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Other cryptocurrencies use "proof of stake" instead of "proof of work". Notably, Peercoin. This doesn't use energy. It's quite possible at some point that one

by frabcus 13y ago

Other cryptocurrencies use "proof of stake" instead of "proof of work". Notably, Peercoin. This doesn't use energy. It's quite possible at some point that one of those will supersede Bitcoin, and/or Bitcoin will alter to proof of stake (perhaps when nearly all coins are mined).

wcoenen 13y ago
How can proof of stake drive consensus? It seems you could mine both sides of a fork simultaneously.
- fragsworth 13y ago
  Proof of stake requires that you are holding coins, making miners personally invested. If a fork occurs, consensus is driven by the fact that stakeholders would lose value if they allow the fork to continue, so they will form consensus quickly.
  - kahoon 13y ago
    Why would they lose value if they allow the fork to continue? They can hold and stake coins in both forks, right?
    - fragsworth 13y ago
      Because the market value of the currency would probably drop if it were forked for very long.
  - wcoenen 13y ago
    When you chose a side of a fork, you risk having chosen the wrong one. So it seems rational not to chose. Let the other miners take the risk. After all, they won't let the currency collapse right? It seems that the Nash equilibrium for this game will then be that none of the miners take the risk, consensus is lost, and the currency does collapse. Perhaps I'm missing something though.
    - oakwhiz 13y ago
      When you choose the side that everyone else ends up choosing as well, you end up profiting from the block reward and also collecting the transaction fees. If you mined the side that ended up being shorter, then your block rewards are part of a transaction that the network considers to be invalid, as in, it never occurred. So there is incentive to try to figure out which side of a fork is the most beneficial and also which side is going to be preferred by other miners based on their affiliations with the addresses in the transactions for either side of the fork. Also consider what has been risked - electrical energy, a small amount of bandwidth, and the ever-present risk of hardware failure. The return is in units of a deflationary currency. In practice the number of wasted blocks is quite low since the network ends up being in consensus most of the time. In the past it has been quite profitable to mine using GPUs and FPGAs.
sroerick 13y ago
Or, perhaps more realistically, any app running on the bitcoin protocol will be incentivised to use proof of stake.

by frabcus 13y ago

wcoenen 13y ago

How can proof of stake drive consensus? It seems you could mine both sides of a fork simultaneously.

fragsworth 13y ago
Proof of stake requires that you are holding coins, making miners personally invested. If a fork occurs, consensus is driven by the fact that stakeholders would lose value if they allow the fork to continue, so they will form consensus quickly.
- kahoon 13y ago
  Why would they lose value if they allow the fork to continue? They can hold and stake coins in both forks, right?
  - fragsworth 13y ago
    Because the market value of the currency would probably drop if it were forked for very long.
- wcoenen 13y ago
  When you chose a side of a fork, you risk having chosen the wrong one. So it seems rational not to chose. Let the other miners take the risk. After all, they won't let the currency collapse right? It seems that the Nash equilibrium for this game will then be that none of the miners take the risk, consensus is lost, and the currency does collapse. Perhaps I'm missing something though.
  - oakwhiz 13y ago
    When you choose the side that everyone else ends up choosing as well, you end up profiting from the block reward and also collecting the transaction fees. If you mined the side that ended up being shorter, then your block rewards are part of a transaction that the network considers to be invalid, as in, it never occurred. So there is incentive to try to figure out which side of a fork is the most beneficial and also which side is going to be preferred by other miners based on their affiliations with the addresses in the transactions for either side of the fork. Also consider what has been risked - electrical energy, a small amount of bandwidth, and the ever-present risk of hardware failure. The return is in units of a deflationary currency. In practice the number of wasted blocks is quite low since the network ends up being in consensus most of the time. In the past it has been quite profitable to mine using GPUs and FPGAs.

sroerick 13y ago

Or, perhaps more realistically, any app running on the bitcoin protocol will be incentivised to use proof of stake.