6 ms·

Among the things that are unfortunate about cryptocurrency as a model is the fact that it's not immune to the general capital-breeds-capital effect. For proof o

Among the things that are unfortunate about cryptocurrency as a model is the fact that it's not immune to the general capital-breeds-capital effect. For proof of stake, people with money to spare are likely to have newly-minted money granted to them in the future. For proof of work, people with money to spare can afford to buy the rigs to increase the odds they have newly-minted money granted to them in the future. I think it's fair to ask what the net benefit is to society for a wealth-distribution system to give more money to those who have the most money. Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor.

iLoveOncall 4y ago
"Unfortunate" is a very generous word in that case. For a technology that claims to be decentralized, it is simply one more major flaw in an already terrible design.
deleted 4y ago
[deleted]
jalino23 4y ago
nothing stops crypto PoS with governance to hand money to the poor as well.
- klodolph 4y ago
  With fiat, there are at least some incentives. Not perfect incentives, but incentives just the same. Not sure what would incentivize crypto here.
  - bee_rider 4y ago
    If a cryptocurrency actually gained widespread use (competitive with cash), I'd imagine it would take on some aspects of a central bank -- being the only currency is only fun if the economy running smoothly. Money given to poor people more-or-less immediately enters circulation.
- bee_rider 4y ago
  Seems like an interesting idea to spur adoption of the currency.
- skybrian 4y ago
  Depending on what you mean by money, there are unsolved problems. You need some kind of layer that maps real people to accounts, or people can just create lots of accounts for unlimited money. There was some crypto startup that wanted to do this and was going to different cities and doing retina scans. I wonder what happened to them? I suppose you could outsource it by donating to GiveDirectly, but that would require conversion to real money and then (by GiveDirectly) to mobile phone payments. In that case, the cryptocurrency isn't solving much of the problem.
the-anarchist 4y ago
- bee_rider 4y ago
  Countries with social safetynets do exist, even if we don't live in one.
  - nightski 4y ago
    Social safety nets are one thing. But in those countries don't fool yourself capital still breeds capital. Also the U.S. does have social safety nets. In fact the largest source of government spending is on them. I'm not saying we don't need more, but we can't dismiss what does exist.
    - derac 4y ago
      The OP didn't claim any currency is immune to that. Actually, noone did.
- shadowgovt 4y ago
  I'm thinking more along the lines of the giant stimulus the United States cut to almost everyone during the COVID-19 pandemic. Everyone who paid taxes just got a check in the mail.
  - sam0x17 4y ago
    It really wasn't giant. It was less than the average cost of one month of rent in most locations
    - hn_throwaway_99 4y ago
      BS, especially since the 3-time IRS checks were just one small part of the stimulus. The enhanced unemployment lasted for months, and the increased amount alone was more than many people's regular paychecks.
DennisP 4y ago
The government authority doesn't go away just because cryptocurrency exists. Unless cryptocurrency somehow replaces fiat entirely, which seems unlikely. And even if that happened, governments could do the same by way of taxes.
- hitpointdrew 4y ago
  > Unless cryptocurrency somehow replaces fiat entirely, which seems unlikely. No the central banks of the world are all working on fiat crypto, so we'll get the worst of both worlds.
  - dsr_ 4y ago
    "fiat crypto", or if you prefer, digital currency, will neither be proof-of-work nor proof-of-stake. Neither mechanism is needed when there is a single trusted authority.
    - hitpointdrew 4y ago
      - lovich 4y ago
        Relative to random individuals it seems like a democratic form of government at least, has several advantages Did society fall apart when current fiat currency with the government as the central trusted authority was adopted?
        deleted 4y ago
        [deleted]
    - codehalo 4y ago
      A "single authority", not a "single trusted authority".
      - 4y ago
px43 4y ago
PoS pays the people who run the infrastructure. Someone has to run it, and it's trivial for anyone to participate. If you have 5 dollars you can stake it in the PoS network and earn rewards. The barrier for entry in the legacy financial system is way way higher. Have you ever applied for a banking license?
- sterlind 4y ago
  you have to have 32 ETH, which is around $50K USD, but agreed other than that.
  - px43 4y ago
    You need 32 ETH to run your own staking node, but there are many options for liquid staking, which can be done with any denomination of ETH.
  - sudhirj 4y ago
    Pooling should be possible, same as mining earlier. Collect ETH from a bunch of people and split the gains by ratio.
- shadowgovt 4y ago
  [edit: misunderstood the initial statement; disregard the part that was previously here] > The barrier for entry in the legacy financial system is way way higher. Have you ever applied for a banking license? One doesn't have to have a banking license to use the local fiat currency of one's nation (basically, one is born into it). And one must do almost nothing to get a check from the government if they decide to stimulate the economy by handing out money to those who showed they had very little on their last tax return.
  - px43 4y ago
    You don't need to be a staker to use Ethereum either. You can also stake with a few clicks on a website if you're using a web3 capable browser. You don't need to buy anything fancy or even open up a terminal if you don't want to. If you're into UBI type stuff, yeah, there are multiple UBI projects on Ethereum https://www.proofofhumanity.id https://www.proofofhumanity.id There are a ton of other projects that allow people to share storage space, compute, art, information, etc to earn cryptocurrencies. People contribute what they can to the network, and are compensated for their efforts. Projects like gitcoin are raising millions of dollars for people who volunteer to provide public goods, from performing security audits on large open source projects, to cleaning plastic out of rivers (https://gitcoin.co/grants/ https://gitcoin.co/grants/). Seems to me like the Ethereum ecosystem is far more altruistic than many current governments.
kmeisthax 4y ago
This isn't unfortunate, this is deliberate. Bitcoin was birthed dripping in the amniotic fluid of right-libertarian ideology. Capital-breeds-capital isn't so much a side effect as much as it is the deliberate goal of capitalism: use money to make more money. And the core of right-libertarian ideology is to more or less let the capitalists do what they want. This isn't exclusive to capitalism; there are other ideologies that work this way. However, they are ever more intolerably authoritarian than capitalism. Capitalists at least offer the promise of growing the economic universe alongside themselves - you can get 10x richer by taking 50% less profit in some businesses. But fascists, criminals, and dictators also play this game - not to create wealth and grow the size of the pie, but to shrink it so their share gets bigger. And without a government to enforce rules, capitalists will be out-moded, out-gunned, and out-played by thieves of various stripes every time. Making this worse is the fact that Bitcoin mining is inherently and deliberately zero-sum. It has to be, because it pays in inflation (block subsidy) and confiscation (transaction fees). So capitalists can offer no wealth creation here. In other words, Bitcoin is how authoritarians trolled right-libertarians into building and buying into a system that creates the thing they hate.
belltaco 4y ago
MS has a patent application on PoL (proof of life) so that crypto can be distributed to every human being that wants it. https://www.pcmag.com/news/microsoft-patent-describes-tracking-brain-activity-to-mine-cryptocurrency https://www.pcmag.com/news/microsoft-patent-describes-tracki...
- dezmou 4y ago
  "By tracking brainwaves when someone watches an advert, Microsoft hopes to use the data generated as a “proof-of-work.” " Look like an episode of black mirror
chef0 4y ago
A deflationary system awards each market participant with an equitable increase of purchasing power relative to the increase in demand for earning more units through value creation. I'd imagine that would shift some social responsibility from being more centralized to being more decentralized. The Gini Index over time has only been trending up toward 100, signaling a growing environment of inequality. Having said that I do believe that we tend to oscillate between central and decentralized governance of social responsibility and technology innovation around how we transfer value (money) enables a shift away from one end of the spectrum.
- lottin 4y ago
  > A deflationary system awards each market participant with an equitable increase of purchasing power relative to the increase in demand for earning more units through value creation. What do you mean? Holding a currency involves zero value creation.
dlivingston 4y ago
> [crypto is] not immune to the general capital-breeds-capital effect. Is there a currency - even theoretical - where 'capital-breeds-capital' is _not_ a side-effect?
- shadowgovt 4y ago
  Fiat currencies can defend against that phenomenon via wealth redistribution: simply creating more currency and handing it to the poor.
- fwip 4y ago
  Most currencies don't have it baked it into the core workings of the currency. In crypto, possessing money generates money, without investing it or putting the money "to work." This would be like if the dollar bills in your wallet periodically grew another dollar.
thayne 4y ago
> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor. Maybe, but it is much more common to summon money out of nothing and give it to the rich. At least in the US this happens in the form of buying securities from entities that hold them, which from what I understand is kind of similar to proof of stake (you stake some of your currency by buying a security for a chance to get more when you sell it).
- __blockcipher__ 4y ago
  Just to give context to others, it sounds like you're talking about https://en.wikipedia.org/wiki/Quantitative_easing https://en.wikipedia.org/wiki/Quantitative_easing
godelski 4y ago
> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor. This is why I'd rather see development of privacy coins, like zcash, and less concerned with the decentralization issue (I've yet to see a project actually address centralization or even acknowledge the issue you're bringing up: momentum). We're moving away from a cashless society and while that has a lot of great benefits it also has a lot of detriments. So why not have digital cash then? ZKPs for transactions. If you want to promote democracy you should also want to decrease the ability for authoritarians to arise, which in our modern era means how much data they can get their hands on and abuse. There's common cop-outs like how will taxes work etc, but society ran pretty smoothly on cash before. Companies still have to report incomes and salaries. We can still do consumption taxes. So we have our income and consumption easily solved. I'm even fine with a small transaction fee, which I know others aren't, but we already pay this in the world of credit cards (2-4%). I think we could really bring down the Visa/Mastercard tax (maybe something like 0.1%/0.5%?) and it would all be a win for everyone. It is clear to me that cryptocurrencies aren't going to get us this world, so let's start thinking about other means.
kayamon 4y ago
> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor. They also have the authority to conjure money out of nothing and hand it to the rich.

iLoveOncall 4y ago

"Unfortunate" is a very generous word in that case. For a technology that claims to be decentralized, it is simply one more major flaw in an already terrible design.

deleted 4y ago

[deleted]

jalino23 4y ago

nothing stops crypto PoS with governance to hand money to the poor as well.

klodolph 4y ago
With fiat, there are at least some incentives. Not perfect incentives, but incentives just the same. Not sure what would incentivize crypto here.
- bee_rider 4y ago
  If a cryptocurrency actually gained widespread use (competitive with cash), I'd imagine it would take on some aspects of a central bank -- being the only currency is only fun if the economy running smoothly. Money given to poor people more-or-less immediately enters circulation.
bee_rider 4y ago
Seems like an interesting idea to spur adoption of the currency.
skybrian 4y ago
Depending on what you mean by money, there are unsolved problems. You need some kind of layer that maps real people to accounts, or people can just create lots of accounts for unlimited money. There was some crypto startup that wanted to do this and was going to different cities and doing retina scans. I wonder what happened to them? I suppose you could outsource it by donating to GiveDirectly, but that would require conversion to real money and then (by GiveDirectly) to mobile phone payments. In that case, the cryptocurrency isn't solving much of the problem.

the-anarchist 4y ago

bee_rider 4y ago
Countries with social safetynets do exist, even if we don't live in one.
- nightski 4y ago
  Social safety nets are one thing. But in those countries don't fool yourself capital still breeds capital. Also the U.S. does have social safety nets. In fact the largest source of government spending is on them. I'm not saying we don't need more, but we can't dismiss what does exist.
  - derac 4y ago
    The OP didn't claim any currency is immune to that. Actually, noone did.
shadowgovt 4y ago
I'm thinking more along the lines of the giant stimulus the United States cut to almost everyone during the COVID-19 pandemic. Everyone who paid taxes just got a check in the mail.
- sam0x17 4y ago
  It really wasn't giant. It was less than the average cost of one month of rent in most locations
  - hn_throwaway_99 4y ago
    BS, especially since the 3-time IRS checks were just one small part of the stimulus. The enhanced unemployment lasted for months, and the increased amount alone was more than many people's regular paychecks.

DennisP 4y ago

The government authority doesn't go away just because cryptocurrency exists. Unless cryptocurrency somehow replaces fiat entirely, which seems unlikely. And even if that happened, governments could do the same by way of taxes.

hitpointdrew 4y ago
> Unless cryptocurrency somehow replaces fiat entirely, which seems unlikely. No the central banks of the world are all working on fiat crypto, so we'll get the worst of both worlds.
- dsr_ 4y ago
  "fiat crypto", or if you prefer, digital currency, will neither be proof-of-work nor proof-of-stake. Neither mechanism is needed when there is a single trusted authority.
  - hitpointdrew 4y ago
    - lovich 4y ago
      Relative to random individuals it seems like a democratic form of government at least, has several advantages Did society fall apart when current fiat currency with the government as the central trusted authority was adopted?
      - deleted 4y ago
        [deleted]
  - codehalo 4y ago
    A "single authority", not a "single trusted authority".
    - 4y ago

px43 4y ago

PoS pays the people who run the infrastructure. Someone has to run it, and it's trivial for anyone to participate. If you have 5 dollars you can stake it in the PoS network and earn rewards. The barrier for entry in the legacy financial system is way way higher. Have you ever applied for a banking license?

sterlind 4y ago
you have to have 32 ETH, which is around $50K USD, but agreed other than that.
- px43 4y ago
  You need 32 ETH to run your own staking node, but there are many options for liquid staking, which can be done with any denomination of ETH.
- sudhirj 4y ago
  Pooling should be possible, same as mining earlier. Collect ETH from a bunch of people and split the gains by ratio.
shadowgovt 4y ago
[edit: misunderstood the initial statement; disregard the part that was previously here] > The barrier for entry in the legacy financial system is way way higher. Have you ever applied for a banking license? One doesn't have to have a banking license to use the local fiat currency of one's nation (basically, one is born into it). And one must do almost nothing to get a check from the government if they decide to stimulate the economy by handing out money to those who showed they had very little on their last tax return.
- px43 4y ago
  You don't need to be a staker to use Ethereum either. You can also stake with a few clicks on a website if you're using a web3 capable browser. You don't need to buy anything fancy or even open up a terminal if you don't want to. If you're into UBI type stuff, yeah, there are multiple UBI projects on Ethereum https://www.proofofhumanity.id https://www.proofofhumanity.id There are a ton of other projects that allow people to share storage space, compute, art, information, etc to earn cryptocurrencies. People contribute what they can to the network, and are compensated for their efforts. Projects like gitcoin are raising millions of dollars for people who volunteer to provide public goods, from performing security audits on large open source projects, to cleaning plastic out of rivers (https://gitcoin.co/grants/ https://gitcoin.co/grants/). Seems to me like the Ethereum ecosystem is far more altruistic than many current governments.

kmeisthax 4y ago

This isn't unfortunate, this is deliberate. Bitcoin was birthed dripping in the amniotic fluid of right-libertarian ideology. Capital-breeds-capital isn't so much a side effect as much as it is the deliberate goal of capitalism: use money to make more money. And the core of right-libertarian ideology is to more or less let the capitalists do what they want. This isn't exclusive to capitalism; there are other ideologies that work this way. However, they are ever more intolerably authoritarian than capitalism. Capitalists at least offer the promise of growing the economic universe alongside themselves - you can get 10x richer by taking 50% less profit in some businesses. But fascists, criminals, and dictators also play this game - not to create wealth and grow the size of the pie, but to shrink it so their share gets bigger. And without a government to enforce rules, capitalists will be out-moded, out-gunned, and out-played by thieves of various stripes every time. Making this worse is the fact that Bitcoin mining is inherently and deliberately zero-sum. It has to be, because it pays in inflation (block subsidy) and confiscation (transaction fees). So capitalists can offer no wealth creation here. In other words, Bitcoin is how authoritarians trolled right-libertarians into building and buying into a system that creates the thing they hate.

belltaco 4y ago

MS has a patent application on PoL (proof of life) so that crypto can be distributed to every human being that wants it. https://www.pcmag.com/news/microsoft-patent-describes-tracking-brain-activity-to-mine-cryptocurrency https://www.pcmag.com/news/microsoft-patent-describes-tracki...

dezmou 4y ago
"By tracking brainwaves when someone watches an advert, Microsoft hopes to use the data generated as a “proof-of-work.” " Look like an episode of black mirror

chef0 4y ago

A deflationary system awards each market participant with an equitable increase of purchasing power relative to the increase in demand for earning more units through value creation. I'd imagine that would shift some social responsibility from being more centralized to being more decentralized. The Gini Index over time has only been trending up toward 100, signaling a growing environment of inequality. Having said that I do believe that we tend to oscillate between central and decentralized governance of social responsibility and technology innovation around how we transfer value (money) enables a shift away from one end of the spectrum.

lottin 4y ago
> A deflationary system awards each market participant with an equitable increase of purchasing power relative to the increase in demand for earning more units through value creation. What do you mean? Holding a currency involves zero value creation.

dlivingston 4y ago

> [crypto is] not immune to the general capital-breeds-capital effect. Is there a currency - even theoretical - where 'capital-breeds-capital' is _not_ a side-effect?

shadowgovt 4y ago
Fiat currencies can defend against that phenomenon via wealth redistribution: simply creating more currency and handing it to the poor.
fwip 4y ago
Most currencies don't have it baked it into the core workings of the currency. In crypto, possessing money generates money, without investing it or putting the money "to work." This would be like if the dollar bills in your wallet periodically grew another dollar.

thayne 4y ago

> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor. Maybe, but it is much more common to summon money out of nothing and give it to the rich. At least in the US this happens in the form of buying securities from entities that hold them, which from what I understand is kind of similar to proof of stake (you stake some of your currency by buying a security for a chance to get more when you sell it).

__blockcipher__ 4y ago
Just to give context to others, it sounds like you're talking about https://en.wikipedia.org/wiki/Quantitative_easing https://en.wikipedia.org/wiki/Quantitative_easing

godelski 4y ago

> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor. This is why I'd rather see development of privacy coins, like zcash, and less concerned with the decentralization issue (I've yet to see a project actually address centralization or even acknowledge the issue you're bringing up: momentum). We're moving away from a cashless society and while that has a lot of great benefits it also has a lot of detriments. So why not have digital cash then? ZKPs for transactions. If you want to promote democracy you should also want to decrease the ability for authoritarians to arise, which in our modern era means how much data they can get their hands on and abuse. There's common cop-outs like how will taxes work etc, but society ran pretty smoothly on cash before. Companies still have to report incomes and salaries. We can still do consumption taxes. So we have our income and consumption easily solved. I'm even fine with a small transaction fee, which I know others aren't, but we already pay this in the world of credit cards (2-4%). I think we could really bring down the Visa/Mastercard tax (maybe something like 0.1%/0.5%?) and it would all be a win for everyone. It is clear to me that cryptocurrencies aren't going to get us this world, so let's start thinking about other means.

kayamon 4y ago

> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor. They also have the authority to conjure money out of nothing and hand it to the rich.