POW vs. POS

[aliashraf]

@d5000
Although I have things to say regarding your post, I deliberately focus on the last part:

...
Plus, 'bank comparison' is to the point: The whole fiat currency and banking system is based on the same subjective idea of money and interest that PoS is based on.

PoS "stakers" do not receive amounts for doing nothing. They do some work validating blocks. The reason why PoS rewards are usually not fixed but percentages of your stake, like an interest, is related to what I explained to Zin-Zang above: to dis-incentive the "multistaking" behavior. And it achieves that "the rich" do not get richer in a disproportional way.

Our 'stakers' will eventually join pools to get rid of availability requirements and such a pool acts just like a bank.

The thing is banks are matured while PoS is not. For instance banks have implemented sharding (Vitalik's dream) already: operational banks maintain their 'shard' of the ledger because they have deposited enough stakes in the network.

OK, this comparison is actually interesting, but I still fail to see that the goal (reason to exist) of PoS coins is similar to the goal of current banks which - like every for-profit company - are existing to enrich the shareholders of one of the "shards". PoS is structured like it is because stake, as a "scarce resource" on the blockchain, is a relatively "low hanging fruit". But the goal is to achieve a "currency" for transactions, without the energy use of PoW.

Other scarce on-blockchain "scarce" resources have different flaws (e.g. NEM's transaction activity/stake combination) or directly cannot be used for consensus finding (e.g. address or even node count, because of sybil attacks). The only exception I know is proof-of-burn, but it is to insecure as a "standalone" model, it needs proof of stake or proof of work to increase its security.

Being a currency does not matter, being a new class of currency matters which PoS fails to get even close.

Stake/Reputation whatever follows power distribution law and is centralized by nature. Both operational and central banks are central stores of money/stake/reputation and it is why they can efficiently process thousands of transactions per second.

Efficient transaction processing is achievable when it is  centralized and yields zero cost. No  matter what is the name or the underlying technology, a centralized zero cost monetary system is nothing much different than a banking system. Lots of banks are considering blockchain technology for fault tolerance and availability issues, this doesn't make them a new monetary system or part of such a system.

Blaming PoW to be energy consuming and hence not environment friendly is ridiculous.
Maintaining the security of a decentralized consensus based monetary system is one of the most important and useful ways ever for consuming energy, imo.

[d5000]

Our 'stakers' will eventually join pools to get rid of availability requirements and such a pool acts just like a bank.

I agree that pools are undesirable in PoS, not only from a "moral"/"decentralization" perspective, but also because of security risks, and thus I don't really like LPoS ("leased proof of stake"), DPoS and similar approaches.

But there are currencies with the explicit goal to make it difficult or impossible to form staking pools - for example, Peercoin's approach is to make "stake pooling" impossible without trust (a pool would need access to the private keys and thus to the funds). In this model, pools would be similar to "Bitcoin banks" like our current exchanges and online wallet providers. These service providers are not really desirable in a cryptocurrency ecosystem, but I don't expect them to go away soon as most people are simply too lazy to look for decentralized alternatives.

Being a currency does not matter, being a new class of currency matters which PoS fails to get even close.

Stake/Reputation whatever follows power distribution law and is centralized by nature. Both operational and central banks are central stores of money/stake/reputation and it is why they can efficiently process thousands of transactions per second.[...] No  matter what is the name or the underlying technology, a centralized zero cost monetary system is nothing much different than a banking system.  

Where is, in your opinion, the difference between centralization in the form of staking pools and centralization via mining pools? Power distribution law cannot be fully avoided in monetary systems, from all what I know until now. It seems the "holy grail" hasn't been found here, and maybe a perfect, not-centralizing cryptocurrency is simply impossible.

In my opinion there are graduations of centralization in PoS and in PoW currencies. PoS requires minimally more trust ("weak subjectivity", as Vitalik calls it), but the difference is not too big, like I've tried to show with the bitcoin.org malware example.

(I mean to remember that you proposed a PoW model which makes pools impossible. This would be a great improvement, of course, but a centralizing tendency which favours big mining farms because of scale effects would still persist.)

Blaming PoW to be energy consuming and hence not environment friendly is ridiculous.
Maintaining the security of a decentralized consensus based monetary system is one of the most important and useful ways ever for consuming energy, imo.

Not if there is a better/more efficient way available. You're probably underestimating the power required by mining if Bitcoin saw mass adoption. In my opinion, that can only be viable long-term if, as I already wrote, miners ran 100% on renewables and didn't compete with the rest of the electricity demand.

[aliashraf]

Our 'stakers' will eventually join pools to get rid of availability requirements and such a pool acts just like a bank.

I agree that pools are undesirable in PoS, not only from a "moral"/"decentralization" perspective, but also because of security risks, and thus I don't really like LPoS ("leased proof of stake"), DPoS and similar approaches.

But there are currencies with the explicit goal to make it difficult or impossible to form staking pools - for example, Peercoin's approach is to make "stake pooling" impossible without trust (a pool would need access to the private keys and thus to the funds). In this model, pools would be similar to "Bitcoin banks" like our current exchanges and online wallet providers. These service providers are not really desirable in a cryptocurrency ecosystem, but I don't expect them to go away soon as most people are simply too lazy to look for decentralized alternatives.

The availability requirement is inherent to PoS of any flavor and Peercoin can't do anything about it. Once a stake holder has to choose between security and profit, the latter is the choice or simply migrating to a coin without such a constraint.

Being a currency does not matter, being a new class of currency matters which PoS fails to get even close.

Stake/Reputation whatever follows power distribution law and is centralized by nature. Both operational and central banks are central stores of money/stake/reputation and it is why they can efficiently process thousands of transactions per second.[...] No  matter what is the name or the underlying technology, a centralized zero cost monetary system is nothing much different than a banking system.  

Where is, in your opinion, the difference between centralization in the form of staking pools and centralization via mining pools? Power distribution law cannot be fully avoided in monetary systems, from all what I know until now. It seems the "holy grail" hasn't been found here, and maybe a perfect, not-centralizing cryptocurrency is simply impossible.

In my opinion there are graduations of centralization in PoS and in PoW currencies. PoS requires minimally more trust ("weak subjectivity", as Vitalik calls it), but the difference is not too big, like I've tried to show with the bitcoin.org malware example.

(I mean to remember that you proposed a PoW model which makes pools impossible. This would be a great improvement, of course, but a centralizing tendency which favours big mining farms because of scale effects would still persist.)

For PoS, being rich is enough to be rewarded for PoS you should spend to have gains.

Centralization via mining pools in PoW sucks but it is avoidable and I have proposed Proof of Collaborative Work, PoCW in this regard, as you mention.

Power law distribution of wealth in PoS directly leads to centralization because of availability dilemma but for PoCW , it just ends to large mining farms which are not the same as  mining pools because they don't take the control of other people's resources.

As a crypto geek, I believe in two very primitive axioms: Resistance Axiom and Decentralization Axiom.

Unlike what commonly is supposed, these are not design goals or agendas, what we want or try to achieve (perhaps relatively), instead both axioms are about the feasibility of such design goals.

Axiom of Resistance is about state/government control:

It is feasible to resist state control.

Axiom of Decentralization says:

It is feasible to have a P2P network with majority of power under the control of the majority of participants.

Axioms are not backed by any kind of proof, they are primitives. Anybody who has doubts about the feasibility of resistance or decentralization is not a member of this movement and his/her contribution to the system is probably poisonous, imo.

Proof of Collaborative Work is an outcome of my deep commitment to decentralization axiom, I'll do my best to make it happen as an evolutionary improvement in bitcoin but no matter what happens next, it has already proved to have enough strength as an idea and a proposal to maintain its integrity against criticism and objections.

And it is so encouraging:
Now we have something to say about the bitter experience with pooling phenomenon in bitcoin and PoW and maintain our deep belief in the feasibility of a decentralized PoW system.

[hv_]

I believe only in the physics of open dissipative economical systems and their inherent operational risks that are nicely working against any centralization in open PoW consensus.

PoS is many dimensions smaller and crap, and no real new achievement btw.


 

[d5000]

The availability requirement is inherent to PoS of any flavor and Peercoin can't do anything about it. Once a stake holder has to choose between security and profit, the latter is the choice or simply migrating to a coin without such a constraint.

There are solutions where the availability requirement is solved without needing pools. I mentioned Peercoin because their approach (called "multisig minting") would do just that: allow a node to stake online without requiring high security measures, because the private key is not exposed. That would allow stakeholders with profit in mind to simply "stake" with a cheap VPS or a basic device connected 24/7. (I don't think you can call 1%/year a real "profit"). In this case, combined with a coin-day based reward approach (e.g."percentage per year") a pool wouldn't make any difference for any participant with significant stake.

(I guess with "availability requirement" you refer to the requirement for a node to be online most of the time, to be able to compete for block rewards. If not, please clarify.)

Power law distribution of wealth in PoS directly leads to centralization because of availability dilemma but for PoCW , it just ends to large mining farms which are not the same as  mining pools because they don't take the control of other people's resources.

If the farm operators become too large (Bitmain, for example, is not only a pool but also a big farm operator) then the centralization problem persists. The centralization problem, in my opinion, is only partially due to pools controlling miners' resources. It's more related to the influence of single operators in relation to Bitcoin's power ecosystem, as they could threat to censor transactions or (if they're not big enough) form a cartel.

Your PoCW proposal is very interesting ... I've just begun to read it. But it is only one step.

Axiom of Resistance is about state/government control:

It is feasible to resist state control.

Axiom of Decentralization says:

It is feasible to have a P2P network with majority of power under the control of the majority of participants.

Axioms are not backed by any kind of proof, they are primitives. Anybody who has doubts about the feasibility of resistance or decentralization is not a member of this movement and his/her contribution to the system is probably poisonous, imo.

Axiom of Resistance can be achieved by PoS, as there may be some centralization but there is not one, but typically multiple "dominating" operators (=big whales), and once they're distributed well enough, there's no possible government control. You're right that the control of the system by the "majority of participants" is very difficult to achieve with PoS, but combining it with other approaches like Proof of burn may do the trick.

[KingScorpio]

Is there anyway for someone to explain this in not so technical terms, the pros and cons of both of these and what they are?

From my understanding:

POW (proof of work) is bitcoin being mined through mining rigs using computers. The first computer that finds the answer distributes it to the network and it is added to the blockchain and the miner gets a reward. So the proof of work is the computer computation.

POS (proof of stake) is bitcoin being mined simply by owning that coin over an arbitrary amount of time. You hold the coin and get more of that coin, because you hold it.

Is this correct?

there is pow and pos in both it and socioeconomic context,

i am afraid these IT freaks and their IT concepts of bitcoin be it pow and pos will only create zombie like sects and mlm system that in the long term wont be taken serious anymore.

people will get tired of them, as they are only constantly seeking to extract more capital

[jaybny]

Is there anyway for someone to explain this in not so technical terms, the pros and cons of both of these and what they are?

From my understanding:

POW (proof of work) is bitcoin being mined through mining rigs using computers. The first computer that finds the answer distributes it to the network and it is added to the blockchain and the miner gets a reward. So the proof of work is the computer computation.

POS (proof of stake) is bitcoin being mined simply by owning that coin over an arbitrary amount of time. You hold the coin and get more of that coin, because you hold it.

Is this correct?

This may help:  https://medium.com/@jaybny/on-proof-of-skill-6af149f45ce8

[crypt0j0e]

If Ethereum would switch to a progressive POS adoption it will make the perfect altcoin scam cycle.
1 Premine with token sale
2 POW
3 Hybrid POW/POS
4 POS
5 Bankrupt

That's so 2013/2014

That sounds about right! Solely running on PoS takes away real world costs and encourages hoarding where at least with Hybrid PoW/PoS there's still electricity costs incurred for mining new tokens. And despite the energy requirements to mine BTC, PoW is what helped turn Bitmain into a billion dollar company and inspire the innovation of new mining hardware.

[byteball]

If Ethereum would switch to a progressive POS adoption it will make the perfect altcoin scam cycle.
1 Premine with token sale
2 POW
3 Hybrid POW/POS
4 POS
5 Bankrupt

That's so 2013/2014

Some new projects (wink wink) begin from step 3.
The motivation seems to be: attempt to achieve better distribution than NXT did (giving all stake to a half dozen close friends);
50% chance of successful attack requires 50% of hashrate and 50% of stake in hybrids.

[cellard]

I don't believe you can manually give people the coin supply as the developer sees best fit, hoping that is egalitarian enough that no big whales sitting on fat sticks will be formed. I think this is delusional. On a long enough timeline, elite factions of people holding massive amounts would arise, then all they have to do is sit on their ass and command and conquer.

With PoW, at least you have to work hard to keep your monopoly going. We give Jihan a lot of shit because he is a bit of a cunt, but to be frank he works hard in his business, it's very competitive out there.

In PoS the Jihan equivalent would just be able to sit and keep getting mad stacks of staked coins.

PoS just doesn't feel right, there are some interesting experiments out there trying to remove PoW from the equation but I wouldn't count my money on it for the long term.

[d5000]

I don't believe you can manually give people the coin supply as the developer sees best fit, hoping that is egalitarian enough that no big whales sitting on fat sticks will be formed. I think this is delusional. On a long enough timeline, elite factions of people holding massive amounts would arise, then all they have to do is sit on their ass and command and conquer.

I currently tend to agree here, and have mostly moved away from (PoS or PoW) coins that were distributed in an ICO (with very few exceptions when the concept is very interesting). That's why I consider PoS must be combined with another mechanism to distribute the currency units. Like Peercoin or Decred do with their hybrid PoW/PoS systems, and at least in Peercoin, you won't get rich or even "richer" sitting only on your coins because the PoS reward is really low (1%/year).

Proof of Burn and Proof of Capacity/Space are another two interesting algorithms to combine PoS with. Both suffer from some of the same drawbacks of PoS (both have a Nothing at Stake problem of varying degree) but they are open for validators from "outside" that don't hold a big "stake" and also don't simply reward "sitting on coins". In contrast, NEM's Proof of Importance seems to be little more than a failed PoS extension - maybe with good intentions (encourage usage) but bad consequences (potential blockchain bloat, useless transactions).

[mu_enrico]

<...>

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Agree with the comments above. The problem with PoS is that the reward is far too high for the "work" done. I mean in PoS system, wallets with stacked coins still perform the block creation but don't require that much computation power. In this case, maybe Peercoin as d5000 said, will get away with it since the reward is very low. Hybrid PoW/PoS might work if the reward is fair between PoW and PoS validators, but usually, this tends to favor PoS. This situation may explain:

<...>
3 Hybrid POW/POS
4 POS
5 Bankrupt
<...>

Nakamoto PoW uses electricity for computation power to mine a block. It doesn't mean that the system cannot use other "work" to create a block. And in order to this "work" to be successful, users/"miners" must perceive the reward as fair. Maybe it still requires "outside" element, or not?

[byteball]

<snip>
That's why I consider PoS must be combined with another mechanism to distribute the currency units. Like Peercoin or Decred do with their hybrid PoW/PoS systems, and at least in Peercoin, you won't get rich or even "richer" sitting only on your coins because the PoS reward is really low (1%/year).
<snip>

I analyzed a new recently released coin Metro: the distribution seems OK but probably far from ideal (NXTers got 10% of max supply for their Jelurida license, but all premine is time-locked and released gradually with each PoW block) and there will surely be miners who got a lot of coins while the difficulty was low.
They will not be likely to become pure PoS as their sidechain idea (main application) is based on PoW contesting periods, inspired by Blockstream. At least not likely in near future. Either pure PoS or replace PoW component with something "greener".
They also have PoS block bloat since DEX will be the 1st application of sidechains, and thus PoS blocks are very frequent without pruning implemented yet.
When DEX starts, you might become richer (according to them  but not by just sitting on your coins - rather you need to spend gas in Ethereum Classic and Ethereum networks and feed blockchain data in both directions (and also between whatever smart contracts can arise to prominence, e.g. Rootstock) but for that gas you get transaction fees for withdrawals, in ETC/ETH.

[hv_]

<...>

<...>

Agree with the comments above. The problem with PoS is that the reward is far too high for the "work" done. I mean in PoS system, wallets with stacked coins still perform the block creation but don't require that much computation power. In this case, maybe Peercoin as d5000 said, will get away with it since the reward is very low. Hybrid PoW/PoS might work if the reward is fair between PoW and PoS validators, but usually, this tends to favor PoS. This situation may explain:

<...>
3 Hybrid POW/POS
4 POS
5 Bankrupt
<...>

Nakamoto PoW uses electricity for computation power to mine a block. It doesn't mean that the system cannot use other "work" to create a block. And in order to this "work" to be successful, users/"miners" must perceive the reward as fair. Maybe it still requires "outside" element, or not?

Goto physiscs, if you need to define 'work' / energy.

You need work to keep order = security over time

So security is a time function, that needs energy input every second (similar to your firewall that needs work to stay secure all second / protect against hackers trying to hack you every second - their little PoW!).

PoW is THAT firewall.

PoS is shit.

[cellard]

I don't believe you can manually give people the coin supply as the developer sees best fit, hoping that is egalitarian enough that no big whales sitting on fat sticks will be formed. I think this is delusional. On a long enough timeline, elite factions of people holding massive amounts would arise, then all they have to do is sit on their ass and command and conquer.

I currently tend to agree here, and have mostly moved away from (PoS or PoW) coins that were distributed in an ICO (with very few exceptions when the concept is very interesting). That's why I consider PoS must be combined with another mechanism to distribute the currency units. Like Peercoin or Decred do with their hybrid PoW/PoS systems, and at least in Peercoin, you won't get rich or even "richer" sitting only on your coins because the PoS reward is really low (1%/year).

Proof of Burn and Proof of Capacity/Space are another two interesting algorithms to combine PoS with. Both suffer from some of the same drawbacks of PoS (both have a Nothing at Stake problem of varying degree) but they are open for validators from "outside" that don't hold a big "stake" and also don't simply reward "sitting on coins". In contrast, NEM's Proof of Importance seems to be little more than a failed PoS extension - maybe with good intentions (encourage usage) but bad consequences (potential blockchain bloat, useless transactions).

There is something that feels very cheap about having to wait for some guy in a forum deciding when to release the next batch of coins, feels like a communist on top of the pyramid.

The automated, predictable algorithm of Bitcoin is much more elegant. It's open for competition, whoever gets the most hashrate wins and this means putting in the work.

As far as PoS + something else combos, im not impressed. All of the present models can be gamed at cheaper cost than Bitcoin.

I remain open minded when it comes to something new and groundbreaking but for now anyone thinking any of these coins can flip Bitcoin is insane.

[d5000]

As far as PoS + something else combos, im not impressed. All of the present models can be gamed at cheaper cost than Bitcoin.

That applies to all altcoins, including big PoW ones like Ethereum

A PoW/PoS combination has the advantage that while the "predictable attack cost" is bound to the PoW hashrate, there is a "plus" of security coming from the proof-of-stake algorithm which doesn't cost additional energy consumption. The hard part is to quantify this "additional" attack cost - PoS coins are more vulnerable to social engineering, bribing and similar attack strategies, which normally should be expensive, but there is no way to calculate an attack cost based really on "hard facts".

I remain open minded when it comes to something new and groundbreaking but for now anyone thinking any of these coins can flip Bitcoin is insane.

I don't believe that any coin - neither PoW or PoS - will "flip" Bitcoin in the short to mid term. But nobody knows what can happen in 10 or 20 years. In theory, Bitcoin can also "enrich" its security algorithm with PoS, PoC, or PoB - but this would need the approval of miners and/or big economic nodes.

[cellard]

As far as PoS + something else combos, im not impressed. All of the present models can be gamed at cheaper cost than Bitcoin.

That applies to all altcoins, including big PoW ones like Ethereum

A PoW/PoS combination has the advantage that while the "predictable attack cost" is bound to the PoW hashrate, there is a "plus" of security coming from the proof-of-stake algorithm which doesn't cost additional energy consumption. The hard part is to quantify this "additional" attack cost - PoS coins are more vulnerable to social engineering, bribing and similar attack strategies, which normally should be expensive, but there is no way to calculate an attack cost based really on "hard facts".

I remain open minded when it comes to something new and groundbreaking but for now anyone thinking any of these coins can flip Bitcoin is insane.

I don't believe that any coin - neither PoW or PoS - will "flip" Bitcoin in the short to mid term. But nobody knows what can happen in 10 or 20 years. In theory, Bitcoin can also "enrich" its security algorithm with PoS, PoC, or PoB - but this would need the approval of miners and/or big economic nodes.

Yes, I included altcoins that are PoW too. We have had many PoW coins being 51%'ed lately. Bitcoin Gold included. Then Verge and some others. The next one is Bitcoin Cash. I believe we will see something interesting happening in september with the spam attack that Bitpico has planned for BCash. If they are legit and not paid by Roger Ver to simulate a failure of the attack, then it should work and BCash should collapse somehow, who knows if some funds get moved against owner's will.

No matter what algo are you using, electricity is limited, and most of it will go to Bitcoin. Then non PoW models or combinations of it don't make me feel any more secure. They usually involve "delegates" and stuff like that which is a big red mark for me. The net result isn't more protection that I can see.

[aliashraf]

No matter what algo are you using, electricity is limited, and most of it will go to Bitcoin. Then non PoW models or combinations of it don't make me feel any more secure. They usually involve "delegates" and stuff like that which is a big red mark for me. The net result isn't more protection that I can see.

PoS options (including hybrid forms) are off the table for obvious reasons but PoW itself should be treated cautiously as well. I understand it has been a long time and centralized mining apparently bitcoin has not been destroyed because of it but taking a deeper look at recent events with so-called scaling debate and the delay in adoption of SW which I believe damaged the reputation of bitcoin, pools are to be blamed.

I go even further and suggest the situation with mining pools to be the most fundamental factor behind the definite slow down in bitcoin and cryptocurrency adoption.

So, I believe it is not about how PoW is better than PoS. Rather it is about how PoW could be better than bitcoin.

[evilsign]

So, I believe it is not about how PoW is better than PoS. Rather it is about how PoW could be better than bitcoin.

Sorry, I still don't understand your words. How can you say PoW is better than bitcoin while bitcoin itself uses the PoW protocol?

Regarding this PoW and PoS, I feel that I have their own advantages, and even though PoS is a newer protocol than PoW, it cannot replace it completely. Then regarding this PoS, I am very interested because there are many systems, one of which is the master nodes. Maybe I should discuss it in another thread.

[aliashraf]

So, I believe it is not about how PoW is better than PoS. Rather it is about how PoW could be better than bitcoin.

Sorry, I still don't understand your words. How can you say PoW is better than bitcoin while bitcoin itself uses the PoW protocol?

Simple! Bitcoin implementation of PoW, is the first version, an experiment and a proof of concept as far as I can understand.

I mean, come on! How is it possible at all, a complete revolution just with one shot 

The unfortunate coincidence of bitcoin getting popular and becoming a high stake game with Satoshi's disappearance  caused it to become rigid and resist evolution, obviously, but it doesn't change the fact that it is nothing more than a beta version of a proof of concept for PoW.

Proof of concept for PoW, not for cryptocurrency I have to emphasis as I see most people are not used to re-think everything and just follow the media.

According to their story: 1-Bitcoin is the ultimate form of PoW, 2- PoS is an alternative, much modern approach to cryptocurrency as a decentralized, public and permissionless system.

Both claims are void:
1- Bitcoin is not the end but a beginning for PoW, 2- PoS is nothing new, it has been around as reputation systems and has failed its mission because of its subjective nature. There is no way to publish money, a justifiable legitimate way I mean, so it doesn't deserve to be considered neither an alternative nor a modern approach to cryptocurrency.