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Author Topic: What would mining look like...  (Read 2222 times)
Jutarul
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June 03, 2012, 11:20:44 AM
 #21


- It will make the money instantly more expensive (since suddenly bitcoin has an economic value, other than store of value)

Your complaint is that proof-of-stake would make the currency price too high. Classic.

No. price is irrelevant. What matters is volatility. If bitcoin has economic value in its own (because it acts as a catalyst for mining) then you're more susceptible to demand fluctuations.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
"The way you solve things is by making it politically profitable for the wrong people to do the right thing.", Milton Friedman
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June 03, 2012, 11:52:06 AM
 #22

No, volatility would not be affected either way by proof of stake (at least not until block reward disappears or becomes insignificant.)

Curious though, why would you (mkstakenly) think otherwise?

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Jutarul
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June 03, 2012, 06:58:46 PM
 #23

No, volatility would not be affected either way by proof of stake (at least not until block reward disappears or becomes insignificant.)

Curious though, why would you (mkstakenly) think otherwise?

in proof-of-stake mining the availability of bitcoins is affected by players entering and leaving mining operations

here's the corresponding numbers game:
assume 100 major stake holders, holding 50% of all bitcoins, doing the proof-of-stake mining
other 50% bitcoins are in constant motion
now one proof-of-stake miner exits & dumps his stake on the market, which would be about 0.5% of available bitcoins
0.5% of currently 9M is 45K, would move the current market from 5.2 to 5.0
if 3 would concurrently exit this would move the current level from 5.2 to 4.2

so in proof-of-stake mining suddenly one single economy (mining operations) has a significant impact on the valuation of bitcoins... That's undesirable.

In proof-of-work mining you don't have that problem. If a proof of work miner exits, he will dump his computing hardware on the market which will just crush the price for mining hardware and not affect the value of bitcoin...

Now, I am not saying that the idea of proof-of-stake is bad. But using bitcoins as stake is a problem.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
"The way you solve things is by making it politically profitable for the wrong people to do the right thing.", Milton Friedman
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June 05, 2012, 05:54:26 AM
 #24

No, volatility would not be affected either way by proof of stake (at least not until block reward disappears or becomes insignificant.)

Curious though, why would you (mkstakenly) think otherwise?

in proof-of-stake mining the availability of bitcoins is affected by players entering and leaving mining operations

here's the corresponding numbers game:
assume 100 major stake holders, holding 50% of all bitcoins, doing the proof-of-stake mining
other 50% bitcoins are in constant motion
now one proof-of-stake miner exits & dumps his stake on the market, which would be about 0.5% of available bitcoins
0.5% of currently 9M is 45K, would move the current market from 5.2 to 5.0
if 3 would concurrently exit this would move the current level from 5.2 to 4.2

so in proof-of-stake mining suddenly one single economy (mining operations) has a significant impact on the valuation of bitcoins... That's undesirable.


Firstly, it could just as easily be 1000, 10000, or 100000 minor stakeholders. There is no business advantage associated with a large holding, unless this holding exceeds 51%.

More importantly, what the hell are you talking about? People already have large stocks of coins, and continuously choose to either continue to hold them or sell them. The current situation is equivalent to a stock investment which does not pay dividends. Under proof-of-stake, the system is again identical to stock investment except the stock now pays dividends. Why would this lead to more volatility? (Correct Answer: It wouldn't)


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Jutarul
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June 05, 2012, 11:51:19 AM
 #25

Firstly, it could just as easily be 1000, 10000, or 100000 minor stakeholders. There is no business advantage associated with a large holding, unless this holding exceeds 51%.

any asset of wealth tends to be distributed exponentially among participants. The majority of coins will be in the hands of a few.

Now why would you say that there is no business advantage with having a large holding? Bitcoin is anonymous. There is no certain way determine the total holdings of an entity. The best you can do is addresses.
How can you distinguish between an entity holding 10000 addresses with 1 BTC or 1 address with 10000 BTC?

More importantly, what the hell are you talking about? People already have large stocks of coins, and continuously choose to either continue to hold them or sell them. The current situation is equivalent to a stock investment which does not pay dividends. Under proof-of-stake, the system is again identical to stock investment except the stock now pays dividends. Why would this lead to more volatility? (Correct Answer: It wouldn't)

The problem is that you promote miners to investors by design. However, miners and investors have different agendas (unless a miner CHOOSES to be an investor). It's difficult to predict the repercussions of forcing them to be the same entity.
My argument about volatility above preassumes that a miner does not care about future stock value. Thus you create additional fluctuation whenever a miner starts or stops business, because he liquidizes his mining equipment and thus his bitcoins.

Now I have seen some proposals for hybrid systems (proof-of-work/proof-of-stake). These may have the benefit of dampening the effect to a degree where it becomes tolerable, because miners may not "need" large piles of bitcoins to work with...

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
"The way you solve things is by making it politically profitable for the wrong people to do the right thing.", Milton Friedman
cunicula
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June 05, 2012, 03:36:06 PM
 #26

Now why would you say that there is no business advantage with having a large holding? Bitcoin is anonymous. There is no certain way determine the total holdings of an entity. The best you can do is addresses.
There is no clear relationship between your question and the series of statements which follow it. I will have to guess at your meaning.

How can you distinguish between an entity holding 10000 addresses with 1 BTC or 1 address with 10000 BTC?

Because the mining power of the stake would be linearly proportional to the amount of the BTC held. It is irrelevant if the entity holds 10000 address with 1 BTC or 1 address with 10000 BTC. His mining power, just like his spending power, is the same in either case. Therefore, large scale investors experience the same rate of return as small investors.

A. any asset of wealth tends to be distributed exponentially among participants.
B. The majority of coins will be in the hands of a few.
A is true, but B does not follow from A.



The problem is that you promote miners to investors by design. However, miners and investors have different agendas (unless a miner CHOOSES to be an investor). It's difficult to predict the repercussions of forcing them to be the same entity.


Okay, so you believe that there are two groups of people, whom you call "miners" and "investors", and who behave differently. There is no economic reason why "miners'" and "investors'" behavior should differ, but you expect it to. This is silly, but it is not possible to provide a counterargument.

I find that typical of discussions here. People generally lack a coherent, logical explanation for their beliefs and it is not possible to constructively argue with them. Consider this argument closed (at least on my side).

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Jutarul
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June 07, 2012, 07:54:50 PM
 #27

Now why would you say that there is no business advantage with having a large holding? Bitcoin is anonymous. There is no certain way determine the total holdings of an entity. The best you can do is addresses.
There is no clear relationship between your question and the series of statements which follow it. I will have to guess at your meaning.

How can you distinguish between an entity holding 10000 addresses with 1 BTC or 1 address with 10000 BTC?

Because the mining power of the stake would be linearly proportional to the amount of the BTC held. It is irrelevant if the entity holds 10000 address with 1 BTC or 1 address with 10000 BTC. His mining power, just like his spending power, is the same in either case. Therefore, large scale investors experience the same rate of return as small investors.
Agreed. I confused advantage with the lack of disadvantage. Hence, your assessment that the size of the holding has no influence over the rate of return is correct.

A. any asset of wealth tends to be distributed exponentially among participants.
B. The majority of coins will be in the hands of a few.
A is true, but B does not follow from A.
Theoretically you're right, because it depends on the slope.
But in practice is follows. Otherwise, we would not observe poor people. The only question is what is a few?


The problem is that you promote miners to investors by design. However, miners and investors have different agendas (unless a miner CHOOSES to be an investor). It's difficult to predict the repercussions of forcing them to be the same entity.


Okay, so you believe that there are two groups of people, whom you call "miners" and "investors", and who behave differently. There is no economic reason why "miners'" and "investors'" behavior should differ, but you expect it to. This is silly, but it is not possible to provide a counterargument.

I find that typical of discussions here. People generally lack a coherent, logical explanation for their beliefs and it is not possible to constructively argue with them. Consider this argument closed (at least on my side).
You said it yourself. The reason for differences has to be non economic. Thus a counterargument must include the assumption that there cannot be a non economic reason for mining. Alternatively, I could support the claim by showing that there is a specific type of miner which does not care about economics.

I agree that the format of the forum makes it difficult to create a coherent discussion. But I disagree that its impossible for it to be constructive. It seems that you have low tolerance for misunderstandings.

The ASICMINER Project https://bitcointalk.org/index.php?topic=99497.0
"The way you solve things is by making it politically profitable for the wrong people to do the right thing.", Milton Friedman
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