> The first class lost the students that simply couldn't keep up with the increasingly difficult sudokus.
This is the story of every proof-of-work cryptocurrency. After a certain point, they only serve to make the rich even richer. Look at Bitcoin for example, where over 50% of the hashing power is controlled by big Chinese mining operations.
Proof of stake literally makes rich richer, thats the point of it - holders can mint new blocks. With proof of work there is actual work involved tol, not just minting money with your capital.
> Proof of stake literally makes rich richer, thats the point of it
That's certainly true with a very simple PoS mechanism. I don't think that type of PoS is used in practice with any major cryptocurrency (please correct me if I'm wrong though).
The one I'm most familiar with (Cardano) uses delegated proof of stake, so users delegate their stake to a stake pool and share in the rewards. The platform supports, encourages, and enables this for users with only very introductory understanding of Cardano.
Stake pools also suffer a penalty when they amass too much stake (their rewards decrease), so decentralization is encouraged and no one would be able to get, say, 50% RoA by owning of 50% of the Cardano currency (ADA)
If some group owns 50% of Cardano, what prevents them to from crating two fake pools with 25% and 25% and avoid the penalties? (Or 100 groups with .5%, or whatever is needed.)
(TL;DR: operators can't make more than ~7% annual return on their stake in the long run, and non-operators (people with only 50 ADA for example) can earn ~6-7% by delegating to the most profitable pools.)
Longer answer:
The most you can get from staking is an annual 6-7% return on your stake. I don't fully understand how their saturation parameter works, but here's the general idea: Currently a stake pool with .2% of all ADA staked is considered 'saturated'. This means (in my working understanding, I suspect things are a bit more nuanced) that ADA delegated to them beyond that .2% doesn't receive additional rewards. Therefore it's in the delegators' interest to avoid delegating to pools with greater than .2% of all ADA, and oversaturation works against the stake pool operators as well.
What this means in practice, is that this theoretical group owning 50% of ADA could set up 250 stake pools and fully saturate them for maximum profitability. However, other users can also delegate to those stake pools and share in the rewards. While the operators may receive 1-2% more rewards than non-operating users (there's a limit to how much 'extra' the operators can take, but this extra percentage is intended to incentivize running stake pools), at a certain point of oversaturation (if their pools are profitable enough), it would make more sense for them to just add more stake pools to (or delegate to other pools which are under-saturated) rather than let their existing pools be significantly oversaturated.
Delegation has nothing to do with it. If you own, say, 1% of staked coins you get 1% of the staking rewards in perpetuity in exchange for doing almost nothing.
I don't consider this a problem but it's a fact that PoS works that way.
This is true (and honestly something I haven't given much thought to). It's true in any economy that the rich can leverage their wealth to get richer through investments at a higher earnings rate than the poor can.
I do like that cryptocurrency platforms can put limits on "how much" leverage they get, to significantly close gap between potential "percentage" return on investments between wealthy and 'poor', and remove the ability for third parties to operate which give preferential treatment to people with high concentration of total market cap.
If you own 1 billion USD, then sure, you're going to get a larger return on investments (when measuring in USD) than someone with 100 USD, even if the percentage RoA was the same. Because of how classical economic systems work though, these are very grossly disparate. Someone with 1 billion USD may be able to generate 5-20% return on investments in a year, whereas someone with 100 USD would be lucky to get 3% (certainly, larger returns are possible with luck and wise investments, I'm talking purely in the aggregate over low-risk investments, like holding your money in an account which pays interest).
But let's assume the person with 1 billion USD and 100 USD are both getting 1% interest annually; the person with 1 billion USD is still making more money from investments because they have 999999900 more USD which they are investing.
PoS doesn't solve that latter problem, but it can close the gap on the return expressed as a percentage of investment
If by major cryptocurrency you mean "only bitcoin and ethereum", then sure. Cardano is the third-largest cryptocurrency by market cap (currently; it's neck-and-neck with a couple more, so this is subject to change still), and has used PoS from day 1 (though I've read some people consider it not "true" PoS because of how they solve the issues of ownership consolidation, and it's also been called "delegated PoS")
In either case you can use your accumulating capital to accumulate more capital -- PoW just means consuming actual resources to do so, as you fold your earnings into more hardware and electricity to earn more.
> In either case you can use your accumulating capital to accumulate more capital -- PoW just means consuming actual resources to do so, as you fold your earnings into more hardware and electricity to earn more.
Proof-of-Work miners have ongoing variable expenses to contend with — electricity cost being the major one.
Conversely, in “Proof-of-Stake”, mining is virtually costless, because it's enough to show you have money to then earn money with your money.
(Disclosure: I’m invested in a true hybrid PoW/PoS system, so I’m familiar with the downsides of both.)
And PoW has significant economies of scale. The big Chinese miners have special deals with power companies and ASIC manufacturers. PoS at least gives everyone an even playing field; big or small you get the same percentage return.
(Of course that's pretty much the point of the analogy.)
> PoS at least gives everyone an even playing field; big or small you get the same percentage return.
Your cost basis in the underlying coin is by far the largest determinant of ROI.
It’s like the old real estate adage: “money is made on the purchase, not on the sale”.
Fairness of mining has always been virtually irrelevant to ROI.
(Except insofar as accusing competitors of shades of mining “impropriety” supports a narrative — and invariably a narrative which disproportionately benefits investors with an ultra low cost basis in a benefactor to said narrative.)
“China miners, special deals” etc — it’s a trope that’s been going around for about a decade.
Virtue signaling aside, judging by the raging bull market for ICO coins amongst cryptocurrency investors, clearly no one is concerned with fairness whatsoever. These things are majority premined by insiders and/or sold to prestigious investors in pre-pre-pre ICOs (yes, there are “levels”). What happens is the general public gets sucked into these coins then adopts narratives which suit them. That’s what you’re seeing here. Not that anyone cares.
(Disclosure: I’m invested in a true hybrid PoW/PoS coin, and I’m rather familiar with the downsides of both PoW and PoS mining.)
On Ethereum's proof of stake network, over 90% of the rewards come from simply attesting correctly to the state of the chain every 7-or-so minutes. Block rewards are a nice little bonus, but effectively irrelevant in terms of rewards in the long run since the block proposer is selected randomly. Sure, controlling more validators improves your chances of being selected for proposing the block, but it's still a random process.
That simply makes two currencies - before-fork, and after-fork. There's no rule that the one that "should" win does, especially in the face of large computing power making the former more attractive. See Bitcoin Cash, versus Bitcoin Classic.
OP may be referring to algorithms that rotate between a fixed set of widely dissimilar POW puzzles, in an attempt to make it discouragingly expensive to design and fabricate a rather complex ASIC requiring a lot of die space.
IIRC it didn't work for long (the of promoters of these tokens were likely well aware of this), and ASICs for them appeared anyway, once an ROI probability threshold was reached.
That's just not an accurate nor truthful account of what happens in practice.
The example you gave has nothing to do with changing the PoW function to counteract ASICs. Both Bcash and bitcoin classic were forked because of completely different reasons, and had people who believed in those reasons defend the new forks and run the node software etc. For example XMR has been doing ASIC-deterrent forks for years now with great success.
In 2018, 50-60% of Monero hashrate was rumored to be from secret ASICs. How “successful” at warding off ASICs could hard forking a coin’s hashing algorithm really be if it doesn’t stop the ASIC manufacturers from building ASICs for any given algorithm?
Also it seems clear that Monero’s purported “ASIC resistance” is very much a social contract — requiring constant vigilance to uphold — one which isn’t guaranteed to be strictly adhered to over the long run, particularly as the cost/benefit analysis gets murkier.
But at the end of the day, PoW is simply a fee that users of the network pay (in the form of inflation) to secure the network. I'm not convinced it's really a distribution mechanism.
Any discussion of 51% attacks that ignores the game theory of it I think misses the original genius of the Bitcoin white paper.
If one has control of 51% of the network it's in one's best interest to keep that network going successfully. Sure, there's suicidal malcontents and those that just want chaos. But barring some brain cancer it's very difficult for individuals to throw away billions of dollars. Because if a 51% attack works it's not going to work for long, the corrupted blocks are going to be immediately known, and everyone else will just fork off and leave that 51% attacker holding the bag.
You could say the same thing about infectious disease. The most successful diseases don't kill you, they just sap your energy a little bit at a time. What is the equivalent of parasites in blockchain-land?
> What is the equivalent of parasites in blockchain-land?
It’s the people insinuating impropriety of Proof-of-Work mining in the hopes of less than transparently promoting a competing premined/ICO’d Proof-of-Stake cryptocurrency sans any form of disclosure statement. You know, the sort of thing that’s been plaguing the cryptocurrency space for a good, solid decade now?
Much if not all of the anti–Proof-of-Work narrative and the debunking thereof can be characterized by Brandolini’s law [1]. ITT “Sure, the overwhelming majority of `$COIN` was premined by insiders or sold to prestigious investors for pennies in exclusive pre-ICOs, but look over there — Bitcoin mining is oh-so-unfair. Disclosure statement? What’s that?”
All the financially-motivated disbursal of misinformation takes a considerable amount of time to debunk, hence the parasitism component.
I would be ok with Bitcoin having had a 10% pre-mine if it also had a pre-sale, rather than limiting it to those technical enough to mine it on day one.
> I would be ok with Bitcoin having had a 10% pre-mine if it also had a pre-sale, rather than limiting it to those technical enough to mine it on day one.
“On day one” it was possible to CPU mine Bitcoin on any ordinary Windows PC using a freely available open source GUI application.
To this day the UI for just sending transactions is pretty bad, so I can't imagine how bad it was on day one. I am interested to see a screenshot, if you could share.
Can you please not post unsubstantive and/or flamebait comments to HN, regardless of how you feel about Bitcoin or whatever? It sends discussions straight to failure mode.
Ideally it would be as a Service Worker that pulls pages and transforms them into HTML, so you could serve your Markdown directly, without a separate build step.
Honestly it just seems like a beginner's weekend idea rather than something useful.
If I squint, I can almost pretend I'm insulted that my browser/Javascript had to render the Markdown instead of their server doing it.
I can't see how their infrastructure is making any real savings by doing this. There are usually more reasons to just cache the HTML next to the input Markdown. e.g. You can then make money breaking changes to the transformation without breaking old posts. Not to mention it now kinda pointlessly needs Javascript to do something trivial.
Unlike what seems to be the prevailing opinion on HN, I'm quite pro-Javascript and pro-SPA. I never saw the need to damn webpages to server-rendered HTML just because it's the only client/server system with the quirk of being able to send markup from the server.
But this sending Markdown over the wire with a 24kB Markdown script + `<script>$('post').markdown()</script>` is just cheeky. ;) Does it really matter though? Nah.
> The class playing Proof-of-stake has a lot of notebooks filled with doodles. The teacher hasn't provided the children with much else to do and they've become quite bored.
physical-economy interpretation: the teachers and children are lucky enough to live in a rich society where only a fraction of the population are required to do productive work such as growing food, distributing clean water, building and maintain housing and providing healthcare services. the teachers and children are freed from the burden of contributing productive work that benefits society and can instead engage in complex art / ritual / prayer activities involving plastic bricks, dice and sudoku.
In the proof of stake class, the people that get rich in dollars are the old timers that collected a lot of bricks during the first year, and now can sell the bricks to the newbies that want to enter the game. (And the teacher, that also saved like the 5% of the initial bricks for ... pedagogical purposes.)
In the proof of work class, the people that get rich in dollars are owner of the owner of the stationary that can sell better pencils, sharpers and erasers to the students, the writer of a book with tips about solving Sudoku, the person that writes a Sudoku solving program. Newbies can just buy the solver program, and participate without paying the old timers.
Except transitioning back to the real world proof of work situation, it’s dominated by players who make their own ASICs and have access to the most heavily subsidized electricity. Newbies can’t even break even anymore.
Don't confuse newbies with amateurs. It's like any normal industry.
Anyone can build a car factory, you don't have to go to Ford and buy a lot of toy cars that they made a long time ago. You just have to hire the right people and build it.
Anyone can build a space rocket factory, you don't have to go to NASA and buy a lot of Moon rocks they collected a long time ago. You just have to hire the right people and build it.
You have to be Elon-Musk-rich to do any of them anyway.
A third class plays using a consensus model based on explicit relationships of trust.
Each student keeps track of which of the others they consider trustworthy. Since they all play together everyday, they know who is nice, and who is naughty.
When a supermajority trusts the student placing a new block, that student is allowed to place it anywhere.
When not enough people trust the student placing the block, they prevent that person from doing so. That person may try again, but until they're willing to play nice and act trustworthy, they cannot place any blocks. They sit in the corner and pout until they come to their senses.
No one has to solve any puzzles, or roll any dice.
The tower is built efficiently, and all sorts of interesting designs are made by the creative energy that would have otherwise been wasted on busywork.
I could be misunderstanding, but I think the problem with this approach is the lack of permanent identity. What's a "supermajority"? Could I get it by making a bunch of fake identities and having them all "trust" me?
Alternatively, we could ask for a supermajority of coins, and then I think we've re-invented proof-of-stake.
You don't need coins, this is a permissioned chain where people agree on who can participate off-chain. Call it proof-of-authority. See Hyperledger Fabric
This is what I expect post-hype / tech-novelty. There are interesting pieces being built in the blockchain space, they can be assembled in more interesting ways if you think about trust and rule making differently (more traditionally?)
The first class was a public class & anybody could join in at any time. The second class had reserved early seats based on the initial supply of the dices; without investment in the initial dices the game doesnt start, whereas sudoku generation is free.
In the early days of Bitcoin like 2011, you could mine basically for free using a gaming PC you already owned (there are a lot of assumptions here that coiners don't want to get into). I actually did this. This has nothing to do with how PoW works today, where even obscure chains are slammed with GPU farms within minutes of mainnet launch.
With PoS you have to buy coins before you can stake. There's no way to bootstrap your stake without spending money.
In the PoS game, the stakers must be trusted to report their dice roll accurately. To overcome this, you would need some kind of random oracle which can't be influenced by any of the participants.
The best random oracle we know is of course, Proof-of-Work.
You, a mathematician, walk into the class to purchase a brick to label.
The first class has solved sudokus with deterministic difficulty to prove they did work to build the structure, whereas in the second class you have just dice sums & have to trust them telling you they rolled the diced only every fixed interval etc. It's distributed but not decentralized.
The first one was only accessible to wizards who knew the magic spells to generate gold. The second one was accessible to anyone willing to risk losing a little bit of gold on an idea.
Can someone continue the staking analogy? What exactly is being staked? You put a bunch of bricks in the center and randomly choose one, then return the remaining bricks to their owners?
What's being staked is ETH (or any other units of PoS-based cryptocurrency) itself. The lock-in, and therefore any opportunity cost associated with the locked-in value, is the price to play.
The analogy, to my understanding, is not 100% faithful to how PoS works, at least in Ethereum. There's no choosing one of the bricks, or one of the units of currency or anything. You simply lock in your units as collateral for your right to take part in the dice roll selection where, if chosen, you get to add a new block to the blockchain. If you append a block without cheating, you are rewarded with new units of the currency. If you cheat, your collateral is taken away. You may choose to keep your stake in as long as you want.
It falls a part a bit. You don't need to stake to use a proof of stake system, much like in bitcoin you don't have to mine to use bitcoin.
But generally the bricks you have in play can be lost if the network thinks you are cheating, even lying by omission (downtime) is penalized. So to try to change the blockchain (to allow double spending or zero someone's zccount) or even not to vote for the valid blockchain can be penalized by losing your staked bricks.
Another detail lost on the analogy is people get more bricks, just before being a good network citizen by helping the network and staking your bricks.
I'm new to the concept of PoS. Would the underlying mechanism of Burstcoin be proof of stake, i.e. large amounts of HDD space instead of computing the solution hash problems? Or is Burstcoin still proof of work? I'm just curious because the proof of space model seems much more environmentally friendly instead of solving random problems with massive amounts of computation.
I'm not sure I see how this relates to cryptocurrency. It misses the core attributes that give crypto value: scarcity, and the fact that it can be exchanged for other things of value.
If there's no shortage of bricks, and those bricks can't be used (or exchanged) for anything other than the material for making the tower taller, then of course that would be pointless.
But that's not how cryptocurrency works. The whole purpose of proof-of-work is to protect the attribute of scarcity in a distributed way where one actor can't control (or change) the rules.
> If they add their brick to the top, other students will pay them (in bricks) to write their own names on it with a sharpie
Other students are paying in bricks? Is that supposed to be transaction fees, mining (that's the sudoku puzzles), or what? And is there any indication that a name on a brick means anything (or can be exchanged for anything)? Is there a limit to the number of names on bricks? Can those names be verified at any instant, anywhere in the world with near 100% confidence?
I know it's a simplification for the purpose of making a point; it's just that the point becomes invalid when the simplification throws out the central characteristics of the thing that's being represented.
Unfortunately this article provides almost no substance on blockchain or it's related technology. HN does not seem to mind as long as it is even remotely critical of anything crypto-related.
It would be nice to discuss the actual implications of the technology, critical or not, without such strong opinions interfering.
Agreed. I think HN's general sentiment against blockchain and crypto is completely counter to the hacker mentality that PG promoted. And it's frustrating, because this is one of the most intellectually stimulating communities on the web. And I see crypto developments rapidly becoming the most disruptive technology of this decade, if not century and we can't discuss it without bikeshedding. Seems to me like there might be a market for an HN-like community that is focused on crypto tech and developments exclusively (and I don't think Reddit or Twitter quite fill the same niche that HN does).
I'm mostly pro-blockchain but I understand the HN stance because every crappy idea has its pumpers who will defy logic and reason and they infest everywhere that doesn't delete them. It's asymmetrical, they make millions by pumping crap and you lose by either reading it or having to take the time to delete it.
Until the legit blockchain space can call out scams (from Iota to Tether) the entire thing is rightly tainted.
That said, you can generally get a good discussion of a type of tech (ie, NFTs for concert tickets) if you avoid the branded implementations (that are always trying to sell some crappy token for use with the idea.)
The technology (ternary) is crackpot and it's centralized. Their plan to decentralize is both technically flawed and unrealistic because they aren't competent enough to execute it.
There are 2 types of blockchain enthusiasts. One are in it to get rich quick and blockchain is only their current vehicle for that endeavour. The other are actually into from a tech and society perspective. The prior group ruin it for the latter.
You are not witnessing normal conversations. You are witnessing engagement on blockchain articles that are themselves only popular whenever the coins are skyrocketing in price. That is the context most of the time. Even though the articles often spend little time on the price. Similarly, the anti-narrative usually attempts to refute the technology but is benefiting from the "this price is nonsense don't purchase this" crowd. And for me, "I am holding coins and writing / promoting positive articles" seems like the slimier position. I love the tech and absolutely hate the profit motive. It is very easy for me to see "pro tech" arguments as just pumping. The tech has almost nothing to do with the price. The tech establishes that a non-zero price can exist, the rest is people manipulation.
Not sure blockchain fits the way PG defined "hacker." Blockchain needs to be more rigorous in implementation due to being in finance and its target preference with malicious hackers.
"It's called a hack when you do something in an ugly way. But when you do something so clever that you somehow beat the system, that's also called a hack. The word is used more often in the former than the latter sense, probably because ugly solutions are more common than brilliant ones.
Believe it or not, the two senses of "hack" are also connected. Ugly and imaginative solutions have something in common: they both break the rules. And there is a gradual continuum between rule breaking that's merely ugly (using duct tape to attach something to your bike) and rule breaking that is brilliantly imaginative (discarding Euclidean space)."
Cryptocurrencies and blockchain platforms are nothing if not rule-breaking and brilliantly imaginative. They're trying to rewrite the entire financial system as code on the blockchain. Can you think of a more brilliant hack than that? Satoshi created the idea of digital scarcity. And the crypto world is running with it. That's clever as hell.
Except they really aren't that break through and imaginative. We had Merkel Trees, distributed algos, and consensus mechanisms beforehand. All the Satoshi paper did was to really solve the double spend problem by making people solve trival problems over and over. Hackers see this as wasteful as tech and as a societal contribution. We can build better systems that aren't as wasteful using proven methods. Keep in mind, here is not proof that staking will actually work, only proof of work has a proof.
Taking a small quote from the article that aligns with what you want to be cool doesn't make it so. In the end, for most people, blockchain will be like ACH or some internal system that a bank wrote. The entire financial system is not going on the blockchain, it's not replacing the dollar. Wait to see how the Digital Yuan plays out.
Keep pumping the fantasy tho, my diamond hands can hodl quite a bit.
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From Paul's article
Those in authority tend to be annoyed by hackers' general attitude of disobedience. But that disobedience is a byproduct of the qualities that make them good programmers. They may laugh at the CEO when he talks in generic corporate newspeech, but they also laugh at someone who tells them a certain problem can't be solved. Suppress one, and you suppress the other.
This attitude is sometimes affected. Sometimes young programmers notice the eccentricities of eminent hackers and decide to adopt some of their own in order to seem smarter. The fake version is not merely annoying; the prickly attitude of these posers can actually slow the process of innovation.
---
Maybe pause to think about why HN has changed their attitude on blockchain from 2017. Pause, listen, and think
I didn't really see it as being critical of blockchains in general. It's just comparing two blockchain technologies and pointing out that one has a more level playing field.
There's no way to save the fundamentally terrible design of guessing random numbers to verify a ledger. These are "solutions" to problems that are self created.
The top Bitcoin mining pools in China create their own mining ASICs in house for competitive advantage. You just can't compete without spending years catching up to their hardware designs.
As long as selling ASIC's are profitable -> more R&D and eventually everyone has access to the most capable ASIC's.
Off the top of my head, data from 2 years back(things might have changed now). Bitmain, one of the top 3 mining pools, 90% of their revenue was from ASIC sales rather than mining.
As long as Bitmain has competitors, they should always be able to put out the best ASIC's to the public.
They don't sell their latest mining equipment. Why would they? They sell the mining equipment after they have no use for it and it's costing them money to keep it running.
This is the story of every proof-of-work cryptocurrency. After a certain point, they only serve to make the rich even richer. Look at Bitcoin for example, where over 50% of the hashing power is controlled by big Chinese mining operations.