3 ms·

That's well argued and gives me pause. Anyone have a good counterargument?

potiuper 5y ago
Work=Force(*distance) measured in energy units is usually concentrated (pressure). The probability distribution of default may be correlated, but is not same as, the distribution of energy.
0-_-0 5y ago
> Proof of Stake, by its very design, centralizes over time. I don't see how. If I have 10% of total supply and you have 20%, means I get 10% of mined coins an you get 20%. This means we will stay at the same percentage over time, no?
- modeless 5y ago
  People with less money tend to spend a higher percentage of it than people with more money. Given that, there is a threshold where people under it will have their wealth decrease over time, and people over it will have their wealth increase over time.
  - bhaak 5y ago
    But the barriers to entry are much higher with proof of work and then I'm still at a disadvantage as the economics of scales heavily favor the big players. With proof of stake I can start with almost any amount and I'm not at a disadvantage.
    - modeless 5y ago
      The important difference is that proof of work is a competition. In a steady state, competition will push costs up until they meet revenue, driving profit to zero. In contrast, proof of stake is not competitive and has very little risk or cost. It's practically pure profit, and the wealthier you are the more you make. Proof of work miners make profits today, but this is a temporary situation caused by the large block reward which will fall, and large price increases which cannot last forever. Proof of work mining is not a risk-free way for the rich to get richer in the long term, the way proof of stake is. It is fundamentally a low margin competitive business. No better than any other business the rich might pursue with their capital, and worse than many.
      - bhaak 5y ago
        > Proof of work miners make profits today, but this is a temporary situation caused by the large block reward which will fall, and large price increases which cannot last forever. But that is the problem I talked about. Already today the entry into the mining business is costly. Not everybody can do that. There are already centralisation concerns with Bitcoin miners and the pressure will only increase in the future due to economies of scale. > In contrast, proof of stake is not competitive and has very little risk or cost. It's practically pure profit, and the wealthier you are the more you make. I disagree. But the competition lies elsewhere than with PoW. As with PoS you are purely securing the blockchain with capital the competition lies with other investments. With Ethereum 2.0 the more ETH is staked the less interest is earned by the stakers (https://docs.ethhub.io/ethereum-basics/monetary-policy/#proof-of-stake-impact https://docs.ethhub.io/ethereum-basics/monetary-policy/#proo...). This means for big players (the wealthy stakers) their stakes need to yield as much ROI as other financial instruments. If their stakes falls below that they will take their ETH elsewhere. For less wealthy stakers who have less easy access to financial instruments they can continue staking with less yield. Also staking is pretty easy, it needs to be, so that enough small stakers can do it and we have enough decentralisation.
- waterproof 5y ago
  I think you're roughly correct. 49% doesn't automatically become 51% purely through the PoS process. But if the owner of 49% of the coin goes out and buys an additional 2% on the market, then they have a majority of the coins and it's all over. It's not guaranteed to happen, but does seem plausible that some single entity could end up with 51% sometime in the future. Or a group could band together to form a majority and steal everyone else's money. It does become harder to prevent a coup over time. As more coins are issued the cost to buy a 1% stake increases but the cost to maintain a 1% stake does not.
  - 0-_-0 5y ago
    Isn't this true of every "Proof of X" algorithm?
    - waterproof 5y ago
      I think the point is that the with PoS, you're proving you have the coin itself, which costs nothing once you have the coin. Changes things a bit.

Work=Force(*distance) measured in energy units is usually concentrated (pressure). The probability distribution of default may be correlated, but is not same as, the distribution of energy.

0-_-0 5y ago

> Proof of Stake, by its very design, centralizes over time. I don't see how. If I have 10% of total supply and you have 20%, means I get 10% of mined coins an you get 20%. This means we will stay at the same percentage over time, no?

modeless 5y ago
People with less money tend to spend a higher percentage of it than people with more money. Given that, there is a threshold where people under it will have their wealth decrease over time, and people over it will have their wealth increase over time.
- bhaak 5y ago
  But the barriers to entry are much higher with proof of work and then I'm still at a disadvantage as the economics of scales heavily favor the big players. With proof of stake I can start with almost any amount and I'm not at a disadvantage.
  - modeless 5y ago
    The important difference is that proof of work is a competition. In a steady state, competition will push costs up until they meet revenue, driving profit to zero. In contrast, proof of stake is not competitive and has very little risk or cost. It's practically pure profit, and the wealthier you are the more you make. Proof of work miners make profits today, but this is a temporary situation caused by the large block reward which will fall, and large price increases which cannot last forever. Proof of work mining is not a risk-free way for the rich to get richer in the long term, the way proof of stake is. It is fundamentally a low margin competitive business. No better than any other business the rich might pursue with their capital, and worse than many.
    - bhaak 5y ago
      > Proof of work miners make profits today, but this is a temporary situation caused by the large block reward which will fall, and large price increases which cannot last forever. But that is the problem I talked about. Already today the entry into the mining business is costly. Not everybody can do that. There are already centralisation concerns with Bitcoin miners and the pressure will only increase in the future due to economies of scale. > In contrast, proof of stake is not competitive and has very little risk or cost. It's practically pure profit, and the wealthier you are the more you make. I disagree. But the competition lies elsewhere than with PoW. As with PoS you are purely securing the blockchain with capital the competition lies with other investments. With Ethereum 2.0 the more ETH is staked the less interest is earned by the stakers (https://docs.ethhub.io/ethereum-basics/monetary-policy/#proof-of-stake-impact https://docs.ethhub.io/ethereum-basics/monetary-policy/#proo...). This means for big players (the wealthy stakers) their stakes need to yield as much ROI as other financial instruments. If their stakes falls below that they will take their ETH elsewhere. For less wealthy stakers who have less easy access to financial instruments they can continue staking with less yield. Also staking is pretty easy, it needs to be, so that enough small stakers can do it and we have enough decentralisation.
waterproof 5y ago
I think you're roughly correct. 49% doesn't automatically become 51% purely through the PoS process. But if the owner of 49% of the coin goes out and buys an additional 2% on the market, then they have a majority of the coins and it's all over. It's not guaranteed to happen, but does seem plausible that some single entity could end up with 51% sometime in the future. Or a group could band together to form a majority and steal everyone else's money. It does become harder to prevent a coup over time. As more coins are issued the cost to buy a 1% stake increases but the cost to maintain a 1% stake does not.
- 0-_-0 5y ago
  Isn't this true of every "Proof of X" algorithm?
  - waterproof 5y ago
    I think the point is that the with PoS, you're proving you have the coin itself, which costs nothing once you have the coin. Changes things a bit.