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>Proof-of-stake systems are not perfect: they still lead to some centralization of power, since in this paradigm the rich tend to get richer. What does this me

by 99_00 4y ago

>Proof-of-stake systems are not perfect: they still lead to some centralization of power, since in this paradigm the rich tend to get richer. What does this mean? Is there a central node in PoS, or are they saying that power is proportional to stake size?

DennisP 4y ago
Depends on the PoS design. Some have a limited number of stakers, or give stakers voting rights in an on-chain governance system. Neither is true of Ethereum's proof-of-stake, but it's not quite in full production yet. As for the rich getting richer, that's no different from mining. Stakers have much lower ongoing costs, but the rewards are lower too so their percentage annual return isn't necessarily better. And everyone gets the same return so there's no economy of scale, which is not true of mining (or, for that matter, savings accounts).
randomran01234 4y ago
The idea is that if you have more tokens, you will reap more reward in PoS. This is because you receive around 5% return on your stake, so if you set up multiple validators you will earn more per year. Note that PoW works exactly like this too, except far worse due to economies of scale. Purchasing mining facilities in bulk will give you a much better deal than buying rigs as a home miner. Whereas in PoS, both the ultra-whale (1000 ETH) and mini-whale (32 ETH) are earning the same exact % return on their investment. The average user delegating in a staking pool is also earning fairly similar return to all validators (with some % of their return paid to validators for their services). I do not think the claim that PoS is more centralizing or more “rich get richer” than PoW is necessarily true.
- pcthrowaway 4y ago
  Your stake is really growing relative to the total supply as fast as a smaller holder's though. Like anything, rich have more opportunities to get richer, but I don't think these problems are specifically egregious in PoS. For chains which have on-chain governance, there's also the possibility that large holders will vote to change distribution in ways that favor them (though this hasn't happened yet), but this is a problem with any vote-by-stake system (imagine if equity share-holders could vote for larger shareholders to get more dividends). And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future? This could even be combined with zero-knowledge to ensure voters are unique humans without making their wallet<->identity associations publicly discoverable (though there may be situations where this is desireable as well)
  - yellowapple 4y ago
    > And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future? This is what I'm hoping for. As soon as this proves viable, this opens up the door for things like automated international UBI.
    - randomran01234 4y ago
      It probably is not solved without a central authority that distributes and revoked identity tokens, like we have with passports. Decentralized proof of personhood is a pipe dream.
      - pcthrowaway 4y ago
        I'm not sure why this was marked dead (unless you're shadowbanned), but this is valid. I think the idea is for centralized entities to issue non-transferable tokens to accounts, which can then be used to verify that account's "personhood" as you call it, while preventing multiple accounts from getting one for the same person.
yellowapple 4y ago
Power is proportional to stake size. This can be (and is) mitigated by penalizing stake pools that get too big relative to the rest of the network, thus encouraging users to stake on other pools.

by 99_00 4y ago

DennisP 4y ago

Depends on the PoS design. Some have a limited number of stakers, or give stakers voting rights in an on-chain governance system. Neither is true of Ethereum's proof-of-stake, but it's not quite in full production yet. As for the rich getting richer, that's no different from mining. Stakers have much lower ongoing costs, but the rewards are lower too so their percentage annual return isn't necessarily better. And everyone gets the same return so there's no economy of scale, which is not true of mining (or, for that matter, savings accounts).

randomran01234 4y ago

The idea is that if you have more tokens, you will reap more reward in PoS. This is because you receive around 5% return on your stake, so if you set up multiple validators you will earn more per year. Note that PoW works exactly like this too, except far worse due to economies of scale. Purchasing mining facilities in bulk will give you a much better deal than buying rigs as a home miner. Whereas in PoS, both the ultra-whale (1000 ETH) and mini-whale (32 ETH) are earning the same exact % return on their investment. The average user delegating in a staking pool is also earning fairly similar return to all validators (with some % of their return paid to validators for their services). I do not think the claim that PoS is more centralizing or more “rich get richer” than PoW is necessarily true.

pcthrowaway 4y ago
Your stake is really growing relative to the total supply as fast as a smaller holder's though. Like anything, rich have more opportunities to get richer, but I don't think these problems are specifically egregious in PoS. For chains which have on-chain governance, there's also the possibility that large holders will vote to change distribution in ways that favor them (though this hasn't happened yet), but this is a problem with any vote-by-stake system (imagine if equity share-holders could vote for larger shareholders to get more dividends). And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future? This could even be combined with zero-knowledge to ensure voters are unique humans without making their wallet<->identity associations publicly discoverable (though there may be situations where this is desireable as well)
- yellowapple 4y ago
  > And there are theoretical solutions to this as well; projects like Bright-ID are working on proof-of-identity / proof-of-humanity.. maybe we'll see a proof-of-stake blockchain with governance tied to identity in the future? This is what I'm hoping for. As soon as this proves viable, this opens up the door for things like automated international UBI.
  - randomran01234 4y ago
    It probably is not solved without a central authority that distributes and revoked identity tokens, like we have with passports. Decentralized proof of personhood is a pipe dream.
    - pcthrowaway 4y ago
      I'm not sure why this was marked dead (unless you're shadowbanned), but this is valid. I think the idea is for centralized entities to issue non-transferable tokens to accounts, which can then be used to verify that account's "personhood" as you call it, while preventing multiple accounts from getting one for the same person.

yellowapple 4y ago

Power is proportional to stake size. This can be (and is) mitigated by penalizing stake pools that get too big relative to the rest of the network, thus encouraging users to stake on other pools.