I see things differently. Here is an assortment of posts I have made to make that case and comparing PoS to PoW. I could be completely wrong about this, but PoW and ASIC mining are largely unproven at this point as ASICs have only been around for a year and a half. I am open to debating this btw.. it is one of my favorite crypto related debate topics.
ASICs are bad mmmmk? They lead to centralization, which leads to other bad things, and make miners susceptible to scams and fraudster ASIC companies. If an ASIC company actually ever delivers anything it won't ever break even. You can be sure the manufacturer has sucked all the profit out of them by setting up huge farms and increasing difficulty, mining with them until it is not as profitable and shipping it while there is still enough meat on the bone for them not to be sued, or by charging huge mark ups on the equipment. ASICs give unfair advantages to large mining farms because they can buy for cheaper in bulk and/or manufacture their own equipment, much cheaper than the average joe can buy at retail prices. When the average joe realizes he will never break even he will stop buying mining equipment, which is when the centralization will set in.
Before you say I don't know what I'm talking about, I have made a handful of ASIC investments and in most cases we were lucky to get half of our money back. None of them came close to ROI'ing. I (and people that have invested with me) have lost enough money to buy a mansion. Furthermore after negotiating several bulk purchases it is crystal clear the large mark ups manufacturers and distributors are charging to average joes, and the advantage that people with deep pockets can buy. The only people that come out ahead are the manufacturers or middlemen.
I am sick of hearing people say ASICs are a good thing, but it is too late to switch algorithms now because it would ruin confidence. Bitcoin and Litecoin are pretty much doomed. It's only a matter of time. PoW is a huge waste of processing power and electricity anyways, so it'll be for the better when people move on to newer and better crypto technology. I'm not saying this is going to happen anytime soon, but I will bet my first born that will happen in my lifetime.
There are several alternatives to PoW:
Transparent Forging as it is in Nxt.
Proof Of Scrypt 2.0 as it is in Blackcoin
Delegated Proof Of Scrypt as it is in Bitshares
Proof Of Importance as it is in NEM
Consensus as it is in Ripple
Are these perfect solutions? Probably not.
Are these as secure as PoW? That is debatable.
Has anyone successfully attacked these PoW substitutions? No!!
Will there be more to come and will they be improved upon in the (near) future? Certainly
If they are secure and work as advertised are they a better solution to PoW? Yes, a million times yes.
It was scary enough to have Vericoin roll back their blockchain via a hard fork and NXT considering it (which if they lost 30% also they would have, I guarantee it).
Vericoin was an important lesson to all PoS coins in that they should be more careful, as to not storing a large percentage of the total money supply with one exchange or service. I think the recent Nxt scare will only reinforce that. Through community awareness campaigns the issues that got them into those messes in the first place can be avoided. Vericoin is also not Nxt and has never been as big as Nxt, comparing the two is akin to saying if Doge were to fork then Litecoin is vulnerable. There are only 26 million Vericoins and there are almost 1 billion Nxt coins, meaning that statistically it is much more unlikely for 30% of Nxt coins to be hacked or stolen. Simple mathematics..
Furthermore, judging a coin on a failed fork or roll back attempt is a bit prejudiced. Both Bitcoin and Litecoin have had somewhat close calls when it comes to forks. Litecoin had the anti ASIC fork movement and Bitcoin had the anti seized Silk Road coins movement. Both of these movements failed, but they still caused a lot of debate and garnered a lot of support for both sides. Judging Nxt for its failed roll back attempt is akin to judging Litecoin/Bitcoin for these failed forks.
Failed Bitcoin rollback:
https://bitcointalk.org/index.php?topic=412041.0Failed Litecoin fork:
https://bitcointalk.org/index.php?topic=549572.0None of them happened because community support wasn't there for any of them, believe it or not PoS consensus works much the same as PoW consensus. Except there is one big difference as with PoW consensus is determined by miners (which are becoming more centralized as ASICs proliferate), and with PoS consensus is determined by the owners of the coins. It is debatable which system is best, me saying PoS is better is only MY opinion. The way people act as if PoS is inferior to PoW is only THEIR opinion, however most people try to pass it off as fact which really annoys me. Sure, there are some drawbacks to allowing the coin holders to call the shots (as in PoS), but as PoW mining becomes more centralized there are also drawbacks to having a small conglomerate of industrial miners call the shots. For instance they could decide they aren't making enough on transaction fees and jack the costs up for transactions. That's only one example.
There are pros and cons to each consensus system, but I think it is unfair to say one is definitely better than the other and it is a fact. Especially when both systems are so new the potential drawbacks have yet to all surface. I guarantee there will be some issues with PoW as well as it becomes more centralized. I agree it is a good method for initial distribution, and lately I have been encouraging all PoS coins to distribute coins using PoW before switching to pure PoS, but we have yet to see PoW fully mature. ASICs have only been in existence for a year and a half, I would venture to say a lot is going to change in the next few years as mining goes from a hobby to more of an industrial undertaking that requires deep pockets or good connections to people in power within manufacturers.
#1 - The centralization of PoW mining will become more and more centralized over time, because big operations such as this will make the little guys unprofitable and therefore push them out of the market.
#2 - The huge amount of electricity that is wasted needlessly with PoW.
PoW is a flaw when compared to something like Bitshare's delegated proof of stake, which has fixed the "nothing at stake" issue with other PoS coins.. among other things. Seeing as though DPoS uses a fraction of the energy to protect the BitsharesX block chain just as securely, this is a vast improvement in and of itself. Furthermore, using dPoS you can increase block speeds to 10 to 30 seconds without seeing the problems that you would see using PoW (stales, forks, etcetra.)
http://bitshares.org/delegated-proof-of-stake/Quote from: Holliday on August 16, 2014, 01:59:24 AM
"Unless large miners are getting discounts on electricity, they really have no advantage over smaller miners.
You actually can get discounts on electricity if you use a lot of it from certain companies, but there are other ways they can gain advantage."
Obviously someone setting up a large farm such as this has pretty deep pockets. Someone with deep pockets can order many more mining rigs than joe blow, which reduces his percentage of the network, which reduces joe blow's profits. This could be done (as we are seeing) to an extent that joe blow will never break even (in BTC... that's all we care about). Do you think joe blow will continue buying mining rigs if he can't break even? They can push him out of the market. The fact that most mining manufacturers offer bulk pricing only exemplifies this.
Another way they could gain an advantage is by investing money in manufacturing their own ASIC mining chips, PCBs, and assembly lines. In that scenario they would be paying a fraction of the price for a mining rig that runs at the same speed as joe blow (even more so than bulk discounts). Which allows them to purchase more mining rigs, further reducing the cost of the mining rigs, and therefore further reduce joe blow's portion of the network.
Quote from: Holliday on August 16, 2014, 01:59:24 AM
"Although, large farms do have additional expenses that a smaller miner doesn't need to worry about (space, cooling, power requirements, upkeep)."
That is true, but if they can achieve a certain percentage of the network they will easily operate at a profit. Especially when they are getting the mining rigs much cheaper than average consumers via bulk discounts or manufacturing their own. If it wasn't wildly profitable, why would large manufacturers like KNC, Avalon, Bitfury be making these massive farms in the first place? I know how much of a headache a large farm is to setup and run.. I find it hard to believe they would do it if it wasn't highly profitable.
Quote from: Holliday on August 16, 2014, 01:59:24 AM
"So, I'm wondering how large mining farms will make "little guys unprofitable". As long as "little guys" have access to the most recent hardware, they will be just fine."
Because of the reasons I've stated above. Sure, the little guys have access to the most recent hardware, but they are paying much more for that same hardware than the large farms and manufacturers are paying. They are at a disadvantage from the get go. To make things worse, a lot of the little guys are closing up shop and moving on. I mean.. if you bought mining hardware and you lost a lot of Bitcoins doing so (IE. did not break even), would you keep buying mining hardware? It is still profitable for large farms and manufacturers, but not so much for the little guys. In my ASIC investments, NONE of them have broken even, and I know I'm not alone. I will never buy a Bitcoin ASIC again in my life.
Quote from: Holliday on August 16, 2014, 01:59:24 AM
"Saying electricity is "wasted" due to PoW is like saying you "wasted" gas driving to work today."
Yes, I would consider both of those processes wasteful of natural resources, and potentially the downfall of humanity living on planet earth at some unknown point of time in the future. If gasoline engines weren't such a bad thing for the environment and wasteful of natural resources, then why is there so much effort being made to move beyond gasoline with the use of alternative fuels? Do you not understand how many natural resources are wasted during the process of generating electricity, how the environment is negatively impacted while doing so, and why using less electricity is beneficial to that problem?
Quote from: Holliday on August 16, 2014, 01:59:24 AM
"Bitcoin is useful and the PoW is required for it to function. So far no other solutions have been able to take a meaningful market share away from Bitcoin, for good reason."
There haven't really been any good solutions to PoW until very recently. There have been different variants of PoS that all suffer from various flaws. Only until recently have most of those flaws been fixed. A change like this (from Bitcoin to something else) will take time. The use of gasoline is actually a great analogy, I am glad you brought it up.
There are issues with the use of Gasoline just like there are issues with Bitcoin, both are not perfect for a few similar reasons (harmful to the environment and waste of natural resources.) Yet, Gasoline and Bitcoin will be around for a long time because of the infrastructure that has been built by both of them. In gasoline's case there are billions of vehicles, power tools, planes, etcetra that use it... to switch to an alternative we would need to rebuild these or design and build new ones. In Bitcoin's case the exchanges, ATMs, payment processors, etcetra are already setup to work with Bitcoin... to work with another crypto currency would require reprogramming just about every core service involved in the Bitcoin ecosystem. Costs are another thing holding gasoline and Bitcoin alternatives.. it is expensive to develop alternative technologies.
The advancement in technology is still being improved upon, but better technological alternatives certainly already exist for both gasoline and Bitcoin. It will take time, how long is anyone's guess, but I am certain that both will be uprooted as the king of fuel (gasoline) and the king of crypto currencies (Bitcoin) at some point in the future. Gasoline is definitely not the only example, all technologies come and go as better technologies replace the less adequate technologies. The transitions from VHS to DVD to Blu-ray took a lot of time. Along with the transition from Records to Tapes to CDs to MP3s to FLACs took a lot of time. I could go on and on with these examples..
Notice the more technological advancements happen at a quicker pace.. I don't see why this couldn't be applicable to Bitcoin as well. It is after all much cheaper to reprogram something than to rebuild all the vehicles, power tools, etcetra in the world. Furthermore, gasoline has many other factors why it is probably the best option for the foreseeable future, but Bitcoin has less so.
Quote from: Holliday on August 16, 2014, 01:59:24 AM
"I have no idea what "special interests" you are talking about."
I just assumed by your reply that you could think through the above reasoning yourself and understand it, yet still chose to call me out for being wrong because you own a lot of Bitcoins and want to protect your nest egg. Many people (individuals, companies, and corporations) are heavily invested in the current system (gasoline and Bitcoin), and profit from it. They are hesitant to allow change and will spend any amount of time, effort, and money that it takes to thwart the opposition because it is how they sustain their lifestyles and provide for their families. I apologize if my assumption was incorrect. If my reasoning is wrong, then please explain how I am wrong. Sometimes I do a horrible job of conveying exactly what I am trying to say, even though it makes perfect sense in my head.
If anyone actually reads all of that, I will be impressed.
