POS inflation.. pointless?

[Mautje]

Hi,

I was thinking about these Proof of Stake coins coming out.. Blackcoin, Whitecoin, Asiacoin.. all promise 1,2, or even 30% interest on your coins if you stake them. However, as far as I know, those are NEW coins being given out> Which means the total money supply grows by the same amount (perhaps a bit less, since not everyone is staking their coins). But let's say everyone stakes, that would mean the total money supply would increase by the same %. So your ammount of coins increases by X % after a year, but it also decreases in value by the same X % due to inflation (growth of total money supply).

Regarding this thought, it seems the interest part of the PoS concept is pointless.

(I know.. if everyone would stake their coins the coin would be worthless anyway.. but as a thought experiment)

Any thoughts?

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[Vivisector999]

The Stake part of a POS system is not to drive up the price of a coin by ending the coin supply.  It is to end the electricity burning PoW cycle of distributing coins, while still rewarding people for staking their coins, and helping keep the chain secure.

Would it make you happier if they hit the goal instead by leaving the PoW on for 5 weeks instead of 2 to hit the cap amount of coins available, then cut all rewards to anyone keeping the coin secure.  None of the coins have the Max coins listed as the amount of coins available when PoW ends.  They all have made ample room on the maximum target levels to distribute the coins.

Plus like a PoW system, eventually when the cap has been reached, the PoS mining "interest" will be supplied by the transaction fees. 

[Pleasantel]

Pow imo is a more direct indicator of interest

[Vivisector999]

Another thing to think about. 

There is no coin market cap in a decentralized system.  It's a falsified number created to make a few people feel happy about their investment.   A coin's price is really only effected by how investors feel about a coin on a particular day, and how much they want to buy/sell that coin for.  If a coin is selling at $1, and 100,000 coins are created that day, the market does not require $100,000 to be invested in it, in order to sustain it's price.  Or $200,000 could be injected into the coin, yet the coin's value and market cap might slide to half if the last investor bought or sold at $0.50.  On the other hand, $100,000 could be taken out of the coins Value / market cap could skyrocket. 

Having a small inflation rate of 5%, or even 10% a year is going to have no effect on the value the coin holds in the coming year.  It's all just based on a single news flash, or lack of new flash that day to drive the investors to buy/sell.


Or think of it this way.  Say you looked at the market cap of a coin, and saw it was $100,000.  You could NOT purchase every coin for the grand price of $100,000.  Demand would overtake supply and the coins price would probably multiply by 100X, and you would only end up with 10% of the total number of coins.  Or if you did own 100% of the coins you could not sell then all and get the market caps price for the pile.  There supply would overcome demand, and the price would probably drop by 100X, and you would only end up with a fraction of the market cap value in your bank account.

[Mautje]

Thanks guys for your replies.

I understand what you guys are saying. But I feel you might be missing my point. My point is this:
They're trying to "sell" the idea of their coins by promising % interest on staked coins. What I'm saying is you actually don't get any interest at all, since the total money supply increases by the same %. (so you get more coins, but the price of the coins should drop by the same %). So it's an "empty promise". That's my point.

I understand above poster who says price is not directly/imidiately affected by newly minted coins, but in the long run it is. Price = coin market cap / number of coins.

Am I the only one who sees it that way?

[Yurizhai]

Thanks guys for your replies.

I understand what you guys are saying. But I feel you might be missing my point. My point is this:
They're trying to "sell" the idea of their coins by promising % interest on staked coins. What I'm saying is you actually don't get any interest at all, since the total money supply increases by the same %. (so you get more coins, but the price of the coins should drop by the same %). So it's an "empty promise". That's my point.

I understand above poster who says price is not directly/imidiately affected by newly minted coins, but in the long run it is. Price = coin market cap / number of coins.

Am I the only one who sees it that way?

In many cases the coin prices go up over time, right?  Say you cannot or will not mine.. The coins you get for free from PoS mean your money is growing right?

[Ix]

Am I the only one who sees it that way?

Your OP said this:

But let's say everyone stakes

But this isn't realistic at all. There's risk involved in staking, you need to have your private keys available at certain times. Maybe this will be easy and relatively risk-free in the future, but it definitely isn't now. It will likely always be somewhat of a privacy risk. But in general I agree with your point - transaction fees could/should be enough of an incentive (although I think all PPC-based coins destroy them?) to stake for the network and provide security, there's no real point to money supply inflation via this mechanism.

[atc1]

I don't know what it is with these new POS coins. I know some are good,but this is getting ridiculous. Every coin now has like a 3-7 day PoW and then the rest is PoS. Seriously,how can you even claim your coin is "fair" if it has such a low PoW period? And then to top it all,they say they will have some multipools. How exactly is that supposed to fit with your claim of "no more mining/environment friendly" hurr durr...? And to crown it all,they say "mine on our multipool". Also, you have to keep it in your wallet and keep your computer on the whole time. And you have their whole blockchain to download. You can't store those coins in an exchange either(not ideal even in PoW,but better than having to download a whole blockchain) ,because then you'd be losing your stake.

Oh,and how is exactly is mining dead if you're encouraged to mine on multipools?

They're trying to "sell" the idea of their coins by promising % interest on staked coins. What I'm saying is you actually don't get any interest at all, since the total money supply increases by the same %. (so you get more coins, but the price of the coins should drop by the same %). So it's an "empty promise".

This guy gets it.

[window9]

the old POW coins are these ones that only sit on their ass and don't do any development

Yes,we need more innovative,This should not be the story of the miners become rich

[Vivisector999]

You're still thinking of the coins as a currency with a fixed market cap based on the amount of coins and the amount invested in them. 

This isn't the case.  The value of a coin is only a 1 second time slice on what price people are believing the coin to be worth, and it can be easily manipulated.

Here is an example of a pump and dump:

I could take a low volume coin with 1 billion coins available.  Say the price is $0.10.  I could slowly buy coins at $0.10, to not effect the value of the coin.  When I have enough, I could slam $1000 down, buy all the coins for sale up to maybe the coins that were selling at $0.30.  Did the Market cap really triple on a billion coins?  Nope all that was injected was $1000.  Then when people see all this activity and rising prices they start buying up coins at $0.20.  The Pumper then sells all the coins he purchased at $0.10 and doubles his money.  Now a lot of money has been injected into the coin by all the buyers, but guess what.  The price will usually come back down, or in many cases be even less then it was in the beginning.

Another case of market cap manipulation.  Just look into Marine coin.  They take a coin that was 97% pre-mined.  That is "supposedly" in a location where it can not be accessed.  They then take their very low volume coins that were mined and because of the small amount traded, the price is relatively high.  This can be done because there are only a handful of coins actually available in the market.  But guess where they "peg" their market cap?   That's right, at the price of the handful of coins X The total amount of coins mined, giving them a fictitious market cap that is the highest market cap of any coin in the world.   

It's easy to get into the belief that a coins value is based on a true market cap, but in reality, its just a speculation driven value, based on news and investor's feelings that day about the coin.  Nothing more, nothing less, and nothing to do with the total amount of coins available.   99.9% of the coins on the market aren't even accepted at any stores.  The price isn't based on how much business transaction are flowing through the coin either.

100% based on speculation and 0% based market cap.

[Vivisector999]

As for the amount of PoS coins coming out right now. 

If you look around.  Most of the "devs" here can't think their way out of a paper bag.  If any thing is remotely taking off, it will be copied.  If a PoS coin starts taking off, 100 PoS coins will be created in a short time frame after.  If a coin based on a color is being noticed, piles of coins named after colors will appear.  Same with Country coins, Famous people names (Which I don't believe any actually have the star behind them), animals, ect ect.

If someone made a coin tomorrow named Rice Krispy coin.  And it became popular, next week, we would be sure to see Lucky Charm coin, Fruit Loops coin, Corn Flake coin.

Everything in the crypto currency world today is based on popularity, and usually almost nothing is based on innovation.

[Mautje]

I bet all this thread wants is to put the Pos/Pow coins into the dark place and show their finger on them while presenting that the pow coins are still the best.

Pathetic behavior to get volume inside their own coins.

Some people don't understand that the old POW coins are these ones that only sit on their ass and don't do any development while the price is falling, this is why people start to move to different coins.

Why does there have to be a motivation behind a post other than curiosity and trying to learn as much as possible about crypto?

If you really want to know, I actually own some PoS and PoW and PoW/PoS coins. I try to diversify a bit etc. I have no preference, besides trying to form an opinion about what I think might have a good feature and I'm willing and open to change my mind at any time.. I'm holding PoW/PoS coins right now and starting to question my the fundamentals behind them and to determine if I should hold them or trade them for something else. While I try to not be influenced by simplistic replies like "do this or do that", I will listen to some good arguments or views on these things.

I understand there is a lot of manipulation; but you must know that not every thread that pops up with some critical questions has some manipulative motivation behind it.

[Zzzack]

Hi,

I was thinking about these Proof of Stake coins coming out.. Blackcoin, Whitecoin, Asiacoin.. all promise 1,2, or even 30% interest on your coins if you stake them. However, as far as I know, those are NEW coins being given out> Which means the total money supply grows by the same amount (perhaps a bit less, since not everyone is staking their coins). But let's say everyone stakes, that would mean the total money supply would increase by the same %. So your ammount of coins increases by X % after a year, but it also decreases in value by the same X % due to inflation (growth of total money supply).

Regarding this thought, it seems the interest part of the PoS concept is pointless.

(I know.. if everyone would stake their coins the coin would be worthless anyway.. but as a thought experiment)

Any thoughts?

Yeah this is sort of obvious. It really helps for marketing though lol.

I personally believe a POS system that is initially distributed fairly, and then a POW combination will be best to create an incentive to support the network, yet POW will make you want to spend.

[Peter R]

Hi,

I was thinking about these Proof of Stake coins coming out.. Blackcoin, Whitecoin, Asiacoin.. all promise 1,2, or even 30% interest on your coins if you stake them. However, as far as I know, those are NEW coins being given out> Which means the total money supply grows by the same amount (perhaps a bit less, since not everyone is staking their coins). But let's say everyone stakes, that would mean the total money supply would increase by the same %. So your ammount of coins increases by X % after a year, but it also decreases in value by the same X % due to inflation (growth of total money supply).

Regarding this thought, it seems the interest part of the PoS concept is pointless.

(I know.. if everyone would stake their coins the coin would be worthless anyway.. but as a thought experiment)

Any thoughts?

I see things exactly as you do.  Only some people seem to "get it" so perhaps we are wrong.  What I believe will now happen is that someone will launch a PoS spin-off of bitcoin that distributes the pre-mine exactly as per the unspent outputs in the bitcoin blockchain.  This will recreate the same distribution of wealth already known to be efficient for bitcoin.  This will be "sold" as both a way to save electricity for the greater good and to reward current stake holders with the share that would otherwise go to miners.  This should worry other PoS coins because immediately the bitcoin PoS spin-off will have a vastly larger potential user-base, an efficient initial distribution, and a legitimate ledger.  But I would not be surprised if the coin collapses anyways, for the reasons that you discuss.  

So this would provide evidence that PoS inflation is, as you said, "pointless" as well as illustrate how a bitcoin spin-off can clone any interesting alt-coin technology and immediately bootstrap it with a more efficient initial distribution.  

Here is a discussion about the "benefits" of awarding the inflation to current bitcoin holders rather than miners:

 https://bitcointalk.org/index.php?topic=581635.0  

Here's an interesting proposal to create a PoS spin-off of bitcoin:

 https://bitcointalk.org/index.php?topic=584719.0

And here's a thread on the general "spin-off" concept":

 https://bitcointalk.org/index.php?topic=563972.0

[Vivisector999]

Your not wrong, and in a perfect world, it would work out that way.

Only problem is we don't live in a perfect world.


BTC in the perfect world would have every BTC miner having a single 5 W ASIC miner.  No more.  No less.  The hash rate would be more then enough to sustain the coin.  But as everyone knows, no one can settle for having everyone take an equal share of the distribution.  So instead we have the an arms arms race but with multiple soon to be 3 TH/s machines worth tens of thousands of dollars sucking down multiple kW's of electricity, all fighting for the exact same number of BTC that would have been distributed if everyone stuck with their $50 USB miner.

Some goes for the market cap having any sense of being equal to the amount of money invested in the coin divided by the amount of coins available.  It would be great, and ultimately very price stable.  But no one would go for this "utopia" as there isn't any money to be made in a stable currency. 

[Brangdon]

They're trying to "sell" the idea of their coins by promising % interest on staked coins. What I'm saying is you actually don't get any interest at all, since the total money supply increases by the same %. (so you get more coins, but the price of the coins should drop by the same %). So it's an "empty promise". That's my point.

If not everyone stakes, then the people who do stake gain at the expense of those who don't. It becomes a kind of inflationary tax on cold storage. Whether that's a good thing will depend on whether you think inflation is a good thing. Many economists seem to think it is (in small doses), and that people who just sit on their savings without investing them ought to be penalised, because the economy will be better off if they spend.

Of course Bitcoin was created with the opposite view. And yet Bitcoin is inflationary, at least in its youth, and needs to be because its PoW mining is so expensive it needs the inflation to create new coins to pay the miners for their hashpower. Where-as PoS does not need to be inflationary because PoS mining (that is, validating transactions) needs trivial computer resources. So to me it seems ironic that so many PoS coins have adopted inflation. I'm surprised and saddened that PoS has become so associated with inflation.

Anyway, you can avoid the inflation by staking, and then it acts in your favour. It's not clear what proportion of people will do that. I know I like to keep my bitcoins in cold storage, for security, and I like to let my computer sleep to save electricity. I have to wonder, if a lot of people stake, whether the community will be more vulnerable to hackers, and whether the loss of electricity from all those computers being left active 24/7 will undo much of the benefits of PoW.