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Because Proof of Work requires computational power, which is expensive and thus requires a lot of capital, and Proof of Stake requires controlling a significant
by hnbad 5y ago
Because Proof of Work requires computational power, which is expensive and thus requires a lot of capital, and Proof of Stake requires controlling a significant amount of the currency, which also requires a lot of capital. Basically the consensus is built around ways to demonstrate you already have a lot of money, either through conspicuous consumption (PoW) or flaunting your balance (PoS).
As to why VCs would invest in it: it's currently dodging most regulations that apply to financial transactions (money laundering, pyramid schemes, pump & dump schemes, etc) much like loot boxes dodge most gambling regulations (and it turns out selling gambling to kids is extremely profitable). This makes the market uniquely profitable to invest in right now with promises of extreme ROI as long as it remains unregulated.
"Humanitarian" campaigns to normalize tracking public records and qualifications on the blockchain in technologically underdeveloped countries also produce a high amount of technological lock-in while increasing the capabilities of automated decision making on the blockchain without having to bother with externalities. For example, if one's ability to use an NFT on social media hinges on demonstrating ownership of that NFT, copyright law becomes a tangential consideration much like systems like ContentID make it harder to claim fair use rights because the ContentID claim is not based in copyright law but in the terms of service.
Additionally a lot of the more vocal tech VCs are libertarians bordering on anarcho-capitalism (i.e. free market maximalists who think humanity's survival and progress hinges on a few Great Men rather than the unsophisticated masses). The greater Web3 ecosystem is trying to solve cooperation with people you actively distrust and represents every interaction as a financial transaction. This is extremely appealing to them. Their problem with capitalism isn't that it inevitably leads to a massive wealth disparity (because after all, some people are "just better") but that the government gets in the way. This makes the promise of decentralization (even if it defers to consensus between the already wealthy) ideologically appealing to them.
Based on my conversations with web3 believers, they would generally agree with most of what I said but object to the language I'm using because it doesn't sound very flattering.
- SyzygistSix 5y agoregarding "free market maximalists who think humanity's survival and progress hinges on a few Great Men rather than the unsophisticated masses" - Libertarianism may have changed in character, or perhaps more in how it is characterized in media, but it used to be that libertarians believed in lots of little people acting freely and that states and the large corporations they are mutually supported by are the opposite of what they want. Hopefully it is because the little people have largely left the relatively pointless large media spaces online and does not represent a genuine change in how the majority of libertarians, who used to not be terribly wealthy if they were wealthy at all, think.
- hnbad 5y agoI think this is a common misunderstanding because "libertarianism" nowadays can refer both to what is now called "libertarian socialism" (i.e. anarchism, individuals cooperating voluntarily for the common good) and right-wing libertarianism (i.e. laissez-faire capitalism or "anarcho-capitalism", natural selection via the free market). The latter generally believe some people are inherently superior (though they will not always make a point of where this comes from) and that everyone therefore deserves their lot in life because those at the bottom either are inherently inferior (and thus undeserving) or failed to activate their potential (and thus undeserving). The former generally believe we don't stand on the shoulders of giants so much as on the shoulders of billions and billions of people no worse or better than us. Some individuals may have genuine innate talent making them better at one thing or another without trying but while that may make their opinion on those matters more qualified it doesn't justify any claim to power as societal decisions (such as allocation of resources) should be reached by gaining consent from everyone affected. Without regulation, markets naturally tend towards centralization and thus a significant power imbalance. Heck, if you were to fully abolish the public commons and the state, you would inevitably reinvent feudalism as the owners of the largest corporations would need to hire private militias to subdue their workers and defend their property claims against competitors, customers and colonies. This is why many right-wing libertarians still want a public police and military and why libertarian socialists generally don't want markets as a political instrument even if they may be favorable towards coops as an intermediate step or for the production of commodity goods.