Topic: Annual 10% bitcoin dividends if mining were Proof-of-Stake - page 10. (Read 16632 times)

If miners mine at a net zero gain (as is now the case; they don't earn excessive returns as defined by economic theory), then there is really no inflation. The new coins do not dilute the value of existing coins because thay have been paid for upon arrival. Somebody has wanted the coins so much that they have been mined and the cost has been paid.

With PoS, new coins are a bonus that are just created without paying anything (or at least full price). If we simplify the case and move the Bitcoin decimal place 3 points, calling the resulting unit "bitcoin", and the process "proof-of-stake", have we fooled anyone? No. This is 1000-fold inflation, and its effect is that the price of the new bitcoin is only 1/1000 of the old.

I don't see at all compelling the idea of valuing something that has a built-in inflation which is not based on some useful work. Owning currency is useful work, but the hoarders should be compensated by opportunities to invest their coins, loan at interest, or declining general price level, not gimmicks such as increase in the account balance without work or risk.

After that I never had an account there again. The proved conclusively to be amateurs then.

Two years ago it would have sounded VERY believable since Mt. Gox was just hacked, which caused the $32 crash.

I'm probably in favor of a PoS switch at some point in a few years from now.

Because many miners liquidate their rewards to replace obsolete equipment and to pay power bills, I expect the net sales of daily mined bitcoins to be less under proof-of-stake. Your argument about inflating the money supply is unclear.

Here is the most substantial response from the bitcoin developers mail list to my initiative . . .


An attacker modifying a past block would have to redo the proof-of-stake of the block and all blocks after it and catch up with and surpass the effort of honest nodes, as Satoshi wrote for proof-of-work. I need to ensure that proof-of-stake works for this.

I will move the continuing technical side of this discussion over to a new thread in the Project Development sub-forum.

POS make the whole system more closed to outside people: Early adopter not only benefit on the price appreciation, but also gain in dividends. This will cause less and less people joining this system

An important part of a distributed system is to continuously give the new comers incentive to join the network, thus new comers with newer technology/better service can re-balance the whole mining picture and take over the throne. For example, deepbit's leadership were replaced by BTCguild, then Ghash.IO and discuss fish, etc... This will make sure the system is enough decentralized and there is always healthy competition to make the network strong and fresh. Miners seek profit, but also have the voting rights, this is a very important aspect

But in POS system miners would lose the incentive due to losing of voting rights. What they do is just make the early adopters rich, and if there is a situation need a protocol level change, they don't have voting rights, they will abandon this closed system

In PoW system, the decision making rights is always stay with the current most actively working miners, that is the best way to distribute the decision making power, although there is certain risk of 51% attack. But the 51% attack is not a big problem, because ultimately is the majority of bitcoin miners decide which chain they select to work on, not existing bitcoin holders, this is a key difference (You can buy lots of coins using printed fiat money thus gaining more stake, but you can't buy a farm with huge amount of hashing power since those guys who are capable of making hashing machines will inform others at the first place)

For the record, the main reason I like PoS (although I'm at the current time not in favour of incorporating it in Bitcoin, although this can change later) is that it gives an incentive to run full nodes. In the current system people are not rewarded for running full nodes while running full nodes is indeed very important to the distributed nature of Bitcoin. I'm not interested at all in reducing wastefulness. There are millions of things in the world I consider highly wasteful and the energy spend to secure the most important social network the world has ever seen is not amoung them.

Found this remarkable thread 2 days too late, but read it all nevertheless My thoughts:

The economy is what ultimately gives value to any coin (or other currency). The economy consists of using the coin in its typical monetary roles as:
A) unit of account (in contracts and pricing, etc.)
B) store of value (deferred spending, investment, speculation)
C) means of exchange (transactions on-chain, off-chain).

To get to a functioning economy, there has to be an incentive to use the coin in some of the roles, ie. it must fulfill at least some of them better than the other alternatives.

Jumpstarting an economy is very difficult, even if the coin is superior in many aspects (like now, Bitcoin is far better than fiat in B) and potentially in C) but mostly dysfunctional in A) - after 5 years, its marketcap and # of transactions is <0.01% of fiat.)  

The coin can receive initial value by fiat, backing, or free market.

One of the novelties of Bitcoin was the mining concept, which among other effects, balanced the rewards of new coin generation to exactly equal the value of the coins (in times of boom, you could get +EV, during declines you would run at a loss).

Therefore, Bitcoin money supply has totally been paid for by expending effort to create it, according to its daily value.

Therefore, all the increases in Bitcoin marketcap are not early miner or early adopter unfair advantages but a reflection of the growth in Bitcoin economy, mainly the aspect B).

Trying to give value to something that you don't have to work for is very difficult.

Network effects are crucial in economy. You only get to that point if your coin is perceived legitimate. Auroracoin tries to achieve this by distributing coins equally in a limited area with a homogenous population. Bitcoin burns the equal amount of resources to acquire new coins so that there is really no inflation, nor has ever been.

In an optimal economy, there should be as little barriers as possible for hoarding and dishoarding wealth (converting income to wealth and vice versa). If this process is reasonably unhampered, it leads to higher value for the coin.

Proof-of-Stake

With the proposed model, the expenditure that is now spent in developing, manufacturing, delivering and operating ASICs, is cancelled.

Instead, there is an expenditure that people who own bitcoins, need to purchase, configure or operate generic equipment, to receive the reward. This reward would not accrue according to the work, and would not be equal to the value of the new coins.

People with many coins would gain more (in proportion to the effort required).
People with less coin would gain less (same work, less reward).
People with the least coins would not gain at all, because there would be a cutoff, below which people do not care to setup the PoS.

The total cost (effort) will be less than the cost (effort) of PoW (because the marginal holder will not work for -EV), but this would end up being a regressive scheme, enriching the rich.

It does not change the price any way, other things being equal. Proof: If we assume that at present supply = demand, which means that newly mined coins must be exactly absorbed by somebody. Mining cost = price, so all of the new demand is "burnt" as expenses. In the PoS case, same amount of coins is generated, but it is doled out to existing holders, inflating the money supply. New demand must buy the coins from them. By buying the same number of coins, it is able to keep their price stable. Net difference is that previous owners get the money.

The above paragraph may sound lucrative. It is what Quark, Blackcoin &co are doing. It has been observed to lead to extreme volatility and be inconsistent with increasing adoption, problem of confidence, necessity of a short premine period, etc. I believe it will only work in "mark of the beast" type environments, where:
- accounts are 100% connected with humans
- buying and selling using this system is compulsory.

Bitcoin's novelty is that each and every coin has been mined into existence, at a 100% cost in open markets. Nobody has got them at preferential terms. All the subsequent gains in value have been because of economy building. The ideas presented do not yet seem compelling enough to me to work on changing this. The idea that a parallel fork would be made instead of an altcoin is an interesting one and warrants careful consideration.

What's the point in doing this?
Why don't we all switch to NXT and leave Satoshi Nakamoto holding the bag?

Bitcoin has not been distributed more fairly then any other shitcoin that came out recently, be it PoW or PoS.
Bitcoin is well distributed now because it is the oldest.

I will be examining PPC, NXT and whitepapers for ideas that I can implement in such a way as the result can be called Bitcoin. The difference would be the absence of wasteful Proof-of-Work, and the presence of mining rewards distributed to full nodes in proportion to the amount of bitcoin each is willing to expose to the network. Coin age is a good starting point.

I should leave alone the coinbase transaction whose output sends the reward to a single recipient and depend upon an envisioned reference peer-to-peer pool or other pool to fairly distribute daily dividends to pool members.

cough cough....PeerCoin

Bitstamp was up earlier in the day and I felt the opposite emotion for a while. Here my analysis of the moment with a chart . . .

https://bitcointalksearch.org/topic/m.6385540

why is it that I get a feeling of impending doom? a - perhaps, desperation to bring in something new?

4000BTC have been dumped on bitstamp in the past few hours. Whoever it was, clearly don't have Bitcoin in their best interest list and it is sellers, like this, who too, would also have no interest in holding their coins for PoS.

Regardless of the algorithm used to create Bitcoin, we will always see would-be-stock-traders cashing out at ~whatever price they can achieve.

EDIT: the dump is more than BTC7k and it's not just on bitstamp, but across many exchanges. You are simply not going to persuade people like that to hold their coins, for any %.

I am sorry if my Luddite remark came off as rude. I was merely trying to express a similarity that I perceived. The Luddites had good reasons for being Luddites, and serious miners have good reasons for supporting PoW. In retrospect, mechanization was clearly beneficial to the economy. The debate between PoW and PoS is not clearly resolved yet, but the more I learn the more it seems to me that PoS is superior.

PoS would reduce electricity use dramatically, it would eliminate mining, not reduce mining difficulty, and while it would make the rich richer, it would make everyone richer in equal proportion, which provides an incentive for more and more people to own coins. In PoW, the only people who get richer are miners who are performing a wasteful, unnecessary task (necessary in the beginning, but unnecessary now that PoS has been invented).

I am willing to listen to any arguments against PoS, but I have yet to hear anything very convincing. The strongest criticism of PoS altcoins was that the initial coin distribution was much worse than Bitcoin, but now the ability to transfer the Bitcoin blockchain coin distribution to a new blockchain overcomes that objection.

It's a big 'if' and for all intents and purposes, you could be correct, but you could also be very wrong, it's a gamble which i'd rather not (s)take.

Sure...but if PoS made things cheaper, you could hold onto more, not less.  just saying.

I cash-out portions of my mining efforts each month, to help pay bills and enjoy an active lifestyle. I think that you will find there are a lot of miners, just like me who enjoy mining, but cannot just hold onto all their coins.

Why would miners have the motivation to cash out their gains?  They would have motivation to hold onto coins to take advantage of PoS awards.