If not everyone stakes, then the people who do stake gain at the expense of those who don't. It becomes a kind of inflationary tax on cold storage. Whether that's a good thing will depend on whether you think inflation is a good thing. Many economists seem to think it is (in small doses), and that people who just sit on their savings without investing them ought to be penalised, because the economy will be better off if they spend.

Of course Bitcoin was created with the opposite view. And yet Bitcoin is inflationary, at least in its youth, and needs to be because its PoW mining is so expensive it needs the inflation to create new coins to pay the miners for their hashpower. Where-as PoS does not need to be inflationary because PoS mining (that is, validating transactions) needs trivial computer resources. So to me it seems ironic that so many PoS coins have adopted inflation. I'm surprised and saddened that PoS has become so associated with inflation.

Anyway, you can avoid the inflation by staking, and then it acts in your favour. It's not clear what proportion of people will do that. I know I like to keep my bitcoins in cold storage, for security, and I like to let my computer sleep to save electricity. I have to wonder, if a lot of people stake, whether the community will be more vulnerable to hackers, and whether the loss of electricity from all those computers being left active 24/7 will undo much of the benefits of PoW.

I like that idea. Does it mean transactions run a risk of picking the wrong recent block? As I understand it transactions can only be included in block-chains that contain the block they nominated, so if they nominated a block that gets orphaned, they will never be accepted into the main block-chain and the transaction itself becomes orphaned too.

This feels like it could have potential for double-spends worse than in Bitcoin. In Bitcoin, when the block-chain forks, both forks can contain the same transactions so most transactions are unaffected by a fork. In TaPoS, as I understand it, a fork means a lot of transactions will be reverted, and will have to be re-broadcast with a new nominated block. If the sender does nothing, the receiver will never get paid, so double-spending becomes the default result of a fork rather than something that only happens if a sender is actively criminal.

To avoid nominating a wrong block, a transaction would like to nominate a really old block, ideally the genesis block, so it can be included in either/both sides of the fork. Presumably the protocol disallows that by enforcing "recent". If so, does that mean that transactions expire? If "recent" means within 5 blocks, a transaction that fails to be included for 6 blocks can never be accepted. Transactions seem to be in a bit of a bind. They want to nominate a young block to minimise their risk of expiring, and an old block to minimise their risk of being discarded by a fork.

Is there anything to stop the same transaction (ie, same inputs/outputs) being issued multiple times, each time nominating a different block, to minimise the chances of it being orphaned? At most one of the versions will be accepted into the longest chain, so it would seem to be free. If so, isn't that the rational thing for a client to do (supposing it genuinely wants its transactions to be executed), and doesn't it make the "Transactions as Proof of Stake" thing pointless? Every transaction will vote for every block, just in case that block wins.

Is there a thread where these issues are discussed? I'm probably mis-understanding or re-inventing wheels.

This question concerns the initial distribution of coins; it's not the same as bankers making deciding how much money to print on a day-to-day basis. It's a one-off choice.

As an aside, I don't think it's right to pick on Satoshi but I do think there's an argument for basing the initial distribution on the unspent transaction outputs in the Bitcoin block-chain that are, say, less than 2 years old. The main reason being, you want the new coins to be held by people who are reasonably active in the Bitcoin community, in the hope that they will also be active in the new altcoin community. Satoshi would be excluded, not because he is too rich, but because he's too inactive. Arguably there is no need to reward the earliest adopters of Bitcoin because they are not early adopters of the altcoin. You would advertise the snapshot date in advance, so that whales that were still active and monitoring the scene would be able to transfer their bitcoins to themselves to freshen their transaction dates before the snapshot.

Rewarding stake is actually rewarding risk. Anyone holding large amounts of bitcoin when they could sell them, is risking the bitcoin price crashing and them losing a fortune. It shows they have faith in Bitcoin. That risk-taking and faith does deserve some reward, in my view.

Also, do you see what a leap it is from "whales are dangerous to our new currency because they could crash it by dumping their coins, so perhaps we should exclude them to reduce that danger", and "we should exclude whales because they don't deserve to be rich, because they didn't work for their money"? The first is pragmatic. The second is philosophical/moral; the politics of envy.

You keep making things up and ascribing them to your opponents.

The PoS does require some work to validate transactions; it's just a lot less work without the proof of work requirement. So forgers (what NXT calls the validators; it doesn't like to use the word "miners") still need a reward, but it can be a much lower one.

Coin creation devalues existing coins through inflation whatever the system. Arguably, PoW requires more inflation because the miners are doing more work and so need higher rewards than mere transaction fees can give them (at least while the currency is young, transaction volumes are low and the capital value is low).

Part of the problem is that there are multiple PoS systems. I, for example, know NXT somewhat better than I know PeerCoin. I get the impression people are assuming features of one coin or another are inherent to PoS, even if they aren't.

And I'm very far from an expert on NXT. I hope you don't conclude that all PoS is smoke and mirrors just because people in one thread aren't expert.

This is referring to a rather technical problem with PoS. The basis of PoS is that mining a block be expensive, with the cost in coin-days. The problem is that they only pay that cost if their mining attempt is successful, because the transaction that takes away their coin-days is effectively part of the block they mined. This means it is free to mine blocks that aren't included in the block-chain. So a rational miner would mine new blocks for the longest chain, but also mine blocks for shorter chains in the faint hope that the shorter chain somehow becomes the longest and that the miner gets some advantage when it does. And this in turn means that there are a lot of long forks floating around, and the system isn't doing a very good job of establishing consensus.

It's a big problem with PoS, that needs to be solved or else the system isn't viable. However, it's not accurate to say that "shares are free to create". They are only free if they aren't actually created.

No, getting the coins for free happens because of the spin-off idea of basing the initial distribution of coins on a snap-shot of the Bitcoin block chain. Any altcoin that uses spin-off will give free coins, even if it uses PoW.

Similarly, the altcoins that have an initial allocation based on, eg, Icelandic or Scottish citizenship also give free coins, and again it has nothing to do with whether the currency is based on PoS or PoW. The initial distribution has to come from somewhere. It's always going to be controversial.

Creating an alias is what I did in step 4. It charged me a 1 NXT fee, so surely I had to transfer some money in first?

I just got that warning, and eventually found this thread explaining it. It seems to make creating an account more complex. You can't just create it and send a ton of money to it. You have to:

• Create the account.
• Send a small amount of money to it, that you wouldn't mind losing.
• Wait for it to confirm so you can spend it.
• Spend it.
• Send the rest of the money to it, like you wanted to do in the first place.
  

Five steps instead of one, plus it costs you a transaction fee. Is that intentional? Do you not want it to be free to start using NXT securely? If it were free, then clients could register the public key automatically without bothering the user.

Incidentally, one of the nice features of Bitcoin is that sending coins to an address does not reveal that address's public key. Only spending from it does. Where-as with NXT, every account's public key is known. It's a tiny bit less secure; or will be, if anyone ever cracks elliptical curve cryptography (as with the legendary quantum computer). I guess you aren't worried about it, but to me it does seem like a small step backwards.

No, it's distributed. (Unless you think Bitcoin is also mined centrally, due to a few mining pools having a virtual monopoly.)

I don't understand the question. Coins can be exchanged for goods and services in the usual way. Doing so resets their age to zero, so the receiver can't use them as mining stake for a while.

You vote with coin-days.

Generally with PoS you pay with "coin-days". The longer you hold coins, the more weight they carry for voting, but the act of using them to vote resets their age to zero. So that's what you lose; not the actual coins, but the coin-days. But you do lose something, something that is unavoidable expensive to acquire (you have to buy the coins and then hold them for a time). So it is not like voting with company shares. As you say, that is essentially free once you have the shares; you can vote the same shares multiple times.

One concern is that a 51% attack could be launched by a privileged player. For example, by an ASIC manufacturer. A lot of ASICs are made in China, a country with a rather anti-Bitcoin stance. The Chinese government could compel chip foundries to cooperate. Or terrorists could, by applying extortion to the chip foundry staff.

You don't even need to be that privileged. You can ask a chip foundry to manufacture some chips just for you, even when that foundry doesn't normally deal in Bitcoin ASICs, and as they'd be new chips they wouldn't affect the general market. That's pretty much what happened when the first Bitcoin ASICs got developed: so that, but as a commercially-secret agreement. (Compare with how PS4 and XBox One contain custom chips.) The chip foundry can't tell the difference between an honest miner and one planning an attack (and they probably wouldn't care anyway). If you are, say, Saddam Hussain planning to attack financial infrastructure as an alternative to developing nukes or other weapons of mass destruction, you might need to conceal your identity through fronts.

It's easier if you can prevent new ASICs being supplied to honest miners, though. I don't follow what you mean by "respond in kind". Try to bid up the price? Where would the money come from? Kidnap the children of the staff of the chip foundry? Become the Chinese government?

PoS is no more inflationary than PoW. Go re-read the first post in this thread. The idea is that exactly the same number of coins gets created in each block, presumably with the same block-reward halving schedule.

We do need to reward the work, to keep miners mining, so that transactions keep getting validated and coins keep flowing. However, the deeper motivation for PoS or PoW is as a solution to the Byzantine Generals Problem. Basically, in a distributed system, conflicts are resolved by majority vote, and voting has to be made expensive to prevent stuffing the ballot-box. Proof-of-work is one way to make it expensive. Proof-of-stake is another.

Yes. And I think that's going to be immensely difficult. The spin-off idea helps, but (in my view) not enough. I doubt Bitcoin will ever be superseded by an altcoin unless some disaster happens to Bitcoin (like a massive, sustained 51% attack).

This is hard to arrange. A rich miner with 10,000 coins could split their holding into 10,000 wallets of 1 coin each, and present to the network as 10,000 poor miners, and there-by get 10,000 times the reward.

I mostly agree. Especially as I think real PoS are still too immature to incorporate into the Bitcoin protocol today. Even though I've been advocating PoS in principle, I'd argue against that step until PoS is better understood.

That said, I think network effects make it almost impossible for altcoins to succeed again Bitcoin. Even if we agreed PoS was better than PoW, I expect getting from here to there will be extremely difficult.

This only works if the service accepts double-spends from everyone. I'd have thought the service was more likely to restrict double-spends to favoured individuals. For example, it could require some pattern in transaction outputs, so that only people who knew how to create that pattern could make double-spends. That knowledge could be traded on underground bulletin boards, rather like how credit card numbers are traded today.

The honest miners could attempt to figure out and replicate the patterns, and then we get an arms race with the patterns getting ever more subtle.

I'm not saying it's a bad idea, necessarily, but it's far from a panacea.

It rewards everyone who participates in proportion to their holdings. Everyone gets 10%. They do need to work for it, though: they need to validate transactions. Only people who operate full mining nodes get the dividend. Coins held in cold storage get nothing.

I don't see why you think that.

With PoW, those who can afford the best mining rigs get to make the rules. Either way it is the richest sector. I think if anything, the barrier to entry is lower with PoS, since you can start smaller. You don't need as much computing power to make a contribution.

(This wasn't always the case. You used to be able to mine Bitcoin on a desktop computer; and that was a good thing. PoS will return us to those days, now long gone. PoW was also necessary as a way of distributing coins, to help boot-strap crypto-currencies. However, we are now past the boost-strapping stage.)

Not at all. Everyone who participates gets 10%, no matter how small their stake. It is still a coin-distribution mechanism. That you say it isn't, makes me wonder if you understand it. It will distribute coins more widely, since mining is so much easier. Everyone can benefit; it's not reserved for the people with warehouses full of ASICs or with the technical knowledge to run them.

Why is consuming less electricity a bad thing? You keep talking about work, as if it were noble. Miners still have to do work in PoS; they still have to validate transactions. That's good, productive work. Solving arbitrary hashes is wasteful work. It's like paying people to dig holes and then fill them in again. The only thing it achieves is network security, which can be achieved equally well without it.

The first point is evidentially true. Other things being equal, less waste is good. The later points don't follow from the first point. Points 2, 3 and 4 could equally happen in a PoW system. They aren't problems specific to PoS. I think your reasoning here is very unsound. You are inventing policies and attributing them to PoS, and then using them to attack it.

PoW is not efficient; that's the point. It favours a never-ending arms race of escalating consumption of computing resources, presided over by an elite with the capital to buy it and the expertise to run it.

Yes; there will always be miners. The problem is that if too many drop out, the network becomes more vulnerable to 51% attacks.

When you say SHOULD, do you mean as a prediction of economic theory, or do you mean morally, or is it merely what you hope will happen? Because I think the 25 BTC per block is too small a fraction of all the coins minted to make much difference to the supply curve, so won't in itself affect the price.

The price may go up anyway, but as I wrote in #23, I wouldn't want to rely on that for the security of the network.