Annual 10% bitcoin dividends if mining were Proof-of-Stake

[theFork]

POS make the whole system more closed to outside people: Early adopter not only benefit on the price appreciation, but also gain in dividends. This will cause less and less people joining this system

An important part of a distributed system is to continuously give the new comers incentive to join the network, thus new comers with newer technology/better service can re-balance the whole mining picture and take over the throne. For example, deepbit's leadership were replaced by BTCguild, then Ghash.IO and discuss fish, etc... This will make sure the system is enough decentralized and there is always healthy competition to make the network strong and fresh. Miners seek profit, but also have the voting rights, this is a very important aspect

But in POS system miners would lose the incentive due to losing of voting rights. What they do is just make the early adopters rich, and if there is a situation need a protocol level change, they don't have voting rights, they will abandon this closed system

In PoW system, the decision making rights is always stay with the current most actively working miners, that is the best way to distribute the decision making power, although there is certain risk of 51% attack. But the 51% attack is not a big problem, because ultimately is the majority of bitcoin miners decide which chain they select to work on, not existing bitcoin holders, this is a key difference (You can buy lots of coins using printed fiat money thus gaining more stake, but you can't buy a farm with huge amount of hashing power since those guys who are capable of making hashing machines will inform others at the first place)

a hybrid pow+pos system would seem to answer many of these issues. Also people with pos nly wtill need to spend some coins for goods and services.

Do you think mining is that open in the asic world. The rate of redundant hardware is scarey.

[theFork]

I find it ironic that Peter is arguing so strongly in favor of the seemingly inferior PoW system, when he is the one who recently proposed the perfect solution for shifting from one blockchain to another.

The adoption of Bitcoin is apparently mathematically chaotic in the sense that certain small changes to the present situation lead to large and unexpected consequences. There is simply no precedent for Bitcoin, and therefore we depend upon argued imagination.

Sorry - I read the 1st post and then skipped the last 9 pages.

Shouldn't PPC have been the one end-all to be all had proof of stake had been successfull wouldn't the mass majority of miners simply convert to PPC and hold a portion of it to roll over with POS?

"makes me dream of folks out there who have 10,000,000 PPC and recieve a cool million PPC each year to live off of "

no one likely has 10M PPC. there are on just over 20M PPC and the less being made than BTC or LTC.

However PPC is looking like it will go >$100 within a year

[Brangdon]

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.

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 think this creates more opportunities for rent-seeking and less impetus for innovation.

I don't see why you think that.

With PoS, consensus is formed by those holding stake.  In other words, those who already have the most also get to make the rules.

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.)

Look at who accrues the new coins in your 10% dividend model: they accrue to the largest stake holders!  It's no longer a coin-distributoin mechanism--it is a way for those with first access to new money to benefit un-proportionately.  Sounds a bit like the Fed.

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.

PoS supporters appeal to idea of the "greater good" (less electricity consumed).

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.

1. For the greater good, we must stop this wasteful bitcoin mining and we will all be richer!

2. For the greater good, we must create more coins so that we can direct them towards important projects that the free-market neglects!

3. For the greater good, we must incentive spending to keep the people employed!

4. For the greater good, we must create more coins so that we can lend them to people to stimulate the economy!

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.

Bitcoin favours efficiency.  Our current system favours debt and consumption.

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.

[rpietila]

What is the reason that the new coins should be given in proportion to existing coins, iff the holder also does some work?

If the work done is equivalent for 1 and 10,000 coin holder, should the reward not be also?

[Adrian-x]

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.

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 think this creates more opportunities for rent-seeking and less impetus for innovation.

I don't see why you think that.

See the point you make in bold. rent-seeking is how you get income without working. (They don't work the computer program does the work)

Bitcoin favours efficiency.  Our current system favours debt and consumption.

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.

It is actually the other way around. PoS is more energy efficient at maintaining a cryptocurrency. It is not efficient at allocating capital in the economy as a whole. Capital is used to fulfill need, currency is the conduit. If you can fulfill need by not working and just holding currency then capital from the economy will accumulate in hoards of revenue generating currency.

And those who need to use currency will do what those who have hoards of it what.

Competition in PoW insurers those who make the currency have to spend it into the economy.

[Adrian-x]

What is the reason that the new coins should be given in proportion to existing coins, iff the holder also does some work?

If the work done is equivalent for 1 and 10,000 coin holder, should the reward not be also?

Good point, actually every node (Stake) is doing the same work. But the reward is not based on the work done, the reward goes to the rich.

The reward should go to those who do the work most effectively.

[rpietila]

Bitcoin block rewards are quickly dwindling. Could it be that it was intentionally designed to be more energy-efficient in the steady state when the initial distribution is completed?

[Peter R]

From a simplified, possible world, business case such as this example, it is clear to me that a very large opportunity exists to disrupt the disrupter. The challenge is to create an invulnerable Bitcoin Core Proof-of-Stake.

I agree with you completely. With all due respect to the PoS innovators like Peercoin and Nxt, seamlessly converting the Bitcoin brand and blockchain to PoS would be far superior to adopting an altcoin. I find it ironic that Peter is arguing so strongly in favor of the seemingly inferior PoW system, when he is the one who recently proposed the perfect solution for shifting from one blockchain to another.

I should make my position clear:

1.  I believe that blockchain "spin-offs" are an excellent tool to facilitate experimentation with new cryptocurrency features.  They award all current bitcoin users with a percentage of any pre-mine equal to the their holdings of the unspent outputs in the blockchain at a pre-defined point in time.  Current users can "claim" their pre-mine in a decentralized and trustless manner using their bitcoin ECDSA private keys.  

SlipperySlope's proposal to create a proof-of-stake spin-off is an example of the general spin-off methodology.  I would like to see the process of creating spin-offs made as easy and transparent as possible, and I intend to assist SlipperySlope by working towards this goal.  

Here is the "spin-off" thread: https://bitcointalk.org/index.php?topic=563972.0 .  And here is a complimentary proposal for a Turing-complete spin-off: https://bitcointalk.org/index.php?topic=563925.0 .

2.  I am saddened that some of the posters that I follow and respect believe that it would be superior if money was created without work or cost.  In my opinion, the issuance of money is too important to trust to humans, even ourselves. I hope readers will go back and read Risto's and Adrian's posts in this thread, as they both explain using different words why coins must come into existence through work, and why this is preferable to shares issued freely based on the consent of stake holders.  

Once again, I support SlipperySlope's PoS spin-off experiment, for I've been promoting spin-offs since April 9.  It will put the fear of god into PoS alt-coins with less-efficient initial coin-distributions, and then it will succeed or fail based on its own merits while piggybacking bitcoin users by default.  

Question for SlipperySlope: Will the initial distribution of wealth in Bitcoin-PoS be exactly as per the unspent outputs in the bitcoin blockchain at a certain point in time in the future, or will you consider redistribution of wealth if you find popular support for it?  

[raskul]

Bitcoin block rewards are quickly dwindling. Could it be that it was intentionally designed to be more energy-efficient in the steady state when the initial distribution is completed?

i'm not so sure anyone could have predicted that ASIC's would have come into play and we would be running the kind of energy that we are running to find Bitcoin blocks. So, no, I don't think that could have been assumed.

[theskillzdatklls]

Nice read Brangdon, thanks for that.  Makes me more in favor of PoS now.

[jonald_fyookball]

2.  I am saddened that some of the posters that I follow and respect believe that it would be superior if money was created without any work or cost.  In my opinion, the issuance of money is too important to trust to humans, even ourselves.

While I'm not sure I agree 100% with your philosophical position,
I think bitcoin is still too young and unstable to abandon
PoW while keeping it psychologically appealing.

[Brangdon]

1.  I believe that blockchain "spin-offs" are an excellent tool to facilitate experimentation with new cryptocurrency features.

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.

[Peter R]

1.  I believe that blockchain "spin-offs" are an excellent tool to facilitate experimentation with new cryptocurrency features.

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.

Brangdon, what SlipperySlope is proposing is an alt-coin.  The only way to turn bitcoin into a proof-of-stake network is to create a spin-off or fork (i.e., an "alt-coin") and try to legitimize it with your influence and economic power.

SlipperySlope's project development thread for Bitcoin-PoS is in the Alt-coin Section for a reason: https://bitcointalk.org/index.php?topic=584719.0

[theskillzdatklls]

How would a hybrid pos/pow work?  50/50 or something thereof?  Do any altcoins already have this feature developed?

I think they both have something to offer to the network.  More "work" and more incentive to create a node.

[BitDreams]

Does proof of work have to be limited to computer calculations?

[Adrian-x]

Does proof of work have to be limited to computer calculations?

No it could be limited to IP address or any other computer operation (all can be digitally reproduced). Satoshi discussed it here on Bitcointalk and argued that it was the hardest process to fake, in that one had to invest economic resources to do it and in so doing that would introduced risk and competition and efficiency, optimizing the distributing of coins.

If you can do Proof of Storage that would be a more effective distribution method than PoS. Some proposals but not invented yet. CloudCoin comes to mind as 1 of 3 attempts I know of.

[cosmos85]

500 millions for miners ? i think this number is  getting lower with time

[amspir]

Where did you come up with $1 billion?

I can buy a CoinTerra TerraMiner IV which gets 2 TH/s for $5999.
Thats $3000 for 1 THs.

At that rate, I can get 60 PH/s (the entire current bitcoin network)
for 180 million.  And arguably, it would be much cheaper for
a bulk order and working directly with core component manufacturers.

The problem with that calculation is supply and demand.   It's simply not possible to simply double the hashrate of the network by buying it all at once.  The supply is not there.   If you were to monopolize the output of ASIC  manufacturers in an attempt to double the network hashrate, the rest of the bitcoin community would see it coming, and respond in kind.

[BitDreams]

Does proof of work have to be limited to computer calculations?

No it could be limited to IP address or any other computer operation (all can be digitally reproduced). Satoshi discussed it here on Bitcointalk and argued that it was the hardest process to fake, in that one had to invest economic resources to do it and in so doing that would introduced risk and competition and efficiency, optimizing the distributing of coins.

If you can do Proof of Storage that would be a more effective distribution method than PoS. Some proposals but not invented yet. CloudCoin comes to mind as 1 of 3 attempts I know of.

Would it be possible to tie Proof of Storage to a gps coordinate for example? If as a miner, I could register an IP address to a physical and known location, earning trust over time (it's centralization - but there could be competition, anyone can register w/gps and documented physical address depending on regulators or trust of your location by the outside world) then work could be defined as transporting to and from storage, getting resources to the most effective location, addressing. It seems to me that work might be defined as almost any human endeavor that can be agreed upon by the block chain. If there is litter on the ground, and that litter can somehow be identified as lost, and it is then registered that I've moved the litter to a waste receptacle, then I've proven work. To me, bitcoin is about rewarding more people for the work they do every day. There should at least be enough coins to measure every keystroke that has ever landed on the internet - if that makes any sense.

[itod]

To me, bitcoin is about rewarding more people for the work they do every day. There should at least be enough coins to measure every keystroke that has ever landed on the internet - if that makes any sense.

To be honest, it doesn't. Only work that is rewarded in Bitcoin is maintaining the integrity of a blockchain. That's exactly what mining does. It doesn't mean that we can not find additional uses for the system, but they have nothing to do with it's core components.