PoS is better all around. It individualizes production of new coins which only helps fight the manipulation by mining and trading cartels that is the current situation.
I do not observe manipulation by the large mining pools. However, many people reading this thread in hopes of receiving 10% bitcoin dividends on the holdings are not aware that of the tens of thousands of Bitcoin mining rigs operating, almost none of them are actual miners. They are rather hashers who do not maintain the blockchain, nor validate blocks, nor propagate transactions. Rather they are delegated Proof-of-Work tasks by the pool operator, who is the actual miner. Look at the following pie chart from Blockchain.info . In the Unknown pie slice are private datacenters and ASIC manufacturers that are large enough to keep the 1% typical pool fee for themselves. Suppose there are four very large datacenters in there. Count the named pie slices and add say 4 for the private datacenters in Unknown and get 12. Those 12 miners control Proof-of-Work Bitcoin mining.I am not really alarmed at this situation. It is not one that Satoshi envisioned when considering how miners would operate, but pools flow naturally from the motivation of miners for steady income as opposed to luck. Hashers, those who actually operate ASIC rigs, are free to move from pool to pool as they see fit to balance this pie chart. My point is that concentration of mining power by large holders in a Proof-of-Stake scheme could not conceivably be worse than this . . .  |
|
|
|
I don't know if it's the same thing but I was able to remain conscious while falling asleep and therefore be aware of my dreams as if I was awake. After a couple of nights of this I had to stop because it wasn't very restful. After I did this I found out Richard Feynman did the same thing when he was young with the same results. There is a reason we lose consciousness. That our conscious mind thinks it's in control of things is merely illusion/delusion.
It seems to be similar. For myself and siblings, we sleep first and the lucid part of the dream happens maybe after an ordinary dream. For me, its the flying part where I swim through the air. I say to myself "there is gravity, I should be falling" but I feel the viscous air as my hands pull through it like water, something tells me then that I am dreaming but I never use the concept dreaming - rather the concept is control. I do not want to wake up at that point because it is so much fun. My lucid dreams do not allow me the freedom of script afforded by a daydream. I am mostly an observer of scenes that associate from one to the other. I can somewhat control and especially enjoy what my character does but there is very little control over and often surprise at what scene comes next. Another aspect of my dreams is my second life. This was much more pronounced when I was younger, but I would have distinct memory from previous dreams - a continuing story so to speak. This helped control the lucid dream because I had explored a building before and knew that it had stairs for example. I have fair recall of dreams and I have never dreamed about technical analysis or charts. Ha. |
|
|
|
Suppose that in order to solve blocks a miner would be required to have 1 BTC in a certain address per quantity of hashing power contributed. Suppose arbitrarily the requirement were 1 BTC per gigahash. For someone who has and intends to hold 10 BTC, it would make perfect sense to devote 10 gigahash to mining, but hashing power beyond that would not increase the chances of solving a block. There are about 12 million BTC that have been mined, so the maximum profitable hashing power of the network would be 12 million gigahash, which I believe is less than it is today, and is certainly less than it is projected to be in the next few years. Excessive energy waste becomes a negligible issue.
I have thought about ways to limit hashing power but they do not seem to work. Others certainly have argued this before so my comment may turn out to be naive. I tried to apply rules from the economics of cap-and-trade for pollution permits. How does the network measure hashing power contributed? I could supply twice the allowed hashing power and claim that I am simply lucky when my share of the block rewards is twice what averages predict. Among miners, there is a protocol named VAR DIFF for variable difficulty in which the pool server measures your hashrate by giving you work-shares to hash with progressively increasing difficulty until a shares are solved by the client at say 4 - 10 per minute. This allows the mining pool to estimate and report your hashing rate. But this can be faked by the client to fool the server if the client wanted to cheat beyond the allowed maximum hashrate. |
|
|
|
... with a PoS network we will exploit our natural resources faster than with a PoW network. Why? I foresee that Proof-of-Work power requirements will continue at the 10x trend we both model. How could Proof-of-Stake exceed that? It is difficult to explain, and that's why I agree with you that it appears that PoW is more wasteful (and that this could be used as a political weapon). This is a half-baked explanation, but perhaps the essence of what I'm trying to communicate will still come across: For me it comes down to the simple fact that PoS rewards those who already hold the most wealth--they no longer even need to work for it. I think this creates more opportunities for rent-seeking and less impetus for innovation. I believe an economy that favours rent-seeking over work + innovation leads to the misallocation of our natural resources. In fact, I am a landlord and collect rents. But of course you mean economic rent-seeking of the sort that patent trolls employ to bedevil innovation. I believe that capital seeks its wisest custodian - optimal for the overall economy if opportunities for rent-seeking are minimized or mitigated. How can rent-seeking behavior be prevented by Proof-Of-Stake? The critical aspect is the Bitcoin mining reward and its schedule for halving. When the mining reward is tiny compared to the transaction fees awarded for solving a block then I propose that rent-seeking behavior will be diminished as annual dividends drop to the point where the risk of exposing the stake to the network is not worth the gain. Because Proof-of-Stake is many orders of magnitude more efficient than Proof-of-Work, I expect that Proof-of-Stake holders would accept much lower transaction fees to process a block than would Proof-of-Work miners who must pay for equipment, power and their own time. In the meantime, I claim without proof, that Proof-of-Stake rent-seeking behavior is less harmful than the manifestly wasteful Proof-of-Work alternative. |
|
|
|
I have also had dreams where the price of Bitcoin is in the single digits. It feels terrible. I also have dreams where the price is five or six digits. Those are always daydreams.
It appears that folks here should learn to control their night dreams . . . http://www.scientificamerican.com/article/how-to-control-dreams/My siblings and I are lucid dreamers from childhood. One of the tricks is to recognize that you are in a dream and what the constraints are. For example, in a lucid dream I launch myself into the air because I can swim in it. I know I can so I attempt it. Likewise, I can perform any physical exercise in a lucid dream without tiring. My mind cannot invent text as fast as I can read it, so I know to avoid trying to read a sign or book in a lucid dream. If something goes wrong, or is otherwise annoying, in a lucid dream I know that I have control and have touchstone places and events that I can return to - as a way of resetting. My brothers and I dream in color with surrealistic sounds, smells and so forth. In school I read a psychology of hypnotism textbook and learned that people like me are easily hypnotized. One of my younger brothers sleepwalked as a child and it was my responsibility to keep him away from the stairs and make sure he really knew where the toilet was. I could control him, with his eyes wide open as he moved around, by gentle voice command. Such memories. But I far prefer daydreams. |
|
|
|
|
Existing Miners Should Love Proof-of-Stake
Proof-of-Stake pays miners a 10% average annual dividend on their bitcoin exposed to the network in a Bitcoin Core wallet. Anyone can be a miner because Proof-of-Stake processes transactions, secures the network, and maintains the blockchain using the modest resources of an ordinary computer.
But why would existing Bitcoin miners love this new thing? Because it is common wisdom among miners that they would have been financially better off by simply buying and holding bitcoin, with the funds they spent buying designed-for-obsolescence ASIC mining devices and the power required to operate and cool them. Plus the time and effort of configuring, maintaining, monitoring, and ultimately disposing of them.
When 10% annual Proof-of-Stake dividends are added to the profit equation, the balance should clearly tip in favor of abandoning the current wasteful Proof-of-Work system.
|
|
|
|
... with a PoS network we will exploit our natural resources faster than with a PoW network. Why? I foresee that Proof-of-Work power requirements will continue at the 10x trend we both model. How could Proof-of-Stake exceed that? |
|
|
|
What you do is create a PoS "spin-off" from the bitcoin blockchain and try to legitimize it using your influence and economic power.
The market will decide whether is succeeds or fails.
I independently had a similar idea before I learned you were yet again ahead of me. Here is the sort of similar idea. Clone all the Bitcoin source code to create XCoin. Cleanly add PoS as an option to PoW but turn off PoS. After sufficient testing, e.g. on a testnet, release XCoin clients in lock step with Bitcoind and Bitcoin Core clients. Operate on the existing blockchain where XCoin peers are otherwise indistinguishable from Bitcoin peers. I propose that XCoin clients inform users as to how much dividend they could receive if there were enough of them. Spin-off the new PoS network by forking the blockchain given an overwhelming number of XCoin clients as compared to validating Bitcoin clients. |
|
|
|
Proof of Stake is socialist. It creates money out of thin air without working for it. Like a bank.
The important part of your argument is the creation of money out of thin air - so to speak. Satoshi put rewards into the network to motivate miners. Proof-of-Stake is exactly like the current Bitcoin system except that you get your fair share of the block rewards as a 10% average annual dividend, instead of those same rewards getting wasted in someone else's datacenter. You are the miner. But the genius of Proof-of-Stake is that it can be performed on an ordinary computer as long as you help process transactions and maintain the blockchain. Proof-of-Work is bizarre. It is sort of like a bank burning their notes in a moat to keep robbers out. |
|
|
|
The main difference is that PoS doesn't waste a bunch of electricity in doing so.
No, the main difference is that consensus is formed by those holding stake and not those willing to work. To me it is the difference between rent seekers (PoS) and innovators (PoW). Yes, the main difference is that PoS doesn't waste a bunch of electricity in doing so. That is why government bureaucrats will force a change in a few years when more than $100 billion gets wasted. (2018) You are a Chinese bureaucrat looking out your window at noon. On your desk is a staff regulation to prohibit SHA-256 and Scrypt ASIC manufacture, sale, installation and operation in China. The staff says that 5% of the coal-burning power plants under construction could be postponed if you sign the regulation . . .  credit: http://www.huffingtonpost.com/daniel-k-gardner/can-china-win-the-war-on-_b_5182132.html |
|
|
|
A proof of stake system sounds like a decent idea. Although it would have some unintended consequences as well. There would be a new incentive to hoard BTC and would slow down the still infant BTC economy. If I am getting an automatic percentage just for holding my BTC it is much more likely to sit idle. Of course the additional coins created by the POS system would help a bit but I do think it would slow down the speed at which BTC moves around the world right now.
Proof-of-Stake should increase bitcoin prices as more gets held in anticipation of earning 10% dividends. The Bitcoin Economy would actually speed up after dropping the wasteful overhead of the current wasteful mining. No additional coins are generated by Proof-of-Stake. Satoshi's promise of fixed supply remains. You simply receive your fair share of the block reward rather than waste it in someone else's datacenter. |
|
|
|
I have to keep the Bitcoin wallet open and I will have a chance to collect more?
An ideal Proof-of-Stake wallet is very much like the Bitcoin wallet you download for Bitcoin Core. There would be a generate option that you would enable with the amount of your bitcoin that you wish to risk exposing to the network in return for dividends. Over 12 months you would occasionally receive a bitcoin dividend that on average amounted to 10% of your risk-exposed bitcoin amount. When the block reward halves in 2017 your dividend rate drops to about 5%. Wallet owners such as yourself could opt to join a mining pool offering daily dividends if you permit them to risk your bitcoins in aggregate with other owners on the network. Mining pool fees are very reasonable - on the order of 1% per payment to you. If you take your coins off the network to be really safe, as in a paper wallet, then those coins do not get the dividend payments. |
|
|
|
funny, i've just been studying proof of stake models today.
Not sure about your idea, but I think more people should be
thinking about POS or other methods to shore up Bitcoin
against 51% attacks, which in my opinion are becoming
more likely the more Bitcoin grows and becomes a threat
to elite power/banking interests.
I believe that the likelihood of 51% attacks is fading. The entities capable of such an attack would have relatively little to gain in the period before the attack is detected, and much more to lose if the integrity of bisection is compromised. Gain of suppose $100K double spent transaction vs loss of 20% bitcoin market cap of $1 billion. I am now investigating how to contribute Proof-of-Stake code, test suites, and documentation to Bitcoin Core - not for immediate approval of course, merely available as a working plug-in library for inspection and comment. I suppose that bureaucrats in about 4 years will declare our current Proof-of-Work scheme contrary the public good, e.g. Article 19 of the Energy Charter Treaty which urges energy efficiency. |
|
|
|
Could someone contrast Proof of Storage with Proof of Stake, in particular with regard to physical resource consumption? For Bitcoin, I am becoming interested in coding, testing, and documenting various alternatives to Proof of Work, which I believe is unsustainable, e.g. ultimately in conflict with the Energy Charter Treaty's Article 19. http://en.wikipedia.org/wiki/Energy_Charter_Treaty#Energy_efficiency |
|
|
|
The Bitcoin Economy will pay miners over $500 million in 2014 to maintain the blockchain and to secure the network. Proof-Of-Work miners have large expenses that subtract from their profit. If Bitcoin had Proof-Of-Stake today and that was the only change, then network-attached, blockchain-maintaining holders would receive an average 10% annual dividend on their holdings. If only half of holdings were exposed to the network, then the annual dividend would be 20%. Ordinary computers suffice. [update April 27, 2014] The Bitcoin Proof-of-Stake project thread is https://bitcointalk.org/index.php?topic=584719.msg6397403#msg6397403 . A descriptive post there is . . . https://bitcointalk.org/index.php?topic=584719.msg6415632#msg6415632 . |
|
|
|
I understand the logic here, and agree that is seems as though mining is wasteful. Maybe that was your point. Your fictitious conversation illustrates the difficulty in explaining the benefits of PoW to a general audience.
But now let's consider the rest of your story. After the network switches to proof of stake, someone would have the following great idea:
Congressman Y: We have saved the people of the world huge amounts of natural resources by adopting PoS. To reward the world with this new found abundance, we will issue new bitcoins and direct them towards projects for the greater good of humanity. We will appoint a wise group of experts to determine the optimal amount of bitcoins to be issued so that we can maintain inflation at 2%, keep the people employed, and grow the economy.
If bitcoin ever leaves PoW, I think it will be the beginning of the end. I'm not saying it can't happen….
Ha. You are fast. I wanted to edit my post to include the Energy Charter Treaty signed by many countries in 1991 whose Article 19 requires that each Contracting Party "... shall strive to minimise in an economically efficient manner, harmful Environmental Impacts arising from energy use.". Governments already have a means to regulate bitcoin mining worldwide. I point out the likelihood of a forced bureaucratic solution, because I want our industry to provide a solution given plenty of time to consider and implement it. The hardest part for us I think, would be the riddance of commercial miners and the equipment providers that benefit most from the earned block rewards. Proof-of-Stake would reward network-attached, blockchain-maintaining bitcoin holders about 10% annual bitcoin dividends, halving according to schedule, on their respective held coins. If there was a 12 month or more advance notice of the blockchain fork, then datacenter owners could retain the bitcoin otherwise spent on new equipment - giving them a substantial stake in the new scheme. The PoS scheme enables numerous more miners to participate with ordinary computers, and upon a blockchain fork, those new miners would outvote the current pools, who actually have only one miner for the entire pool, as the pool members submit shares and do not maintain a copy of the blockchain. |
|
|
|
The number of transactions excluding popular addresses chart as provided by Blockchain.info has recently been fixed, and now clearly shows a trend reversal that appears to support the notion that April 10 was the bottom of the November 2013 bubble collapse. Bitcoin prices are presently in a dampened oscillation centered at about the present price $492.  |
|
|
|
[I personally expect the square of the number of transactions, N, to diverge from the V = ($1.50) N2 model prior to 2022. In fact, I expect it to occur should the market cap grow by another 100X (and the number of transactions grow by another 10X).
I think this current Metcalfe model is capturing more of the "store of value" properties of bitcoin, along the lines of what marcus_of_augustus said when he used the SWIFT analogy. Bitcoin as a store of value alone could easily take us into the mid 5 figures, due to its useful properties (it has zero weight, is difficult for corrupt governments to confiscate, can be sent anywhere in the world, and the keys can be stored in your brain or geographically distributed in m-of-n form).
Should bitcoin's usefulness as a "medium of exchange" also be realized (after lifting the 1Mbyte blocksize limit), perhaps it will be convenient to add a new term to the equation:
V = cSOV NSOV2 + cMOE NMOE2,
where SOV = store of value and MOE = medium of exchange. cSOV may still be approximately equal about $1.50, but I expect cMOE to be significantly less. We'll have to think of ways to isolate the "store of value" transactions from the "medium of exchange" transactions. I already have a few ideas here I'd like to explore…
I am very excited about the sidechain technology soon to be revealed in open source code, that will enable altcoin features to be applied directly to the Bitcoin network by way of the two-way peg. In particular I would expect sidechains to address usefulness as a medium of exchange. I will provide any data you need to adjust your model in the public spreadsheet that supports this multi-year thread. Let me know what needs to be recorded daily and I have the time and motivation to do it. |
|
|
|
Lastly, I don't think I would say that the energy spent on bitcoin mining is wasteful. Beyond securing the network, bitcoin mining also helps efficiently distribute new coins. In fact, I would argue that any other coin-distribution method (e.g., lottery, air drop, etc) would result in more waste.
Imagine a 2018 US Senate Energy and Natural Resources hearing in which a panel of Bitcoin Core developers and Washington State mining datacenter owners answer difficult questions prepared in advance by zealous staff. Senator X: Is it true that all that electricity, whose infrastructure was paid for by the public as a whole, is simply wasted? Core Developer Y: No Senator, Beyond securing the network, bitcoin mining also helps efficiently distribute new coins. Senator X: But these vast datacenters perform meaningless calculations to win a sort of lottery - is that all it amounts to? Core Developer: Yes, but that method was designed by Satoshi Nakamoto and has stood the test of time. Senator X: Remember that you are under oath. Is there not some other way to secure the network that does not waste so much power that we could otherwise use for the public good? Core Developer: None that has gained the adoption of what we call Proof-Of-Work. Senator X: I am glad you mentioned that. I don't really understand - I'm not an expert like you . . . But my staff has learned of an alternate scheme that has been used in other digital virtual currencies named Proof-Of-Stake. Could you explain that to us and why it cannot be used? Core Developer: Well, we would have to fork the Blockchain! . . . |
|
|
|
The Bitcoin Network Will Probably Be Compelled To Abandon Electricity-Consuming Proof-Of-Work in 2018Here is a simplified projection of Peter_R's Metcalfe Law bitcoin valuation model. I project that bitcoin transactions grow at the rate 3.2x until 2022 at which point the daily number of transactions equals the daily number of incumbent credit card transactions. The model projects that bitcoin mining pools will receive an income of over $200 billion in 2017, the majority spent by them on mining equipment, but a very substantial portion - perhaps a third - will be spent on electricity. It is widely known that bitcoin mining is entirely wasteful unless the heat can be reused.  Countries around the world have already implemented severe steps, affecting all consumers, that phase out incandescent light bulbs because more efficient alternatives exist. Bitcoin pool miners have relatively few members and thus little political influence that would prevent bureaucrats from asking for better alternatives. And at least one such altcoin-implemented alternative exists - Proof of Stake, which requires little in the way of equipment and electricity but does require miners to hold bitcoin in proportion to their chances of obtaining the scheduled block reward. In an earlier post, I puzzled how a single Satoshi could be valued at $100 - which is predicted by the up-to-now close fitting Metcalfe Law relationship between transaction quantity and price. Proof-of-Stake is an answer as to what would motivate holders of bitcoin to never sell. The bitcoin mining reward in table above, would be effectively distributed to network-attached holders in proportion to their holdings. In 2018, should Proof-of-Stake be substituted for the existing Proof-of-Work, then all network-attached holders would fairly share, in proportion to their holdings, over $2 trillion worth of bitcoin.
|
|
|
|
|
Show Posts
