I promise to do some bedtime reading of that, now that I've given Scribd my email and personal biometrics in exchange for the pdf.
To me it sounds like people are getting so tied up in details like: how hardware re-usability affects incentives, that it's easy to lose sight of context. Meanwhile, others are shocked that there exists an ecosystem of altcoins at all, and they're clearly fearful that this stealth inflation will dilute their profits
https://bitcointalk.org/index.php?topic=279650.0. Plz bear with me while I try to summarise some coin evolution:
Communist coins (least evolved)
Anyone can make infinite coins for free. No scarcity, no relative scarcity. Basically no-one is 'fooled' into valuing them.
Proof of Work coins
Anyone can make coins, expensively. The production rate is continuously measured and then tightly regulated so that it follows some horrible arbitrary-looking scheme. The game seems to introduce scarcity, and because the coins are unevenly scarce, lots of people value them. However, altcoins and liquid exchanges can dilute this scarcity, though I admit it seems like a formidable task predicting just
how network effects and a first mover advantage might play out in a future. At least "communist coins 2.0" doesn't seem likely, since there seem to be distinct elements of meritocracy at play (more about that in a moment).
Proof of Stake coins
I'm rusty on the details, but IIRC they fix a bunch of perverse incentives, by promoting a monopoly coin rather than an unhealthy ecosystem of coin-hopping speculators. And the production cost is low, which gives a PoS based economy a competitive edge ahead of PoW money. The lesson seems to be that the scarcity doesn't have to be 'real' with costly PR in the form of a PoW mining game. As long as the coins are
relatively scarce, having trusted stakeholders seems fine. (And they could probably fine-tune the system by controlling velocity by managing transaction fees).
However, if I'm correct that PoS coin would trend towards a monopoly, then lending becomes a problem. Fractional reserve in the form of a pyramidal banking hierarchy is highly inefficient: every time an end-user wants to borrow money, the banking hierarchy creates friction by adding their own (usually enormous) costs at each level. Compare that to something like this:
A business wants money for some venture. In order to overcome the lending problem (what units do they borrow to fund their business??) they issue high-tech shares that are somehow added to a popular currency that represents a basket of various participants' shares. But how to do it? Perhaps something like:
the business registers itself as a participant on a blockchain somewhere.
the business releases 'old' coins, while everyone else's pre-existing coins are automatically devalued slightly with the new shares. The transparency prevents stealthy, dishonest inflation*. And there is no longer any need for lending. *The idea is of course incomplete. There would probably need to be additional incentives to prevent excessive inflation, perhaps some system of dividends. This is where we should be focussing our efforts. Proof of stake is still nibbling around the edges.
