POW vs. POS

[d5000]

Internal systems (i.e. Proof of Stake) cannot be censorship resistant. Once the censor has controlling stake (which cannot be prevented) there is no way to unseat it.”

In some designs with a "dormancy period" (stake used for minting becomes "dormant" for a large portion of blocks and doesn't participate in minting), as far as I know, you need a large supermajority of the stake (66%) to be able to censor transactions. While an attacker with less stake (e.g. 51%) could try to orphan all blocks found by his competitors, at some moment his  "active stake" would be so low that no client would follow his chain for several blocks, and the attacker won't be able to install his attack chain as the consensus chain before the "reorg limit" has passed.

Apart from that, a ETH/ETC-style hardfork could be a measure of last resort.

[1715138407]

1715138407

[Cloudbet]

@d5000 Thats a really interesting idea that I haven't seen before, it seems like a pretty reasonable way to reduce the chances of a single node taking full control of the network.

Do you know of any projects that have deployed (or are planning to deploy) this design? I’d love to do some further reading!

One point that’s been brought up in regards to PoS is the idea that the ‘controlling stake’ wouldn’t be as desirable, as the value lies with the other participants in the chain having trust in the system - if someone gained a controlling stake and started to act against the best interests of the chain, and given the countless offerings in crypto today, people might just decide to move elsewhere, effectively de-valuing the stake held by the ‘controller’.

I'm still not completely convinced and am leaning towards PoW if the vulnerabilities of PoS can't be solved in my personal opinion (not speaking for Cloudbet or any other employees).

Thanks,

Ronnie @ Cloudbet

[d5000]

@d5000 Thats a really interesting idea that I haven't seen before, it seems like a pretty reasonable way to reduce the chances of a single node taking full control of the network.

Do you know of any projects that have deployed (or are planning to deploy) this design? I’d love to do some further reading!

The "dormancy period" exists in all Peercoin-based currencies.

However, to be more effective against censorship, it must be combined with a "reorg limit" (clients would not follow reorganizations of more than X blocks, so the attacker sits on a worthless chain). There are only a few currencies that combine both mechanisms. As far as I know, Blackcoin is one of them.

It should be clarified however that these mechanisms do not prevent double spend attacks based on the Nothing at Stake problem. An attacker with 51% of the active stake could always generate a chain long enough to trick other nodes into accepting a double spend.

One point that’s been brought up in regards to PoS is the idea that the ‘controlling stake’ wouldn’t be as desirable, as the value lies with the other participants in the chain having trust in the system - if someone gained a controlling stake and started to act against the best interests of the chain, and given the countless offerings in crypto today, people might just decide to move elsewhere, effectively de-valuing the stake held by the ‘controller’.

This is true, and has been analyzed under concepts such as "altruism-prime" (Vitalik Buterin).

But unfortunately there are possible attacks where this game-theory-based mechanism would not work - e.g. if the attacker is able to short sell a large amount of the coins, attacks the chain, and then profits from the decreased price.

I'm still not completely convinced and am leaning towards PoW if the vulnerabilities of PoS can't be solved in my personal opinion (not speaking for Cloudbet or any other employees).

Yes, I also think PoW, as for now, is superior. But PoS may "just work", above all in mature currencies with a decent distribution, or alternative with a group of "benevolent" whales, when it is extremely difficult to exploit Nothing-at-stake.

[Wind_FURY]

Yes, I also think PoW, as for now, is superior. But PoS may "just work", above all in mature currencies with a decent distribution,

What makes a "decent" distribution? Plus how do we know that the original people who received large stakes in the network will sell their coins?

Staking is costless, why should the Jihan Wu of POS be given the right to retain power of an economic system forever?

or alternative with a group of "benevolent" whales, when it is extremely difficult to exploit Nothing-at-stake.

We should trust them?

[d5000]

What makes a "decent" distribution?

In my opinion, a decent distribution has two components:
- No mega-whales - that means, no entities controlling more than ~10% of the stake (those that could launch an N@S-based attack alone or cooperating with few others)
- A large group of at least ~1000 larger investors - people that really have something to lose if the coin's value fell to zero. This is important because only if larger investors exist, "altruism-prime" works.
I believe no PoS coin currently meets both requirements. Bitcoin is beginning to show a "decent distribution". Maybe also Ethereum. But a PoS coin which achieves some adoption out of the "pure speculation" market (e.g. when it's really used as "cash") should be able to reach a "decent" distribution relatively easily. The problem is that almost all altcoins (also PoW coins) are used 90% for speculation, and this leads to the problem of exchanges that become mega-whales.

Plus how do we know that the original people who received large stakes in the network will sell their coins?

I'm critical of PoS coins distributed via ICOs, just because of the problem of original stakeholders which may become too powerful (it's impossible to control them). The best way, in my opinion, is the Peercoin way - use PoW to distribute the initial stash of coins.

Staking is costless, why should the Jihan Wu of POS be given the right to retain power of an economic system forever?

What you mean would be a "mega-whale" (see above) which I consider harmful for PoS coins. PoS communities should do everything in their power to avoid that one entity achieves more than ~10% of the stake. Often those mega-whales are exchanges, so a possible measure is to take care that no exchange dominates the market. Again, "usage as cash" would automatically lower the importance of exchanges.

or alternative with a group of "benevolent" whales, when it is extremely difficult to exploit Nothing-at-stake.

We should trust them?

I share your skepticism here, but some coins seem to just work because there are mega-whales that would lose everything if the coin fell to zero. The most obvious examples are DPoS coins like Steem. Technically the "benevolent" behaviour of the whales could be justified by game theory, but in coins with "delegation" mechanisms there is too much trust involved and social engineering could be really catastrophic. The "decent distribution" alternative is way better.

[byteball]

I think this reasoning (that is, doubting PoW value like that) is wrong. The problem of "conventional banking" is not in said overhead.
It's wrong to compare an average bank electricity consumption, plus it's workers salary with Bitcoin/PoW alts consumption.

Bitcoin doesn't eliminate banks. Banks are the ultimate liquidity providers to enable capitalism. FRB evolved because the demand for money exceeded the supply of gold. Should Bitcoin become the dominant currency of the world, banks would need to apply FRB to it as well to help control the price or risk massive waves of bankruptcy in a deflationary event. The alternative is banks won't touch bitcoin. Without demand for bitcoin investment capital, it will likely always remain niche.

Well, either banks can apply FRB using Bitcoin as "reserve currency", or there could be alternative to banks represented by alts. Obviously, alts are not mature right now for that, but that doesn't preclude them from solving the power vacuum problem in the future (I mean, more broad power vacuum problem than Bitcoin alone already has solved).

[Wind_FURY]

Staking is costless, why should the Jihan Wu of POS be given the right to retain power of an economic system forever?

What you mean would be a "mega-whale" (see above) which I consider harmful for PoS coins. PoS communities should do everything in their power to avoid that one entity achieves more than ~10% of the stake. Often those mega-whales are exchanges, so a possible measure is to take care that no exchange dominates the market. Again, "usage as cash" would automatically lower the importance of exchanges.

But why should we grant the originators of a POS system to be the perpetual maintainers, validators, stakers, the forever receivers of incentives of the network?

Distribution is not the problem. The fact the staking bears no cost is the problem.

[d5000]

But why should we grant the originators of a POS system to be the perpetual maintainers, validators, stakers, the forever receivers of incentives of the network?
Distribution is not the problem. The fact the staking bears no cost is the problem.

There is no reason why the developers ("originators"?) should receive a "stake" initially. What you refer to, probably, is that even with a PoW "distribution" period, there is a high probability that the "originators" participate actively in mining in the first phase, and this way, ensure a "perpetual influence" (like it occurred in Steem).

A possible solution is to offer PoW always as an alternative algorithm, like in Peercoin, so always new stakers are allowed to enter the distribution via the "PoW door", or add other algorithms without the "perpetuality" problem, like Proof-of-Capacity/Space, or Proof-of-burn. These two mechanisms share the energy efficiency (at least not high costs), but they require permanent investments by the validators to ensure their influence.

In my opinion, an underestimated approach is to combine PoW, PoS, PoC/S and PoB. I'm a supporter of the (very small) Slimcoin altcoin which already uses three algos (PoW, PoS and PoB), and that seems to work fine. A four-algorithm coin would be even better - at least two thirds of the blocks would be generated with methods where no "perpetual" power is possible.

There is no perfect algorithm. You always will face some sort of "injustice" or tradeoff. However, I think people over-estimate the influence or power of the validators. The real challenge for a cryptocurrency is to gain acceptance as a "means of payment" with respect to other payment methods. Once they are accepted as a payment means, then the market will be always open enough to ensure a high "movility" of the coin/stake ownership.

[Wind_FURY]

The reply does not satisfy me. Anyone can say the answer is a "more fair distribution", or an initial POW phase, or something else. But that doesn't change the reality that large stakeholders are granted the power perpetually, they will be richer because their stakes increase at no costs, and because of this they can dilute the small holders.

[d5000]

The reply does not satisfy me. Anyone can say the answer is a "more fair distribution", or an initial POW phase, or something else. But that doesn't change the reality that large stakeholders are granted the power perpetually, they will be richer because their stakes increase at no costs,

If we have a coin with a combination of PoS and another algorithm like PoW, PoB or PoC, and the PoW/PoB/PoC rewards are higher than the PoS reward, then the stakeholders - big or small - over time lose shares in comparison to the total supply.

This is fairly typical for PoS hybrids (with the exception of the "high stake coins" like Highcoin, which in my opinion are nothing more than HYIP schemes). For example, in Peercoin, the 1% per year reward stakeholders can get when they find the maximum amount of possible stake blocks, isn't enough to compensate losses due to supply inflation (I believe Peercoin had about 4%/year due to PoW rewards).

So in this case, I consider the problem "solved".

and because of this they can dilute the small holders.

That depends, again, on the algorithm. In coins like Peercoin, where the reward is proportional to the size of the stake, big holders are diluting only very small holders - those that either do not mint at all or hold so few coins that they don't find blocks.

[byteball]

The reply does not satisfy me. Anyone can say the answer is a "more fair distribution", or an initial POW phase, or something else. But that doesn't change the reality that large stakeholders are granted the power perpetually, they will be richer because their stakes increase at no costs, and because of this they can dilute the small holders.

This is not so for non-inflationary PoS, like NXT. A hybrid of NXT + PoW has a good chance of achieving a good distribution:
10% of max supply are given (Jelurida Public License requires that) to NXT holders, that admittedly, mostly consist of few whales;
x% of max supply is given to founders;
the rest (up to 90% max supply) is issued gradually over time to miners or other value contributors, not to original stakers! Original stakers and miners who become stakers only get transaction fees.
So initial whales are diluted over 5-15 years time.

[Wind_FURY]

The reply does not satisfy me. Anyone can say the answer is a "more fair distribution", or an initial POW phase, or something else. But that doesn't change the reality that large stakeholders are granted the power perpetually, they will be richer because their stakes increase at no costs,

If we have a coin with a combination of PoS and another algorithm like PoW, PoB or PoC, and the PoW/PoB/PoC rewards are higher than the PoS reward, then the stakeholders - big or small - over time lose shares in comparison to the total supply.

This is fairly typical for PoS hybrids (with the exception of the "high stake coins" like Highcoin, which in my opinion are nothing more than HYIP schemes). For example, in Peercoin, the 1% per year reward stakeholders can get when they find the maximum amount of possible stake blocks, isn't enough to compensate losses due to supply inflation (I believe Peercoin had about 4%/year due to PoW rewards).

So in this case, I consider the problem "solved".

I know POW, POS hybrid coins could work depending on the implementation, that's why I invested in Decred. But I would like someone like Gregory Maxwell or Achow to comment on this for enlightenment's sake.

What is your opinion on Decred?

[d5000]

I know POW, POS hybrid coins could work depending on the implementation, that's why I invested in Decred. But I would like someone like Gregory Maxwell or Achow to comment on this for enlightenment's sake.

As far as I know, they consider the "Nothing at stake" problem to be too severe to consider PoS an alternative for PoW, and that's why they aren't participating much in the debate anymore. I wrote already that I consider that we need more research on that. The PoS detractors are maybe right, but until now, there are PoS coins that "work" for years now, and nobody really was able to exploit the weaknesses - only in a handful of very small coins.

What is your opinion on Decred?

I like the model a bit, and I own a small quantity of them, too. What I did not like is the high proportion of the premine that went to the developers (50%). They justify it with the cost for development work, but Bitcoin and many other coins had development work too and it was done "for free".

[Wind_FURY]

I know POW, POS hybrid coins could work depending on the implementation, that's why I invested in Decred. But I would like someone like Gregory Maxwell or Achow to comment on this for enlightenment's sake.

As far as I know, they consider the "Nothing at stake" problem to be too severe to consider PoS an alternative for PoW, and that's why they aren't participating much in the debate anymore. I wrote already that I consider that we need more research on that. The PoS detractors are maybe right, but until now, there are PoS coins that "work" for years now, and nobody really was able to exploit the weaknesses - only in a handful of very small coins.

Yes they "work". But the large stakeholders are granted the power in the network in perpetuity, and without costs. What kind of an "economic system" would that be?

What is your opinion on Decred?

I like the model a bit, and I own a small quantity of them, too. What I did not like is the high proportion of the premine that went to the developers (50%). They justify it with the cost for development work, but Bitcoin and many other coins had development work too and it was done "for free".

The premine was not given away for free. The investors and the developers spent $415,000 to start the project, in exchange for some DCR from the premine. The rest of it went to airdrops for contributors.

[Lauda]

Energy consumption is not a technical deficit; PoS has plenty of problems. Read any decent research paper instead of getting information from Coindesk et. al.

There seems to be a lot of Proof of Stake haters.  POS tech is evolving it will be a absolute necessity considering how much power Proof of Work is consuming right now and it will only increase in the future.

PoS is completely unnecessary; the main people shilling hard for it are uneducated shitcoin bagholders.

The fact the staking bears no cost is the problem.

Cat 'members the nothing at stake problem.

[xbossJ]

In my understanding of what POW and POS are! I would pick POS (Proof Of Stake) over POW(Proof of Work)! Since proof of stake requires less energy interms of mining, and the fact that some think it is more secure! I would go with it! I don't know of any manipulations in staking as I do of POW! Any hardware is good to go for staking! Mining however needs specialized hardware which in most cases are very expensive! You can stake on the smallest unimaginable Raspberry! I have heard of mining bugs and all of that but not staking bugs! If Anyone knows what I don't as regards the two (POW and POS) I am happy to learn from you!

[byteball]

Pure PoS equates to charging for sublicensing property rights to code. PoS with an ICO is slightly better, but not by much. Just dilutes the whales initially a bit.
NXT is an example.
1 Gigatoken appearing from nowhere, distributed to a few whales. Only small number of tokens in real circulation,
thus overvalued capitalization: multiplying price of small number by very large number. Similar to forks of Bitcoin where too many tokens do not move, but without further mining.
The only value of them: rights to the code, requirement to distribute 10% of forging tokens in any clone.

Whereas in PoW we have reified (sometimes temporarily, sometimes permanently - for die-hard HODLers, fundamentalists and those who lost their wallets) capital of mining equipment, specialized skills and irrecoverable dissipated electricity.

[Cryptopotato021]

Proof of Work:

Imagine a running race in which the whole of this forum is taking part in. So, Now the advantage in this running race is the kind of shoes you have. If you have a very very good shoes you could run and finish the race as soon as possible. The chances of you winning the running race depends on how good your shoes is and that is it!
Now imagine you've won the race and there is a board of which has a list of all the races that is ever been won so as you're the winner of this race you get to place your name on the board and everyone would be notified of it. Once you're done you would get a reward which is the incentive for you to take part.

Proof of stake:

Now, In proof of stake the scenario is a little different. Here, You would bet some money and gain a chance to run alone and the chance of you getting selected depends on the amount of money that you have bet. There's a caution to this process!, If you're caught cheating your money would be slashed off.

The advantage of selecting one person here is saving the amount of money that is being spent of shoes. There is no point in spending money on shoes if you are not guaranteed to win.

Shoes= Computational Power
Reward= Bitcoin or ether
Running race= Mining