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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. Wit

by 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.

by bhaak 5y ago

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.