Topic: Long Live Proof-of-Work, Long Live Mining - "there is no meaningful alternative" - page 5. (Read 15726 times)

There are way more than a dozen p2pool mining nodes, each with the ability to accept or reject any transaction.

Sure the p2pool hash rate is miniscule, but any large home miner willing to run a computer 24/7 can set up a node if they get pissed off with the larger pools.

For some miners, yes. For the big guys with low costs, no. We just had a small difficulty drop, indicating even some of the big miners are dropping out.

Today, unless you have a big mining farm, cheap labor, good relationships with an ASIC vendor, and cheap power, you can't make money mining Bitcoins. See the Mining Speculation part of the forum.

Because it's impossible to prove that any PoS system is not centralized (the metaphysical ontological argument) it boils down to faith. And that's just distribution. Then there's the fact it costs nothing to clone. Then it boils down to marketing. Who's advertising would you trust., some guy on the Internet? Wouldn't it be better if Mastercard creates a PoS debit card? Would you still like Proof of Stake then?

The only ones having the ability to sign a block are the miners. They are the ones with the ability to accept or reject any transaction. There are not thousands of them, around a dozen.

You just exactly down to the very word described NXT's version of PoS.  Just as PoW should really be called "proof of waste", PoS should really be called "protection of stake."  People that are running NXT nodes are big whales and are often doing it for no gain.  They do it not to try to get rich, but they do it to protect the blockchain and protect their investment.  

I think like only the top 30 accounts can actually make money paying for their electricity by running a node, and that would be if they only ran one.  But most of those whales are all running multiple nodes, many of which are being run on Amazon.  

The beauty of the NXT system is that they whales are being burdened with maintaining the blockchain.  I as an end user get a network of trust and my money is diluted 0% forever.  In fact the opposite is true.  Occasionally NXT is lost, so effectively my NXT grows interest.   

I am not saying their system is perfect, but I do think for the end user, it is a big improvement over PoW.  

I know this argument is long, but stay with me for a minute.

None of them had a car but the guy with a small shop. It was an old pick-up. He sold bags of rice and coke-a-cola, soap, toilet paper, beer, tobacco, and other most basic things.  He had no employees. That was the only western style business within walking distance. Money only comes into the village from people that have left the village to work in one of the cities. They get there by walking to the road and hitching a ride from there (I did this myself so many times).  

The rest of the "economy" is communal. Not communism as taught by Marx, but communal. The houses are built from materials sourced locally; rocks from the field for walls, branches from trees for roof beams and grass from near the river for thatch to finish off the roof, and dung from animals to finish off the walls and floor. The people locally raise animals that are slaughtered for weddings and funerals.  For daily meals they eat food veggies and grains grown locally.

Most of course would work for western wages if they could and there simply aren't jobs within walking distance. (Exception being a small school that is an hour walk away in a different village that has a teacher being paid by the government).  They could of course hitch a ride to the city and try to find work, and a few younger ones do, but most don't. There is a chance for work but the process is psychologically intimidating because it's a world they don't understand well.

The people do work every single day and are not lazy, but a wage is not there proof of work. That is a western concept. For them a good is the product of their work. They literally have fruits from their labor whether it be meat, a house, or a plate of food.  They can exactly look at their labor and judge if the amount of labor is worth the end good.

With Bitcoin the system gets way more complicated. Whereas the African has a simple one to one judgment of asking himself "was today's work worth the fruits?", in Bitcoin there are multiple parties involved asking themselves this question. I'll leave the developers out of the equation and just focus on the miners and the end users.

The case for the miners is quite simple. “If I run this ASIC, will I get a just reword for my work/waste of electricity and computational power?” I say waste because most of the power being used doesn't actually produce an end result. An African farmer might only have a 25% success rate per seed to plant. The other 75% of his effort was wasted in trying to get that 25%. If he could improve efficiency, he would be much better off.  His cost per fruit would be much lower.  How many hashes does a miner waste before finding the productive one?  I think the answer is, “A LOT.” Now when a good hash is found a large reward is given. And so miners can justify whether or not it is profitable to run an ASIC. It is a simple question of work done for reward, just like the farmer. And for the miners it is a system that works well.

But what about for the end user? What are they paying for and is the service they pay for worth the service received. When a person puts a record into the blockchain it costs about $0.04 which all things being considered is pretty cheap. Somebody just recently moved millions of dollars worth of Bitcoin for that small fee. What a great deal! But how much did it cost the whole system. See that exchange only paid four cents to make that transaction, but the real price of that transaction came from me and you. It came via the fact that the miner that made the block was rewarded bitcoins. Those bitcoins diluted the total supply. Effectively taxing me and taxing you a little bit for his transaction. That guy didn't pay the fee for the transaction, we did. The miner didn’t mine that block for the transaction fee, he did it for the block reward, a reward that is a tax me and on my existing bitcoins because they are now worth less because of the dilution.

So the question I need to ask as an end user is, "am I getting a good service for what I'm paying?"  The service I'm getting is trust with a community of people that can see my record of bitcoins. They can trust I have Bitcoins and I can trust that they can trust that and vice versa. Anonymint has some pretty weird ideas but sometimes he comes up with a good point. I don't know if his numbers are right but he said the real cost in miner rewards is $30 per transaction. This comes via dilution of your and mine money. It's easy to figure out. Just figure out how many transactions were processed and divide it from the block reward. That's how much a transaction really costs.

A system where a user only pays $0.04 per transaction but the community as a whole was taxed $30 is simply just not sustainable. When I as an end user pay more for a good or service than its actual value, then a bubble is created.  Right now there is an effective bubble of $29.96 per transaction out of $30.

Now we are in an early stage of Bitcoins development and PoW whether you consider it work or waste is actually a very successful system right now. But will it always be? When the block rewards go down dramatically, then I as an end user am no longer being taxed for the action of others putting a record in the blockchain. It's a big win for me. At that point the miners are working more for the transaction fees, so now we need to ask ourselves "is it worth it for them?" Remember right now the network is currently subsidizing miners at a rate of $29.96 per transaction via taxes on the people. We all know that miners are selfish. If they won't continue to be paid well then they won't work. Just like farmer that can't get a certain crop to grow moves on to a new crop, a miner of PoW will move onto a different chain or just stop being a miner all together. Here in lies the problem with a system of waste to secure the blockchain, in the long run it just feels like to me it can't continue. The end users and miners need to come to an agreement on how the chain will be secured.  With PoW so many hashes are being wasted per transaction.  What we need to find is a way to increase our hash per fruit of labor ratio.  That way the system isn’t being taxed and subsidized so much.  

In different proof-of-x systems this problem is being solved in that the end user is securing the blockchain at the same time they are using it (not the miners). They are not wasting as many hashes and the fruit of labor per hash ratio is more balanced. They are putting their energy and computational power to as good as use and most efficient use as possible. This brings down the cost per transaction to the whole system down much lower.  In a pure proof of stake system, you and I are not taxed at all per transaction of other people. As an end user, this sounds better to me. Why have my money diluted via miner’s fees when I can have my money not diluted at all on a different chain?

I think PoW is and has been an amazing system and I own a lot of Bitcoin, but honesty when a more beautiful blockchain comes around, one in which I'm not getting taxed so heavily for being provided with my network of trust, I will move to that blockchain. See miners aren't the only selfish actors; end users are selfish too. Right now I use Bitcoin because it is the main and only real option to me, but in the future that may or may not always be the case.

This is very much not true. There may be only ~a dozen pools, however it is not difficult for a miner to switch pools in the event that a pool is not act in a way that consistent that is good for the overall network

An interesting story. Why do you consider them poor? Is it because they have no good work to earn money? Do you think they would not work for Western wages if they had the opportunity? Work is important. Wages are your Proof of Work. That's how you stop being poor. We all have to work. How can you morally justify someone getting rich without working when there are so many starving children in Africa?

@jabo38

The beauty of PoW blockchain is that it is so simple!

It also has an interesting property that players with the large amount of coins would likely be the ones who will compete in the mining arena the most to secure control of their stake in the system. If competition is strong enough major players will be doing it even at a loss. The choice major holders of coins will be facing is this: tax themselves by mining at a loss or let the competitors take control over their money. It's quite brilliant if you think of it. I haven't seen any other proof-of-x system that would have a built-in tax on the rich.

All things considered, I don't think Satoshi's design was rushed or is somehow flawed. In fact, it has some interesting hidden aspects that will only start manifesting themselves in the long run. The actual configuration of mining space will of course depend on people's behavior. It might turn out quite peaceful and distributed or heavily concentrated and aggressive. What's certain though is that it will be changing over time as old players are leaving and new ones coming.

I'm interested in other forms of consensus algorithm for blockchain, but simplicity and robustness of PoW will be hard to match. Things that concern me with PoI, that I haven't seen addressed anywhere, are related to long lasting network effects for control concentration. Very popular online services like Google, Facebook, Amazon might eventually gain so much importance in the system, that they will essentially become new central banks, and it's not that they will be getting richer that concerns me, but the fact that they will maintain most of the control over what gets into blockchain and what doesn't.

The other problem is that blockchain doesn't have information on actual delivery of products. It means that real economic activity can be simulated within a large botnet and will be indistinguishable from honest players. The actual impact might not be significant though.

All in all, there are many unknowns in the way this will be unfolding that's why I'm still curious about PoI. I wouldn't write off PoW as inferior or flawed in any way. It is very simple and very robust design that has passed the test of time and survived many attack vectors. It is now securing a market cap of $5 billion, something that other models can only dream of. This song reflects my sentiment the best: https://youtube.com/watch?v=x6LwYmVqzG0

I have searched the crypto world.  I have in the last year become fascinated with the world of the blockchain.  What I have seen has both delighted and disappointed me.  Both freed up possibilities of the future but also continually frustrated me.  But it is in this world that I see some great potential.
 
I have seen extreme liberals and extreme conservatives and even extremists of upstart third parties buy into Bitcoin and believe in it.  These are people that have little else in common, but when they see the system, it just makes sense.  I think this is because on an intuitive level once people get what a blockchain is, it just makes sense, and it is known deep down inside that this is something that solves a fundamental problem, one that is so deeply ingrained in our history and culture, most people are oblivious that it is even a problem.  This is the fundamental problem that humans cannot trust each other. 

The blockchain is a truly amazing invention and its implications are pretty profound. I have thought about this long and hard. For thousands of years our societies have been built around the fact that humans inherently can't at large trust each other. We have of course at often times trusted those very near to us, those 1-100 people we are close to, but after that the circle of trust breaks apart. It is just too easy for somebody from the next village over or next country over to say "they are not one of us, lets cheat them.”  And this narrative has happened all over for thousands of years, sometimes on a small interpersonal level, but sometimes on a global scale. Whole governments and societies are built knowing that this is one of the fundamental constraints of human nature and therefore must be accounted for. But now a global system of trust can be created, where I can literally trust a 65 year old woman in Brazil, and she can in turn trust a 15 year old boy in Africa and so on.

The implications of how society can be restructured knowing now that there is an open and reliable system of trust is so disruptive that nobody is really acknowledging its importance because things have been the way they have been for so long, that this new invention creates a paradigm shift outside of tradition that goes back all the way to the agricultural revolution; a time when a major concern was what to do with the surplus of grain and who should be trusted to manage it.

I am lucky because I lived in one of the poorest places in the world, a poor village in one of the poorest countries in Africa (no running water no electric no telecommunications and so on). I saw how the village’s social structure was arranged around the chief and trust was put in him as a centralized authority to bring order. All societies everywhere arose out of a system nearly identical. And now because of the blockchain that fundamental precept that we must have a centralized authority to guarantee trust with all our interactions has been thrown out. This allows so much of what we know of today as society to be rewritten from the ground up. I am saying it here. I believe that the repercussions of the blockchain will be extremely disruptive. A few of the old systems that have long proven to be crucial for maintaining order, just simply are not needed anymore. The rest still are of course, but this has the potential to radically shape our narrative concerning these matters.

And while the blockchain has been given to us as a great invention, it was by no means given to us in its final form, and actually wasn’t even given to us in a good model.  It was given to us in the form of proof-of-waste/work championed by Bitcoin.   But honestly, we needed PoW, because if other forms of blockchain were the first version, it wouldn't have ever caught on. People would have thought of it as Monopoly money and laughed it off. It was the miners in Bitcoin that gave some legitimacy to it as they were really working/wasting energy to get the Bitcoins so therefore in the minds of others they should be worth something. And the system worked because the blockchain was secured.  Whoever could work/waste more electricity and computational power would ensure that they were devoting their energy towards the correct chain (longest chain) or otherwise they would be operating at a loss. 

But the inherent value of the blockchain is not in the work/waste used to produce a Bitcoin, but actually what a Bitcoin can stand for and how it can be used as smart programmable money verses simple dumb paper with symbols and numbers on it. I really think Satoshi knew this all along and pulled a fast one over on everybody. He made a purposely flawed mining system, one that would work very well in the short term at protecting the blockchain but all the while knowing it wouldn't work well in the long run, but would draw a lot of attention to the more important invention of the blockchain.  I believe Satoshi didn’t know if Bitcoin would or wouldn’t make it, but that if he could design a system that could just grow large enough and loud enough for the blockchain to gain awareness and support, than his overall project would be a success.

I am talking about the blockchain being a revolution in that it allows trust on a fundamental level that the world doesn’t know. With the blockchain my circle of trust goes from 37 people to 6 billion. With a blockchain a Bitcoin can come not to represent money, but anything of value.  The versatility of colored coins, assets, and records being built into the blockchain is what makes it so powerful and the fact that now I can agree on those representations with billions of other people.  During the agricultural revolution, I could only trust those from my village and the chief was the final authority and stamp of the law.  Later this stamp was written down into constitutions and large governments were formed, but the basic overall structure remained the same.  One centralized authority maintains and enforces the trust.  With the blockchain, the people can now in a decentralized nature maintain the system of trust, and maybe even someday enforce it too. 

Smart contracts on the blockchain will go part of the way towards enforcing the trust of unknown parties.   This means that a blockchain token is now programmable and will only act in certain ways following certain rule sets, and even can be returned back to the sender if certain conditions aren’t met.  There is no need to call the police or the government or lawyer, the blockchain in many instances (not all of course) has removed a need for them to exist in certain manifestations all together. 

Some will argue that Bitcoin and/or all other cryptos are doomed to centralize and will fall down into the same trap of centralization; that sooner or later the centralization authority starts to give advantages to itself because it can; that power unchecked always leads to abuse of that power.  But in reality if trust is facilitated through a centralized or decentralized institution, it doesn’t really matter; the important thing that exists is that it is open, honest, and transparent. The advantage of the decentralized system is it gives a much higher degree of insurance that it is indeed open, honest, and transparent because open decentralization forces this to a greater magnitude. Decentralization essentially acts as a checking system to maintain reputability, but if a centralized system has a different but equally good checking system to ensure the proper outcome, then it too is okay. In the case of Bitcoin becoming centralized, it still to some degree has a checking mechanism built into its core.

Part of that is based off of the belief that Bitcoin is open, honest, and transparent. If there is a way that centralization learns how to cheat Bitcoin, then its purpose has been voided. Now someday Bitcoin might be too big to fail and if it becomes over centralized and actors get an unfair advantage because of it, the world might just have to live with it being a mostly good system but still a little flawed. But as it stands today, if Bitcoin ceases to be 100% open, honest, and transparent, then there is always another blockchain and another proof-of-x waiting to take its place.

This is where other proof-of-x systems come in.  In fact, Bitcoin doesn’t even have to become centralized and fail.  This is because it wasn’t designed well enough in the first place.  Some kind of novel proof-of-x can displace it because it is superior tech all around.  Those that maintain the blockchain should rewarded not by how much they can work/waste, and not by how much they have invested in the system upon foundation (PoS), but how actively they work (not waste) within the system; that basically those using the system stand to gain the most benefits from it.  Pumpers and dumpers and manipulators will ultimately have their influence decreased.  Inactive whales too will eventually be at a disadvantage.  Over the long run, it is those that use the system the most that should be rewarded the most.  A whale who sits back and does nothing gains less for their investment because they are doing nothing within the system; additionally their wealth brings no real world value to themselves other than psychological.  Wealth that is buried in the backyard and not ever once touched is ultimately of no use. 

A proof-of-x system where those most active in the system are also those that maintain it is to me how a blockchain should operate.  Those that are most active should be the creators of tokens.  Where the token comes from and how it is created in the long run is irrelevant.  Even if Bitcoin was to last 10,000 years, then this short time of mining would be irrelevant.  In the end, all blockchains end up on a form of PoS or other proof-of-x.  The blockchain is beautiful and elegant not because of how the token is created, but because of how the token can be programmed and all the things it can represent that couldn’t have been represented before.  The blockchain is beautiful because of the trust billions of people can now put into it, instead of trust in the chief, the mayor, the government, the president and the prime minister.   It is beautiful because it solves a fundamental problem of human nature that goes back to the dawn of the agricultural revolution, that question of how can we make a system of trust to represent and control our surplus so we can be assured it is safe. 

This post was slightly edited from its originally posting here.

Mining very reliably operates on greed, it's part of the design. All rational miners are now working on an average 6 months "greed horizon" they will do that which gives them best return over 6 months, since they need at least that to cover hardware costs.

The number that will fuck with this are about equal to the number of people who will pre-pay at restaurants and forget they're hungry and wander off.

Only a dozen? List their IPs from the block rewards.

There no thousands of miners. There are only a dozen miners, which is the problem with Bitcoin which is supposed to be decentralized.

will this always be 100% true for any PoS scheme?

PoS designers try to make their system deterministic and hard to game,
yet it seems that they cannot avoid computational competition because
there can always be an endless variety of combinations (people
can create a new transaction, which changes the variables of the system).

But I'm not sure.  what do you think?

There is no centralization of mining, but rather a clusterization. It's natural and is a reflection of our society. We don't have a flat hierarchy of people on the planet, we have structures and sub-structures and those compete for control and resources. What's important though is that entry to the mining arena is free for everybody, though you need to be well-funded and/or well-skilled to have a good chance at staying afloat there.

I think "permission-less decentralized exchange for energy" is a very good description from the article for what mining really is, apart from the fact that it is also a competition for control. Bad actors are not completely ruled out, but at least they can be challenged and defeated if people care about their money at all. If they don't, they deserve what they get. Also be cautious who you entrust control over the network when you sell it for profit via certain derivative schemes.

PS: Technology cannot change society, but a good technology will serve as a perfect mirror and allow society to see its own reflection and take action to improve it.

one Ghash employer did exploit the 51% hashrate...

https://bitcointalksearch.org/topic/ghashio-and-double-spending-against-betcoin-dice-321630

I think he is saying that miners will not switch pool quickly in the event that a pool operates in a way that is damaging to Bitcoin. He is using the fact that ghash was able to gain 51% of the network hashrate and miners did not leave as an example of this. However this is not a valid example as ghash did not actually attempt to attack the network when they had this hashrate

Blackmailing miners is quite difficult. The govts can try to regulate them but thats again something easier to say than done. Targeting the pools and pool owners could work in the beginning but moving a pool server to some other country is quite easy (not to mention that if a big pool goes down there will be hundred new to take over). So I agree, attacking the BTC network is not an easy task.

The last fork was reacted upon very quickly. Pools operate on greed. How do you blackmail thousands of miners? This type of unspecified FUD is the silliest of all. Please be specific about how exactly a person of any authority can do this.

Great article.