Topic: My beef with Proof-of-stake - page 2. (Read 2160 times)
The additional money that people receive when they stake a PoS coin is almost always from transaction fees, although sometimes it can be from outright inflation. When it is the former the overall money supply will remain constant and people will have an incentive to hoard their coin, however when it is the later there is zero advantage to holding the coin as the total value of your holdings will remain constant at best while you simply have a larger number of coins in your possession
The money from POS afaik comes from basically being what would be a miner in a situation where all coins are mined in a PoW coin, you are processing transactions. Im not that versed in economics to really argument how this is or isnt better than POW or other methods.
My whole problem with proof-of-stake is that it's supposed to be analogous to putting money in say a 3- or 6-month CD where it sits tied up and earns interest.
The reason a CD earns interest is that while it sits tied up, the bank issues loans and extends credit to businesses (very few 3- or 6- month personal loans). These businesses take the loans in order to continue day to day operations and repay it with a portion of future sales proceeds. The reason the businesses need the loans is that it's cheaper for them to borrow than to sit on excess cash that could put to work doing productive things.
Meanwhile, the bank promises you x% on your CD while it charges x + y% to the business, and makes the incremental profit of y%.
With a POS wallet, where does the interest come from? If it's just coming from the POS hashing creating a flow of coins by generating new money supply, well this is doomed to fail. Imagine if instead of the mechanics of the CD above, you put the money into the CD and get promised x%, and instead of loaning that money out to earn a spread on the interest received they ask the Fed to print x% more dollars for you. Nothing has changed. There has been no value added. The result is just more money, which will ultimately reduce the *real* value of that money in terms of buying power:
Say $100 buys all the groceries you need for the month.
You put $100 in a 3-month CD that pays a 3-month rate of 2%. And assume the second scenario where money is just created for you and not put to work. You receive $102 back after 3 months, but now it costs you $102 to buy all the same groceries for the month that used to cost $100.
The reason a CD earns interest is that while it sits tied up, the bank issues loans and extends credit to businesses (very few 3- or 6- month personal loans). These businesses take the loans in order to continue day to day operations and repay it with a portion of future sales proceeds. The reason the businesses need the loans is that it's cheaper for them to borrow than to sit on excess cash that could put to work doing productive things.
Meanwhile, the bank promises you x% on your CD while it charges x + y% to the business, and makes the incremental profit of y%.
With a POS wallet, where does the interest come from? If it's just coming from the POS hashing creating a flow of coins by generating new money supply, well this is doomed to fail. Imagine if instead of the mechanics of the CD above, you put the money into the CD and get promised x%, and instead of loaning that money out to earn a spread on the interest received they ask the Fed to print x% more dollars for you. Nothing has changed. There has been no value added. The result is just more money, which will ultimately reduce the *real* value of that money in terms of buying power:
Say $100 buys all the groceries you need for the month.
You put $100 in a 3-month CD that pays a 3-month rate of 2%. And assume the second scenario where money is just created for you and not put to work. You receive $102 back after 3 months, but now it costs you $102 to buy all the same groceries for the month that used to cost $100.
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