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So with PoS, we recreate a system where a few rich pool have decision over the network. Can someone enlighten me on how this is different from the current fiat

• sergioisidoro 5y ago
  Current system is no different, as the hash power is related to how many computers you can afford to buy. This doesn't fix the problem but it does fix the environmental impact.
  • gruez 5y ago
    The difference is that with PoW you constantly have to do "stuff" (ie. buying equipment, running datacenters) or get left behind. PoS on the other hand you can just sit on your ass and wait for the $$$ to roll in.
    • yokem55 5y ago
      Except, using the same kind of pooling that POW depends on, you can still get in at just about any price level. .01 Eth can be staked just as easily as 10,000 eth. And running a validator with 32 isn't nothing - you still have to keep a machine on and online 24/7 with an uncapped connection or pay someone to host that machine.
    • nerdponx 5y ago
      Or you can pay someone a flat amount to do the "stuff" and experience your own unlimited percentage-based gains, like in pretty much any other market where "capital" is a thing.
    • sergioisidoro 5y ago
      Good point. But I still don't understand how it changes the premise presented by the comment, of "The one who has the money controls the network".
      • pinkybanana 5y ago
        There are lots of participants in the global economy who has money. The idea is that you have enough different people with competing incentives. PoW provides incentive model which separates different actors (pools, exchanges etc) and also at the same time doesn't seem to lead to monopolies.
    • meowkit 5y ago
      Can you explain what “sitting on your ass” means? I thought you had to maintain a validator?
      • sendbitcoins 5y ago
        Exchanges like CoinBase will stake for you. You as an individual don't have to do anything.
        • G3rn0ti 5y ago
          An earn interest, right? So I could lend Coinbase some of my ether for staking and they pay me interest in return. So PoS could give us an interesting investment possibility.
          • sendbitcoins 5y ago
            Well, its not called interest, its called 'staking rewards'. You can also earn interest lending out your ETH, but that's a different process and entails counterparty risk.
    • tux3 5y ago
      Yes and no. Keeping up with the day to day details is something you delegate at some point. PoW is also "just" an investment, with extra steps to set things up.
    • narush 5y ago
      This is not the case. In Ethereum's PoS model, you put value at risk when you sign up to be a validator. You have to lock funds up to play a part in consensus. This means that if you start acting maliciously, or even just not fulfilling your responsibilities (e.g. you let your computer go offline), then you are punished for it (depending on the severity of your offense, obviously). Aka, you can't just wait for the money to roll in. You have to run a node, you have to verify blocks, and you have to make sure you're acting in the best interest of the network + keeping things running smoothly.
      • secondcoming 5y ago
        Who gets these funds? This is beginning to sound suspicious.
        • thebean11 5y ago
          The other actors in the network running validators. Specifically you are punished for: - Being offline (the penalty is small, and roughly equal to the rewards earned by being online - Running the same validator twice (huge penalty, be careful!)
          • secondcoming 5y ago
            Are the funds paid in fiat or ETH?
            • bidirectional 5y ago
              ETH of course, this is an automated part of how the system works, not some behind-the-scenes deal based on reputation or whatever.
      • f38zf5vdt 5y ago
        This is something I don't understand. You lock the funds on a chain and you lose them on the chain. But what happens if two groups decide to split the chain, and both chains lock the opposing chains funds? It seems like there's no way to prevent social forks in the longer term, just a lot of hand-waving about that if the current social contract stays in place, some minority malicious group will be punished for secession. It would seem that if some participants on the network can't abide by their national laws while running some contracts, the outcome would be inevitable. And then you would just get multiple chains running under multiple governments. This seems like a reinvention of the international banking system?
    • Polygator 5y ago
      Yeah, but obviously the "stuff" has led to a Red Queen problem, with the outcome being incredible waste of electricity and computing resources (compared to PoS or having a less competitive eth mining industry)
    • shawnz 5y ago
      In PoS, you are still permanently burning the time value of the money you have staked. That's unrecoverable just like the electricity spent in PoW is unrecoverable.
    • serverholic 5y ago
      I find comments like yours hilarious. The idea that the ethereum foundation has spent years and years designing a PoS system, writing papers, doing tests, building proofs of correctness aaaaaand derp they just didn't think of people sitting on their asses.
      • arrow7000 5y ago
        Maybe answer the question instead of scoffing at how ridiculous it is?
        • serverholic 5y ago
          No, I refuse to put in effort to correct the level of confident ignorance the OP displayed.
      • AlexandrB 5y ago
        It's not that hilarious when you realize that this is the same kind of thinking some cryto-boosters apply to hundreds of years of financial regulation and history.
    • everfree 5y ago
      This isn't really true. You also have to buy equipment and run specialized software to participate in PoS. It requires keeping a node connected to the internet with high uptime, and maintaining its software and hardware. Plus, due to slashing, you are uniquely responsible for mistakes your validator makes. So, staking comes with both responsibilities and consequences for breaching them, just like any legal contract. The fact that you can rent a turnkey cloud solution to do all this work for you and split the profits isn't really relevant to the argument IMO (I consider staking with Coinbase "renting cloud computing" in a specialized way).
  • pinkybanana 5y ago
    No, it is very different because in practice the pools and exchanges are totally separate entities. With PoS the biggest holders will be exchanges and therefore exchanges will control the cryptocurrency. With PoS there will be clearly less decentralization compared to PoW.
    • fastball 5y ago
      In order to be a validator in PoS (at least Ethereum's implementation) you need to lock up the funds, so not sure how an exchange would be particularly well-suited for that – they need to keep most of the coins on their books liquid so that the customers who actually own them can quickly trade them.
      • pinkybanana 5y ago
        You don't seem to understand how exchanges work. Locking the funds won't be problem to exchanges. Most of the funds just sit dormant in cold storage for long periods of times. For withdrawals you always use most recent deposits and you minimize the transfers between hot and cold wallet.
        • fastball 5y ago
          I don't know anyone who keeps large amounts of ETH sitting unused on an exchange.
          • rfd4sgmk8u 5y ago
            Just take a look at any of the account tables. Most of it is in exchange cold wallets. These exchanges will be staking against your interests. It has happened before, it will happen again. Just say no to PoS.
            • fastball 5y ago
              But that's only because Ethereum is currently on PoW, so (naive) people don't care. But as soon the switch happens, people will want to be staking their ETH in pools that will earn them money.
  • ballofrubber 5y ago
    PoW is a lot different, as burning real world resources (energy) brings sell-pressure to miners, whereas PoS only has cost of locking the funds. This means that regardless of the size of your "operation" cost scales very flat. PoS also does not come with the property of innovation and disruption. In a PoW (especially ASIC-based) system you will find new ways to outperform your peers and disrupt old players. PoW incentivices cheap energy in developing countries more than anything before. It is the fix for environmental problems.
    • SR2Z 5y ago
      This is a spicy take, not least because the cheapest source of energy in the developing world (i.e. the one without environmental regulations) tends to be coal.
    • TeMPOraL 5y ago
      > PoW incentivices cheap energy in developing countries more than anything before. It is the fix for environmental problems. That can only become true if and when governments decide to suddenly ban PoW, so that all that cheap energy services anything other than crypto. I don't think it works as an argument in favor of PoW, for the same reason "we're only spreading knowledge of chemistry and democratizing process engineering" doesn't work as an argument in favor of drug cartels. Also, 'SR2Z is right - "cheap energy in developing countries" == coal.
    • swiley 5y ago
      PoS burns capital in the sense that it could be invested in something else (I was looking at staking coins but it doesn't come near the yield I get from my 401k for example, which is effectively providing unsecured debt to finance innovation.) IMO: it's much better than PoW as long as it doesn't end up too centralized. I'm not too sure how I feel about the minimum amount required to stake though, that seems a bit odd.
      • gverrilla 5y ago
        from what I heard the minimum ammount might change, and it was decided in a time ETH value was lower
• Jyaif 5y ago
  They have an incentive to not mess around.
• sp332 5y ago
  Is it different from the current PoW system?
  • narush 5y ago
    Yep! It's a new chain as well - that will eventually consume the old Ethereum PoW chain :)
• xiphias2 5y ago
  While I myself stay with Bitcoin, Ethereum still has lots of advantages compared to the fiat system: it's still open source, and people can still validate the rules (although that full validation is extremely hard). Also the current fiat system is debt based, which means that the vast majority of money is printed by banks and the money printing power is at the highest ranking sales person, and hidden.
  • secondcoming 5y ago
    Have you ever actually used an Ethereum in real life outside of price speculation?
    • xiphias2 5y ago
      Ethereum no, but Bitcoin sure, I'm travelling a lot, and I have a lot of payment problems (for example my bank disabled my credit card just because they said that it's not working with some types of contactless recievers, but they can't send a new one to my hotel, just to my home address). Bitcoin always works, although it's not real-time (still faster than sending money to my Revolut account, which takes days). If a person thinks that fiat payments work well, he hasn't really travelled yet to different cultures.
      • dmitriid 5y ago
        I have traveled to different countries. Fiat works, and works well. You're advised to keep some cash on hand, but it works multiple orders of ↑↑↑ [1] better than bitcoin [1] https://en.wikipedia.org/wiki/Graham%27s_number https://en.wikipedia.org/wiki/Graham%27s_number
      • cageface 5y ago
        I've been traveling all over the world for the last ten years. I've never had any serious problems paying for anything with good old fashioned credit/debit cards. Even getting cash in the local currency is trivial with ATMs.
        • 5y ago
• bobbylarrybobby 5y ago
  Unlike with fiat, you're not forced to use any particular crypto. If the rich stakeholders of ethereum decide to muck around with the network, nobody will want to use it anymore and the value will drop.
  • gspr 5y ago
    Demanding a single currency to settle debts is a feature, not a bug. I don't wanna spend each morning researching which currency to use today. And I'm sure the local store doesn't wanna figure out which set of ten optional currencies to sell milk for. This doesn't even begin to consider long term debt.
• Polygator 5y ago
  The justification is that contrarily to PoW, where there are economies of scale on computing power, PoS power scales linearly with your stake. Mining has been concentrated in the hands of a few gigantic mining pools for a while, and PoS will actually make Ethereum more democratic. Again, this is based on documentation, there might be unforeseen consequences
  • iDisagreedEar 5y ago
    Anyone can mine Bitcoin, the rich are the only people in control of Ethereum transactions. Unforseen? This has been known before the miners eliminated the soft cap on EIP 669.
  • Geee 5y ago
    There are no economies of scale in PoW. At least for longer term. Cost of energy rises locally the more you use it. Cheap energy is somewhat equally distributed around the globe, which ensures geographical decentralization.
    • logimame 5y ago
      Energy prices aren't really distributed equally around the world: https://www.globalpetrolprices.com/electricity_prices/ https://www.globalpetrolprices.com/electricity_prices/
      • micropresident 5y ago
        That has nothing to do with economies of scale.
      • Geee 5y ago
        This has more to do with electricity demand. It's important to understand the relationship between energy price vs. population density and standard of living. Energy is always cheapest where population density and standard of living are the lowest. That's why bitcoin mining will find it's way to remote sources of natural energy.
• loceng 5y ago
  Except with fiat system we can at least elect who the government is.
• gspr 5y ago
  No, they can't enlighten you. They've bought into a cult, and if they started considering the fundamental question of how this is better than fiat currency, the cognitive dissonance would hurt.
  • mustafa_pasi 5y ago
    In truth nobody knows. People hypothesize that recreating financial products on top of Ethereum (or Polkadot or Cordano) will result in competitive offerings. But it is hard to predict what will actually happen.
• meowface 5y ago
  Here's a comparison of PoS and PoW by Vitalik Buterin (creator of Ethereum): https://vitalik.ca/general/2020/11/06/pos2020.html https://vitalik.ca/general/2020/11/06/pos2020.html Obviously he's biased in favor of PoS for various reasons, but I think it's a worthy read.
• contravariant 5y ago
  Governments don't typically own >50% of the current money supply.
• purple_ferret 5y ago
  It's not that different. But the end goal isn't a revolutionary overhaul, but progress in a different direction. The delusion that crypto is or can be the best thing humanity has ever created has to come to an end. Let crypto just be another moderately useful system in society and let the speculation game die out.
• Vanclief 5y ago
  It is a system where you have skin in the game, the more skin in the game you have, the more power you have. Think it like a democracy where you are voting with your wallet. The main difference with the fiat world is that with Ethereum you have transparency, and there is no corruption. You can't just bribe a politician to enact a rule you want. Everything that happens in the network is recorded permanently, and rules are not a suggestion, but a practical reality that can't be circumvented.
  • briefcomment 5y ago
    What exactly do Ether holders vote on in this scenario? Changes to the protocol? Is that process highly transparent and easily accessible?
    • DennisP 5y ago
      There's no on-chain governance like that. Some other blockchains do it but Ethereum devs are skeptical. The upgrade process will keep working like it does now.
  • jayd16 5y ago
    That's called a plutocracy not a democracy.
• zionic 5y ago
  PoS is more equitable than endgame PoW. With PoS anyone with any amount of capital can secure the network. Even $10 can via decentralized stake pools. With endgame PoW only the rich can acquire mining ASICs and locate them in cheap/free (stolen) electricity zones. The vast majority of the world is entirely excluded from PoW mining BTC because the cost of electricity in their region makes mining unprofitable.
• je_bailey 5y ago
  So I'm more familiar with how Cardano and Polkadot do their POS rather than Ethereums. In Cardano since the entry level requirement to operate a stake pool is much smaller than it is to do something like Bitcoin mining, it creates a larger number of stake pools. There's also a soft limit on the size of the stake pool that encourages people to spread out their commitment so no one pool gets to large.So at least in the existing POS systems it seems to be working quite well. I'm going to be interested to see how it shakes out in Ethereum because they have to commit their funds. Which is in a way a burden.The more you put into the system for staking the less that you can use.
  • spopejoy 5y ago
    How do they prevent impersonation? There's no way a cryptosystem can prove that two different people actually have two different keys. If I want to pwn Cardano/Polkadot, don't I just need to run a bunch of different staking keys?
    • je_bailey 5y ago
      Looking at Cardano. There are currently 2,497 staking pools which are staking 72% percent of all Ada that is out there. Which is about 23 billion coins staked. So if you owned 12 billion cardano and set up 188 pools to hold all of it, yes you would control the majority of the network.
    • Sargos 5y ago
      Binance runs about a dozen staking pools publicly so there are definitely problems with trying to keep pools decentralized.
• ArkanExplorer 5y ago
  Whenever you have a system where it costs several dollars to carry out a transaction, it will always be inferior to fiat. We could bring microtransactions to the web, and replace a lot of advertising, if transaction costs were zero.
• TarasBob 5y ago
  Read the pros and cons of proof of stake compared to proof of work here (written by Vitalik): https://vitalik.ca/general/2020/11/06/pos2020.html https://vitalik.ca/general/2020/11/06/pos2020.html
• RivieraKid 5y ago
  In our current system, decisions are made democratically - you vote politicians, who choose central bankers, who make the decisions.
  • seph-reed 5y ago
    On the scale between a full democracy and a full oligarchy, what you're describing would be a "representative democracy." Unfortunately, our representatives don't really represent us, so we're much closer to oligarchy than democracy. Also, a full democracy it terrible. It's basically the equivalent of facebook... having representatives who's full time job is to be knowledgable is much better than giving everyone an equal say on everything.