificially low cost basis translates into them reaping outsized profits which dwarf that of later investors. (And frankly, it’s absurd the PoS astroturfing has gotten so out of hand that this needs to be pointed out at all.)
  - wmf 5y ago
    It seems like that argument could equally apply to PoW or startups.
    - atweiden 5y ago
      > It seems like that argument could equally apply to PoW or startups. It isn’t clear to me what you meant to say here. Early investors tend to be by far the biggest winners in general, crypto or not. However, we were discussing mining revenue, not profits in general. Importantly, early PoW miners had to source new ASIC mining rigs from China year after year, pay to install those ASICs in datacenters, and pay for the electricity to power them. For the better part of a decade. Only then would they have continued earning bitcoin mining revenue at all. Conversely, PoS staking yield requires little more than showing up with cash on day one. From then on out, PoS stakers earn mining revenue in proportion to their holdings. It costs them almost nothing to do this in perpetuity. In addition, PoS is sadly linked with ICOs, pre-ICOs and pre-mines. These financial shenanigans allow early investors to stake disproportionately more coins than later investors. IMO it’s highly misleading to present this situation as being somehow “more fair” than PoW mining.
      - 22c 5y ago
        >However, we were discussing mining revenue, not profits in general. If you are talking about mining revenue then you are completely wrong about what you have been saying so far, because the rate at which you receive mining rewards is usually around 5-10% pa. What you're trying to do is have your cake and eat it too. You admit that you are not talking about early adopter profits in general, but you complained above about cost basis of early adopters being low (that's how early adoption typically works). This is the same as complaining about someone investing in 10 year government bonds and then the underlying currency increasing in buying power. You could go buy Argentinian or Venezualan bonds right now and hope the peso or bolívar goes up in value. It's no different, all you need is seed money to get started.
shawnz 5y ago
> And yet, anyone who buys these proof-of-stake coins now, years after they were launched, suffers from having a cost basis orders of magnitude higher than that of the early investors. Yeah, they’re all superficially earning “the same staking ROI”. But in relative terms, the earliest investors are mopping the floor with the later investors, because the earliest investors can stake orders of magnitude more coins. Sure, but how is that any different than proof-of-work early adopters becoming rich and being able to afford more mining hardware and electricity?
- atweiden 5y ago
  > Sure, but how is that any different than proof-of-work early adopters becoming rich and being able to afford more mining hardware and electricity? You have to spend money on mining hardware and electricity to get those yields. To do that on a large scale requires a datacenter and enormously expensive long-term power contracts with utility companies. But with PoS mining, little to no effort is required. Click a button, and start earning yield in perpetuity. Put yourself in the shoes of an early adopter of any PoW coin. At what point do you decide to spend millions of dollars ordering mining rigs from Asia, and setting up a datacenter with power contracts? Whereas with PoS this is simply a matter of clicking a button, which costs almost nothing and can be done more or less instantly. It’s a night and day difference.
  - shawnz 5y ago
    So is your argument that the profit from mining PoW currencies is actually sub-linear with the initial investment because it's more expensive per unit to get larger quantities of hardware and electricity, and so that counteracts the gain that early adopters have had? That doesn't seem right to me, economics of scale suggest it should be cheaper per unit to get larger quantities (even if there are additional difficulties doing so at a big scale).
    - atweiden 5y ago
      The difference with PoW mining is it involves more than just clicking a button. Conversely, with PoS, people — and particularly insiders who are in on the ICO, pre-ICO or premine — can click a button and earn X% per annum in perpetuity. Which they do. Bitcoin has many problems, it just doesn’t have this particular one.

22c 5y ago

> But in relative terms, the earliest investors are mopping the floor with the later investors, because the earliest investors can stake orders of magnitude more coins. PoS networks are typically not going to be minting coins in perpetuity. Most PoS networks aim to reach a "zero issuance" state where the network can sustain itself on TX fees alone. It's also typically in a networks interest to decentralise TX verification as much as possible (in contrast to banking, which tends lean towards the opposite). Ideally a PoS network will reach a steady-state where TX verification is profitable enough that people will be willing do it for TX fees alone, but efficient enough that you can be market competitive regardless of how you choose to run your validator nodes (ie. costs should not be prohibitively high as to prevent geographical distribution). There will always be rich and poor people - PoS networks don't aim to solve that - but the question will be is a rich person able to participate in the network more efficiently than a poor person.

atweiden 5y ago
> Most PoS networks aim to reach a "zero issuance" state where the network can sustain itself on TX fees alone. Whether ICO investors are stakemining coins issued through inflation or transaction fees doesn’t matter — they’re still mining orders of magnitude more coins, at the end of the day. Their artificially low cost basis translates into them reaping outsized profits which dwarf that of later investors. (And frankly, it’s absurd the PoS astroturfing has gotten so out of hand that this needs to be pointed out at all.)
- wmf 5y ago
  It seems like that argument could equally apply to PoW or startups.
  - atweiden 5y ago
    > It seems like that argument could equally apply to PoW or startups. It isn’t clear to me what you meant to say here. Early investors tend to be by far the biggest winners in general, crypto or not. However, we were discussing mining revenue, not profits in general. Importantly, early PoW miners had to source new ASIC mining rigs from China year after year, pay to install those ASICs in datacenters, and pay for the electricity to power them. For the better part of a decade. Only then would they have continued earning bitcoin mining revenue at all. Conversely, PoS staking yield requires little more than showing up with cash on day one. From then on out, PoS stakers earn mining revenue in proportion to their holdings. It costs them almost nothing to do this in perpetuity. In addition, PoS is sadly linked with ICOs, pre-ICOs and pre-mines. These financial shenanigans allow early investors to stake disproportionately more coins than later investors. IMO it’s highly misleading to present this situation as being somehow “more fair” than PoW mining.
    - 22c 5y ago
      >However, we were discussing mining revenue, not profits in general. If you are talking about mining revenue then you are completely wrong about what you have been saying so far, because the rate at which you receive mining rewards is usually around 5-10% pa. What you're trying to do is have your cake and eat it too. You admit that you are not talking about early adopter profits in general, but you complained above about cost basis of early adopters being low (that's how early adoption typically works). This is the same as complaining about someone investing in 10 year government bonds and then the underlying currency increasing in buying power. You could go buy Argentinian or Venezualan bonds right now and hope the peso or bolívar goes up in value. It's no different, all you need is seed money to get started.

shawnz 5y ago

> And yet, anyone who buys these proof-of-stake coins now, years after they were launched, suffers from having a cost basis orders of magnitude higher than that of the early investors. Yeah, they’re all superficially earning “the same staking ROI”. But in relative terms, the earliest investors are mopping the floor with the later investors, because the earliest investors can stake orders of magnitude more coins. Sure, but how is that any different than proof-of-work early adopters becoming rich and being able to afford more mining hardware and electricity?

atweiden 5y ago
> Sure, but how is that any different than proof-of-work early adopters becoming rich and being able to afford more mining hardware and electricity? You have to spend money on mining hardware and electricity to get those yields. To do that on a large scale requires a datacenter and enormously expensive long-term power contracts with utility companies. But with PoS mining, little to no effort is required. Click a button, and start earning yield in perpetuity. Put yourself in the shoes of an early adopter of any PoW coin. At what point do you decide to spend millions of dollars ordering mining rigs from Asia, and setting up a datacenter with power contracts? Whereas with PoS this is simply a matter of clicking a button, which costs almost nothing and can be done more or less instantly. It’s a night and day difference.
- shawnz 5y ago
  So is your argument that the profit from mining PoW currencies is actually sub-linear with the initial investment because it's more expensive per unit to get larger quantities of hardware and electricity, and so that counteracts the gain that early adopters have had? That doesn't seem right to me, economics of scale suggest it should be cheaper per unit to get larger quantities (even if there are additional difficulties doing so at a big scale).
  - atweiden 5y ago
    The difference with PoW mining is it involves more than just clicking a button. Conversely, with PoS, people — and particularly insiders who are in on the ICO, pre-ICO or premine — can click a button and earn X% per annum in perpetuity. Which they do. Bitcoin has many problems, it just doesn’t have this particular one.