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PoS is a pretty broken system imo, it essentially codefies "rich gets richer" into the protocol. The biggest holders now control both the supply on the exchange

PoS is a pretty broken system imo, it essentially codefies "rich gets richer" into the protocol. The biggest holders now control both the supply on the exchanges and the protocol itself. It creates all kinds of weird issues (for example, what happens if an attacker gets a hold of a significant percentage of the coins, now they also have a great control over the network). Stakers don't have the same pressure to sell their coins because they are not actively spending money on hardware and energy which makes the system more exclusionary over time. I can go on and on. For all of it's problems, PoW is simple and just works. It ensures that there will be constant supply of coins for sale and ensures that nobody can just become richer because they started rich.

Slartie 5y ago
> nobody can just become richer because they started rich Right. In PoW, they need access to limited semiconductor supplies and cheap electricity. Which are two things that can be bought with...what was that stuff called...? Ah, yes: money! So PoW does just the same - the rich tend to get richer - but it adds the necessity to cause unnecessary environmental pollution on the scale of an entire country to it. Oh, and all the crypto holders pay collectively for that unnecessary "work". What a stroke of genius!
- rawtxapp 5y ago
  The profit margins of a miner is pretty slim. If the price increases, mining becomes profitable, competition increases bringing down the profitability, likewise in reverse. So yes, you need money to mine, but whatever you mine, you pretty much have to turn around and sell it right away to cover your costs and keep a small profit.
  - Slartie 5y ago
    That's exactly what I meant with "all crypto holders pay for it": in the state of equilibrium of costs and rewards, the huge costs are effectively paid by devaluing existing crypto holdings and via transaction costs. Is that good for crypto holders? No way! It's also not too good for miners of course, as they are in it for profit, not for rewards equaling costs. But fortunately for the miners, crypto mining is rarely in that state of equilibrium. In reality, mining does allow for a hefty profit margin to be reaped most of the time. Ask the miners if you don't believe me, they're not exactly used to just making "small profits". And who pays for that profit margin? Crypto holders and those making transactions with it - again! However you want to look at it, this coin looks crappy from both sides. Unless you're a miner.
    - pinkybanana 5y ago
      > However you want to look at it, this coin looks crappy from both sides. Unless you're a miner. Depends on what you are comparing to. For me, Bitcoin is easier to understand than the fiat system we are currently using, and that's why I'm heavily invested in to it. In addition to miners making huge profits, there have been also cases where miner operations have turned sour, KnC Miner being one example. Yes, there might be better systems out there. But BTC has very clear and simple protocol rules which are easy to understand, and it has properties which are very lucrative (permissionless, decentralized, limited supply, easily verifiable and transferable and so on). Other consensus mechanisms fail to deliver their promise in as effective way.
- fleddr 5y ago
  No, they are far from the same. It's true that BTC mining is capital intensive, yet it is highly competitive and risky, and most miners get a decent profit, yet need to sell the vast majority of mined coins to run their operation. Miners can never move on some parabolic increase of wealth as the very protocol itself prevents this. Rather, we should look at holders. Bitcoin is fair in the sense that it does not have rich get richer built in. If I'm rich and own 1,000 BTC whilst some poor slum has 0.001 BTC, neither of us has an advantage within the protocol. The rich person does not get free extra coins just for owning lots, nor do they have any additional say anywhere within the protocol. With PoS, just having lots of money means you get free new money, as well as an extra say in the protocol itself. Further, you should speak of electricity consumption combined with the energy mix. Electricity consumption does not automatically translate into pollution.
  - pinkybanana 5y ago
    I wouldn't say BTC is fair, but it is clearly fairer. With PoS coins, it is clear that minting new coins will heavily centralize for exchanges and big holders. With BTC, miners are clearly categorized as separate economic actor, where the skillset and capital needed to mint new coins is very different from let's say operating an exchange.
    - fleddr 5y ago
      I have a feeling that there's far too much emphasis on mining from a wealth perspective. The vast majority of Bitcoin is owned by a few thousand whales combined with many millions of smaller holders. There seems to be this narrative where some people believe miners are minting and then holding all the coins, getting ever richer, but this is plain false. It would be true with PoS though, so agree.
  - viraptor 5y ago
    > If I'm rich and own 1,000 BTC whilst some poor slum has 0.001 BTC, neither of us has an advantage within the protocol. Why would we care about "advantage within the protocol" while ignoring the whole world around it? A similar absurd description is: one person is holding $1B in their hands, another is holding $1 - neither has more say about the money nor any advantage within the system as long as they don't spend it. It's true, but not very meaningful - we do things with money we own.
- kerkeslager 5y ago
  1. Including sarcasm in your post didn't achieve anything except to increase the reader's blood pressure and make people like you less. Let's keep this polite, please. 2. You're right that the rich get richer with PoW as well, but I think we can agree that the connection between existing wealth and increasing wealth is stronger with PoS--PoS is almost literally just a statement of "the rich get richer". 3. The "it adds the necessity to cause unnecessary environmental pollution" argument is simply incorrect. Much of existing mining is already done with renewable energy--it's the most cost-effective way to mine anyway in most cases.
  - Slartie 5y ago
    1. It helps get the point across just _how crazy_ this is. Sarcasm isn't only a tool to personally attack people - it's also a tool to verbally emphasize objectively valid arguments. 2. That's the beauty of it! We arrive at the same result, but just skip the part where people need to buy tons of custom silicon that can't do anything other than burn energy for mining, and then burn energy. That part has a lot of not-so-nice side effects on the real world out there, from silicon shortage to environmental pollution. 3. It is entirely correct. Even if some mining in some places is done with renewable energy (which is far from the majority - otherwise: please provide proof for your statement regarding just "how much" mining is renewable-based), that renewable energy is removed from the market and thus can't be used to power other consumers, which then must use fossil-fuel based energy sources. It's not like there's not enough demand for energy in the world, especially of the renewable kind.
    - ballofrubber 5y ago
      The second point is objectively wrong. PoW needs participants to spend capital in order to keep the organization running, thus not the rich get richer, but the more efficient get richer. PoS participants have no sell pressure and no way of being "better" than their peers, which is why it is incredibly broken. In a PoW system you have fierce competition and the drive to the cheapest energy. Which today is stranded energy, that the market would never buy. It is hard to estimate what percentage is truly renewable. The biggest source of energy was hydroelectric. It is estimated that during rain season the renewable percentage is up to 70%. However even if you look at the lowest estimate of renewable energy (~25%) you get double the percentage of the best country. Bitcoin is the true solution to monetizing cheap energy production. It removes a large risk associated with investing in renewables as the network is a buyer of last resort. Thus you know that your energy always sees 100% usage (which is a big problem with grids today) Just a small thought experiment. Lets assume you want to build a charging station for EVs powered by your own solar farm at a somewhat remote location. 4 hours of the day you have a peak consumption of 100 units, the rest you only have 80 units consumption. Moving energy over large distances is incredibly expensive. Having a buyer for your energy (Bitcoin network) means that the investment carries a lot less risk.
norswap 5y ago
PoW also codifies "rich gets richer" - mining begets return on invested capital in exactly the same way that PoS does. In fact, arguably PoW is worse, because it has economies of scale that PoS does not have, so the rich truly do have an edge in PoW.
- rawtxapp 5y ago
  A PoW miner has to spend to cover their costs, a staker doesn't have any cost to cover, providing a cryptographic signature requires no energy on an ongoing basis, just an initial investment. PoW requires constant investment or you'll be left behind.
  - humperdink 5y ago
    I wish there would be more debate about the equity of a cryptocurrency amongst the tech community. Why should the least well off in society be part of a crypto-coin whose supply has been given to early adopters and insiders? Ultimately the social compact of the economy you create will involve everyone, so we should design a coin that solves hard problems, not just narrowly defined ones that conveniently benefit a narrow minority.
    - pinkybanana 5y ago
      > Why should the least well off in society be part of a crypto-coin whose supply has been given to early adopters and insiders? They shouldn't, what Bitcoin is enabling is the ability for whoever to use whatever kind of coin they want. Bitcoin opened the whole pandoras box where anyone can create their own coin if they want. However, for each crypto coin there is clear incentive to make the coin more useful in transactions, both for those more well off and for those less fortunate. Typical BTC holder wants to make BTC useful for everyone, because that adds value for their holdings. That usefulness might add value to those less well-off. If not, they can use something else - in the end there is more choice in the marketplace which should (in theory) benefit everyone.
    - rawtxapp 5y ago
      Bitcoin had by far the fairest distribution and the largest holder (Satoshi) hasn't touched his coins and for all practical purposes they are gone. You just can't replicate the same conditions which lead to it's existence today. From what I've seen, the main purpose of like 90+% of altcoins is to benefit their developers and investors and they'll likely all die and disappear.
Black101 5y ago
> PoS is a pretty broken system imo You could have a PoS currency that would initially distribute all coins evenly across the globe (that would be a really cool experiment). But yeah I don't like PoS either.
- t4t5 5y ago
  The only way this could work would be to force people to register their wallet address using some kind of government ID to prove that they are unique. But at that point you’re back to having created a completely centralised system.
nootropicat 5y ago
PoW empirically isn't secure. Attacks already happened, most notably on ethereum classic. If it was possible to rent enough hashpower all PoW blockchains would already be attacked because daily mining rewards are trivial compared to potential gains. The actual security relies on obfuscated proof of stake - how hard it is to attain enough mining hardware. Even so, attacking bitcoin is relatively cheap - even starting from zero, few billions are enough to order mining chips from a fab and organize mining warehouses with enough power to 51% the network. The reason it didn't happen is because there's not enough genuine economic activity on btc to profit from it - the worst you could do is try to steal other crypto from several exchanges, but given that they all require kyc today and the impossibility of hiding such a big operation, it's extremely unlikely to turn out profitable. If btc ever becomes widely used - for example, by Iran to sell their oil, to the point that freezing their btc bankrupts the country - attacking btc may become a military objective, and given the cost involved it would be trivial for the US military. They could leverage all Western owned mining facilities trivially, by telling them to enforce OFAC sanctions - chances are they wouldn't even have to build any mining facilities themselves. Another way to summarize this is: PoW only works for bitcoin as long as it remains a speculative toy. Such an attack is impossible in PoS, because unlike mining chips, acquiring enough staking tokens is simply impossible for sufficiently distributed coins - there isn't enough for sale and most owners are anonymous, making sanctions unenforceable. For this reason PoS is the only existing consensus system that can actually support something widely used for real world commerce.
- runeks 5y ago
  > Such an attack is impossible in PoS, because unlike mining chips, acquiring enough staking tokens is simply impossible for sufficiently distributed coins - there isn't enough for sale and most owners are anonymous, making sanctions unenforceable. This is only true in the absence of software bugs. In the presence of buggy node software, a worm can spread through the network, compromising all the private staking keys. In this way the whole network can be subverted by gaining access to secret information (private keys). This attack is not possible with PoW.
  - jude- 5y ago

Slartie 5y ago

> nobody can just become richer because they started rich Right. In PoW, they need access to limited semiconductor supplies and cheap electricity. Which are two things that can be bought with...what was that stuff called...? Ah, yes: money! So PoW does just the same - the rich tend to get richer - but it adds the necessity to cause unnecessary environmental pollution on the scale of an entire country to it. Oh, and all the crypto holders pay collectively for that unnecessary "work". What a stroke of genius!

rawtxapp 5y ago
The profit margins of a miner is pretty slim. If the price increases, mining becomes profitable, competition increases bringing down the profitability, likewise in reverse. So yes, you need money to mine, but whatever you mine, you pretty much have to turn around and sell it right away to cover your costs and keep a small profit.
- Slartie 5y ago
  That's exactly what I meant with "all crypto holders pay for it": in the state of equilibrium of costs and rewards, the huge costs are effectively paid by devaluing existing crypto holdings and via transaction costs. Is that good for crypto holders? No way! It's also not too good for miners of course, as they are in it for profit, not for rewards equaling costs. But fortunately for the miners, crypto mining is rarely in that state of equilibrium. In reality, mining does allow for a hefty profit margin to be reaped most of the time. Ask the miners if you don't believe me, they're not exactly used to just making "small profits". And who pays for that profit margin? Crypto holders and those making transactions with it - again! However you want to look at it, this coin looks crappy from both sides. Unless you're a miner.
  - pinkybanana 5y ago
    > However you want to look at it, this coin looks crappy from both sides. Unless you're a miner. Depends on what you are comparing to. For me, Bitcoin is easier to understand than the fiat system we are currently using, and that's why I'm heavily invested in to it. In addition to miners making huge profits, there have been also cases where miner operations have turned sour, KnC Miner being one example. Yes, there might be better systems out there. But BTC has very clear and simple protocol rules which are easy to understand, and it has properties which are very lucrative (permissionless, decentralized, limited supply, easily verifiable and transferable and so on). Other consensus mechanisms fail to deliver their promise in as effective way.
fleddr 5y ago
No, they are far from the same. It's true that BTC mining is capital intensive, yet it is highly competitive and risky, and most miners get a decent profit, yet need to sell the vast majority of mined coins to run their operation. Miners can never move on some parabolic increase of wealth as the very protocol itself prevents this. Rather, we should look at holders. Bitcoin is fair in the sense that it does not have rich get richer built in. If I'm rich and own 1,000 BTC whilst some poor slum has 0.001 BTC, neither of us has an advantage within the protocol. The rich person does not get free extra coins just for owning lots, nor do they have any additional say anywhere within the protocol. With PoS, just having lots of money means you get free new money, as well as an extra say in the protocol itself. Further, you should speak of electricity consumption combined with the energy mix. Electricity consumption does not automatically translate into pollution.
- pinkybanana 5y ago
  I wouldn't say BTC is fair, but it is clearly fairer. With PoS coins, it is clear that minting new coins will heavily centralize for exchanges and big holders. With BTC, miners are clearly categorized as separate economic actor, where the skillset and capital needed to mint new coins is very different from let's say operating an exchange.
  - fleddr 5y ago
    I have a feeling that there's far too much emphasis on mining from a wealth perspective. The vast majority of Bitcoin is owned by a few thousand whales combined with many millions of smaller holders. There seems to be this narrative where some people believe miners are minting and then holding all the coins, getting ever richer, but this is plain false. It would be true with PoS though, so agree.
- viraptor 5y ago
  > If I'm rich and own 1,000 BTC whilst some poor slum has 0.001 BTC, neither of us has an advantage within the protocol. Why would we care about "advantage within the protocol" while ignoring the whole world around it? A similar absurd description is: one person is holding $1B in their hands, another is holding $1 - neither has more say about the money nor any advantage within the system as long as they don't spend it. It's true, but not very meaningful - we do things with money we own.
kerkeslager 5y ago
1. Including sarcasm in your post didn't achieve anything except to increase the reader's blood pressure and make people like you less. Let's keep this polite, please. 2. You're right that the rich get richer with PoW as well, but I think we can agree that the connection between existing wealth and increasing wealth is stronger with PoS--PoS is almost literally just a statement of "the rich get richer". 3. The "it adds the necessity to cause unnecessary environmental pollution" argument is simply incorrect. Much of existing mining is already done with renewable energy--it's the most cost-effective way to mine anyway in most cases.
- Slartie 5y ago
  1. It helps get the point across just _how crazy_ this is. Sarcasm isn't only a tool to personally attack people - it's also a tool to verbally emphasize objectively valid arguments. 2. That's the beauty of it! We arrive at the same result, but just skip the part where people need to buy tons of custom silicon that can't do anything other than burn energy for mining, and then burn energy. That part has a lot of not-so-nice side effects on the real world out there, from silicon shortage to environmental pollution. 3. It is entirely correct. Even if some mining in some places is done with renewable energy (which is far from the majority - otherwise: please provide proof for your statement regarding just "how much" mining is renewable-based), that renewable energy is removed from the market and thus can't be used to power other consumers, which then must use fossil-fuel based energy sources. It's not like there's not enough demand for energy in the world, especially of the renewable kind.
  - ballofrubber 5y ago
    The second point is objectively wrong. PoW needs participants to spend capital in order to keep the organization running, thus not the rich get richer, but the more efficient get richer. PoS participants have no sell pressure and no way of being "better" than their peers, which is why it is incredibly broken. In a PoW system you have fierce competition and the drive to the cheapest energy. Which today is stranded energy, that the market would never buy. It is hard to estimate what percentage is truly renewable. The biggest source of energy was hydroelectric. It is estimated that during rain season the renewable percentage is up to 70%. However even if you look at the lowest estimate of renewable energy (~25%) you get double the percentage of the best country. Bitcoin is the true solution to monetizing cheap energy production. It removes a large risk associated with investing in renewables as the network is a buyer of last resort. Thus you know that your energy always sees 100% usage (which is a big problem with grids today) Just a small thought experiment. Lets assume you want to build a charging station for EVs powered by your own solar farm at a somewhat remote location. 4 hours of the day you have a peak consumption of 100 units, the rest you only have 80 units consumption. Moving energy over large distances is incredibly expensive. Having a buyer for your energy (Bitcoin network) means that the investment carries a lot less risk.

norswap 5y ago

PoW also codifies "rich gets richer" - mining begets return on invested capital in exactly the same way that PoS does. In fact, arguably PoW is worse, because it has economies of scale that PoS does not have, so the rich truly do have an edge in PoW.

rawtxapp 5y ago
A PoW miner has to spend to cover their costs, a staker doesn't have any cost to cover, providing a cryptographic signature requires no energy on an ongoing basis, just an initial investment. PoW requires constant investment or you'll be left behind.
- humperdink 5y ago
  I wish there would be more debate about the equity of a cryptocurrency amongst the tech community. Why should the least well off in society be part of a crypto-coin whose supply has been given to early adopters and insiders? Ultimately the social compact of the economy you create will involve everyone, so we should design a coin that solves hard problems, not just narrowly defined ones that conveniently benefit a narrow minority.
  - pinkybanana 5y ago
    > Why should the least well off in society be part of a crypto-coin whose supply has been given to early adopters and insiders? They shouldn't, what Bitcoin is enabling is the ability for whoever to use whatever kind of coin they want. Bitcoin opened the whole pandoras box where anyone can create their own coin if they want. However, for each crypto coin there is clear incentive to make the coin more useful in transactions, both for those more well off and for those less fortunate. Typical BTC holder wants to make BTC useful for everyone, because that adds value for their holdings. That usefulness might add value to those less well-off. If not, they can use something else - in the end there is more choice in the marketplace which should (in theory) benefit everyone.
  - rawtxapp 5y ago
    Bitcoin had by far the fairest distribution and the largest holder (Satoshi) hasn't touched his coins and for all practical purposes they are gone. You just can't replicate the same conditions which lead to it's existence today. From what I've seen, the main purpose of like 90+% of altcoins is to benefit their developers and investors and they'll likely all die and disappear.

Black101 5y ago

> PoS is a pretty broken system imo You could have a PoS currency that would initially distribute all coins evenly across the globe (that would be a really cool experiment). But yeah I don't like PoS either.

t4t5 5y ago
The only way this could work would be to force people to register their wallet address using some kind of government ID to prove that they are unique. But at that point you’re back to having created a completely centralised system.

nootropicat 5y ago

PoW empirically isn't secure. Attacks already happened, most notably on ethereum classic. If it was possible to rent enough hashpower all PoW blockchains would already be attacked because daily mining rewards are trivial compared to potential gains. The actual security relies on obfuscated proof of stake - how hard it is to attain enough mining hardware. Even so, attacking bitcoin is relatively cheap - even starting from zero, few billions are enough to order mining chips from a fab and organize mining warehouses with enough power to 51% the network. The reason it didn't happen is because there's not enough genuine economic activity on btc to profit from it - the worst you could do is try to steal other crypto from several exchanges, but given that they all require kyc today and the impossibility of hiding such a big operation, it's extremely unlikely to turn out profitable. If btc ever becomes widely used - for example, by Iran to sell their oil, to the point that freezing their btc bankrupts the country - attacking btc may become a military objective, and given the cost involved it would be trivial for the US military. They could leverage all Western owned mining facilities trivially, by telling them to enforce OFAC sanctions - chances are they wouldn't even have to build any mining facilities themselves. Another way to summarize this is: PoW only works for bitcoin as long as it remains a speculative toy. Such an attack is impossible in PoS, because unlike mining chips, acquiring enough staking tokens is simply impossible for sufficiently distributed coins - there isn't enough for sale and most owners are anonymous, making sanctions unenforceable. For this reason PoS is the only existing consensus system that can actually support something widely used for real world commerce.

runeks 5y ago
> Such an attack is impossible in PoS, because unlike mining chips, acquiring enough staking tokens is simply impossible for sufficiently distributed coins - there isn't enough for sale and most owners are anonymous, making sanctions unenforceable. This is only true in the absence of software bugs. In the presence of buggy node software, a worm can spread through the network, compromising all the private staking keys. In this way the whole network can be subverted by gaining access to secret information (private keys). This attack is not possible with PoW.
- jude- 5y ago