Long Live Proof-of-Work, Long Live Mining - "there is no meaningful alternative"

[cbeast]

Because it's impossible to prove that any PoS system is not centralized (the metaphysical ontological argument) it boils down to faith. And that's just distribution. Then there's the fact it costs nothing to clone. Then it boils down to marketing. Who's advertising would you trust., some guy on the Internet? Wouldn't it be better if Mastercard creates a PoS debit card? Would you still like Proof of Stake then?

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[Nagle]

The cost of mining 1 bitcoin nowadays is greater than the cost of 1 bitcoin itself.

For some miners, yes. For the big guys with low costs, no. We just had a small difficulty drop, indicating even some of the big miners are dropping out.

Today, unless you have a big mining farm, cheap labor, good relationships with an ASIC vendor, and cheap power, you can't make money mining Bitcoins. See the Mining Speculation part of the forum.

[Soros Shorts]

Governments or any DOS army can attack a pool, but 2 more will take its place. There are many small pools ready, willing, and able to scale.

Government won't attack directly, they will blackmail a couple and then attack Bitcoin. As the Ghash incident showed, miners are slow to react and don't care about the health of the network, otherwise by now they would've diversified.

The last fork was reacted upon very quickly. Pools operate on greed. How do you blackmail thousands of miners? This type of unspecified FUD is the silliest of all. Please be specific about how exactly a person of any authority can do this.

There no thousands of miners. There are only a dozen miners, which is the problem with Bitcoin which is supposed to be decentralized.

Only a dozen? List their IPs from the block rewards.

The only ones having the ability to sign a block are the miners. They are the ones with the ability to accept or reject any transaction. There are not thousands of them, around a dozen.

There are way more than a dozen p2pool mining nodes, each with the ability to accept or reject any transaction.

Sure the p2pool hash rate is miniscule, but any large home miner willing to run a computer 24/7 can set up a node if they get pissed off with the larger pools.

[jabo38]

It is true that if somebody is willing to buy a dozen ASICs, it isn't that much more for them to set up their own node at that point.  If smallish miners don't like the mining pools, the small time miners can do this fairly easily. 

[cryptogeeknext]

PoS is suitable for shares in the company. It is also compatible with the idea that many PoS systems need to compete between each other to stay robust, while PoW allows competition within the system.

We already have a money system in place owned by snake err... stakeholders, you know how it turned out. We are not yet at the hunger games scenario, but that's where any unchallenged PoS system is eventually headed.

Plus what cbeast said about cloning and marketing.

[kodtycoon]

PoS is suitable for shares in the company. It is also compatible with the idea than many PoS systems need to compete between each other to stay robust, while PoW allows competition within the system.

We already have a money system in place owned by snake err... stakeholders, you know how it turned out. We are not yet at the hunger games scenario, but that's where any unchallenged PoS system is eventually headed.

Plus what cbeast said about cloning and marketing.

why are you just cross posting this across different PoS v PoW style threads? in the hope to rise another debate out of someone with you stupid "fit for company shares" "pos leads to hunger games" argument?

quit trolling...

[jonald_fyookball]

What will these individuals spend their X dollars on, to produce the block? Maybe they’ll be generating lots of addresses, or using computing power to examine many alternate block histories (under proof-of-stake (PoS), both of these use CPU power to increase the likelihood of generating coins).

will this always be 100% true for any PoS scheme?

PoS designers try to make their system deterministic and hard to game,
yet it seems that they cannot avoid computational competition because
there can always be an endless variety of combinations (people
can create a new transaction, which changes the variables of the system).

But I'm not sure.  what do you think?

bump

[cryptogeeknext]

PoS is suitable for shares in the company. It is also compatible with the idea that many PoS systems need to compete between each other to stay robust, while PoW allows competition within the system.

We already have a money system in place owned by snake err... stakeholders, you know how it turned out. We are not yet at the hunger games scenario, but that's where any unchallenged PoS system is eventually headed.

Plus what cbeast said about cloning and marketing.

why are you just cross posting this across different PoS v PoW style threads? in the hope to rise another debate out of someone with you stupid "fit for company shares" "pos leads to hunger games" argument?

quit trolling...

My goal is to find truth and help others see it as well.

I'm interested in the long term evolution for each model, that's why I advocate for continued competition in this space instead of turning one system into another. My concerns about PoI still haven't been answered. My point is not to harm other systems, but simply point out some of their deficiencies that might lead to serious consequences in the future. This allows to better see the problem and take actions to address it.

Not everybody likes trolling, but sometimes it brings nice dynamic to the conversation. In this regard, I will say that PoI might turn quite PoIsonous if not implemented well, no offense

With that said, I feel that I have saturated the channel enough, so I will take some rest and let others compete with their ideas. Good luck and have fun!

PS: I am defending Bitcoin on Bitcoin's own turf, so it is other players calling it proof-of-waste that are trolls here. What you put out is what you get back. Also see this thread to understand why PoW is the way it is: https://bitcointalk.org/index.php?topic=855520

[devphp]

Of course, whatever functions longer has more credibility: PoW ~6 years, PoS -1 year, PoI - 0 (still in testing). However, dismissing flaws and vulnerabilities in systems that have run for a long enough time is not constructive. "Good enough" may be not enough for some rare case situations, which can happen under certain conditions, those rare case situations should be foreseen and measures should be applied prior to such events, it's only common sense in engineering.

[cbeast]

Of course, whatever functions longer has more credibility: PoW ~6 years, PoS -1 year, PoI - 0 (still in testing). However, dismissing flaws and vulnerabilities in systems that have run for a long enough time is not constructive. "Good enough" may be not enough for some rare case situations, which can happen under certain conditions, those rare case situations should be foreseen and measures should be applied prior to such events, it's only common sense in engineering.

I absolutely agree with the principle of that statement. However, my objections with PoS is not in its software engineering, but with its social engineering design.

[Fernandez]

Of course, whatever functions longer has more credibility: PoW ~6 years, PoS -1 year, PoI - 0 (still in testing). However, dismissing flaws and vulnerabilities in systems that have run for a long enough time is not constructive. "Good enough" may be not enough for some rare case situations, which can happen under certain conditions, those rare case situations should be foreseen and measures should be applied prior to such events, it's only common sense in engineering.

Precisely. Its always good to look at ways to innovate rather than stagnate. PoW has flaws, that can be accepted or a better alternative may be searched for.

PoS itself has evolved from the basic to TF, DPOS, PoI. It will continue to improve so rather than dismissing it as it may represent a threat to some groups, it should be welcomed.

[cbeast]

Of course, whatever functions longer has more credibility: PoW ~6 years, PoS -1 year, PoI - 0 (still in testing). However, dismissing flaws and vulnerabilities in systems that have run for a long enough time is not constructive. "Good enough" may be not enough for some rare case situations, which can happen under certain conditions, those rare case situations should be foreseen and measures should be applied prior to such events, it's only common sense in engineering.

Precisely. Its always good to look at ways to innovate rather than stagnate. PoW has flaws, that can be accepted or a better alternative may be searched for.

Besides being wrong about there only being a dozen Bitcoin miners when there are hundreds or thousands, what other flaw do you think exists?

[jabo38]

Of course, whatever functions longer has more credibility: PoW ~6 years, PoS -1 year, PoI - 0 (still in testing). However, dismissing flaws and vulnerabilities in systems that have run for a long enough time is not constructive. "Good enough" may be not enough for some rare case situations, which can happen under certain conditions, those rare case situations should be foreseen and measures should be applied prior to such events, it's only common sense in engineering.

Precisely. Its always good to look at ways to innovate rather than stagnate. PoW has flaws, that can be accepted or a better alternative may be searched for.

Besides being wrong about there only being a dozen Bitcoin miners when there are hundreds or thousands, what other flaw do you think exists?

I am still wondering about this....

Poor villagers in remote areas do work every single day and are not lazy, but a wage is not there proof of work. That is a western concept. For them a good is the product of their work. They literally have fruits from their labor whether it be meat, a house, or a plate of food.  They can exactly look at their labor and judge if the amount of labor is worth the end good.

With Bitcoin the system gets way more complicated. Whereas the African has a simple one to one judgment of asking himself "was today's work worth the fruits?", in Bitcoin there are multiple parties involved asking themselves this question. I'll leave the developers out of the equation and just focus on the miners and the end users.

The case for the miners is quite simple. “If I run this ASIC, will I get a just reword for my work/waste of electricity and computational power?” I say waste because most of the power being used doesn't actually produce an end result. An African farmer might only have a 25% success rate per seed to plant. The other 75% of his effort was wasted in trying to get that 25%. If he could improve efficiency, he would be much better off.  His cost per fruit would be much lower.  How many hashes does a miner waste before finding the productive one?  I think the answer is, “A LOT.” Now when a good hash is found a large reward is given. And so miners can justify whether or not it is profitable to run an ASIC. It is a simple question of work done for reward, just like the farmer. And for the miners it is a system that works well.

But what about for the end user? What are they paying for and is the service they pay for worth the service received. When a person puts a record into the blockchain it costs about $0.04 which all things being considered is pretty cheap. Somebody just recently moved millions of dollars worth of Bitcoin for that small fee. What a great deal! But how much did it cost the whole system. See that exchange only paid four cents to make that transaction, but the real price of that transaction came from me and you. It came via the fact that the miner that made the block was rewarded bitcoins. Those bitcoins diluted the total supply. Effectively taxing me and taxing you a little bit for his transaction. That guy didn't pay the fee for the transaction, we did. The miner didn’t mine that block for the transaction fee, he did it for the block reward, a reward that is a tax me and on my existing bitcoins because they are now worth less because of the dilution.

So the question I need to ask as an end user is, "am I getting a good service for what I'm paying?"  The service I'm getting is trust with a community of people that can see my record of bitcoins. They can trust I have Bitcoins and I can trust that they can trust that and vice versa. Anonymint has some pretty weird ideas but sometimes he comes up with a good point. I don't know if his numbers are right but he said the real cost in miner rewards is $30 per transaction. This comes via dilution of your and mine money. It's easy to figure out. Just figure out how many transactions were processed and divide it from the block reward. That's how much a transaction really costs.

A system where a user only pays $0.04 per transaction but the community as a whole was taxed $30 is simply just not sustainable. When I as an end user pay more for a good or service than its actual value, then a bubble is created.  Right now there is an effective bubble of $29.96 per transaction out of $30.

Now we are in an early stage of Bitcoins development and PoW whether you consider it work or waste is actually a very successful system right now. But will it always be? When the block rewards go down dramatically, then I as an end user am no longer being taxed for the action of others putting a record in the blockchain. It's a big win for me. At that point the miners are working more for the transaction fees, so now we need to ask ourselves "is it worth it for them?" Remember right now the network is currently subsidizing miners at a rate of $29.96 per transaction via taxes on the people. We all know that miners are selfish. If they won't continue to be paid well then they won't work. Just like farmer that can't get a certain crop to grow moves on to a new crop, a miner of PoW will move onto a different chain or just stop being a miner all together. Here in lies the problem with a system of waste to secure the blockchain, in the long run it just feels like to me it can't continue. The end users and miners need to come to an agreement on how the chain will be secured.  With PoW so many hashes are being wasted per transaction.  What we need to find is a way to increase our hash per fruit of labor ratio.  That way the system isn’t being taxed and subsidized so much.  

To sum up:  Miners are getting paid the equivalent of $30 per transaction they process.  The sender of the bitcoins only pays $0.04.  That means the miners are being subsidized $29.96 from somewhere else per transaction they process.  That extra money is coming from what is effectively a tax on the prior owners of Bitcoins.  They are not having bitcoins directly taken from their accounts to subsidize the miners, but they instead they are having their current stash of Bitcoins diluted.  On average there are about 144 blocks a day (that is 24 hours times 6 blocks an hour) and each block is releasing 25 bitcoins.  That means each day 3,600 bitcoins are being created to pay miners.  The value of those bitcoins at today's market prices are $1,332,000.  The more than 1 million dollars a day being paid to the miners comes from dilution of mine and your bitcoins, effectively taxing us.  Now the miners love this, because they are getting paid well, more than a million a day.  But what happens when those block rewards keep on halving?  They won't be getting paid nearly as much.  Will they still want to mine then?


At some point when block fees drop, then fees for senders have to go up.  Miners won't mine for free.  To me it just doesn't seem sustainable.  If miners weren't being subsidized today, then each sender would have to pay a $30 fee.  How many people are really going to want to do that?  Western Union actually doesn't look so bad then.

I do think PoW has been a truly amazing system and I am very glad it exists and I own a lot of Bitcoin, but the system as it is right now to me doesn't seem sustainable in the long run. 

Some kind of different system where people processing blocks don't need to be paid so much seems a much better way to maintain the blockchain to me.   

[jonald_fyookball]

To sum up:  Miners are getting paid the equivalent of $30 per transaction they process.  The sender of the bitcoins only pays $0.04.  That means the miners are being subsidized $29.96 from somewhere else per transaction they process.  That extra money is coming from what is effectively a tax on the prior owners of Bitcoins.  They are not having bitcoins directly taken from their accounts to subsidize the miners, but they instead they are having their current stash of Bitcoins diluted.  On average there are about 144 blocks a day (that is 24 hours times 6 blocks an hour) and each block is releasing 25 bitcoins.  That means each day 3,600 bitcoins are being created to pay miners.  The value of those bitcoins at today's market prices are $1,332,000.  The more than 1 million dollars a day being paid to the miners comes from dilution of mine and your bitcoins, effectively taxing us.  Now the miners love this, because they are getting paid well, more than a million a day.  But what happens when those block rewards keep on halving?  They won't be getting paid nearly as much.  Will they still want to mine then?


At some point when block fees drop, then fees for senders have to go up.  Miners won't mine for free.  To me it just doesn't seem sustainable.  If miners weren't being subsidized today, then each sender would have to pay a $30 fee.  How many people are really going to want to do that?  Western Union actually doesn't look so bad then.

I do think PoW has been a truly amazing system and I am very glad it exists and I own a lot of Bitcoin, but the system as it is right now to me doesn't seem sustainable in the long run.  

Some kind of different system where people processing blocks don't need to be paid so much seems a much better way to maintain the blockchain to me.  

I think you might be slightly confused.

First of all, the "dilution" you speak of happens regardless of the price of Bitcoin, who is mining, how much they are spending on mining, etc.
New bitcoins are being released according to the protocol -- there is a steady, predictable rate of inflation and issuance.

Second, you say it "doesnt seem sustainable", but what are you basing that on?  You have to remember that
supply and demand set the price of Bitcoin, and everything else follows.  Miners are claiming $1.3M/day in
block subsidies (and the same amount is being spent on security)
because that's how much Bitcoin is worth right now.  
Competition is going to make sure that happens.

If the subsidy reward were cut in half today to 12.5 BTC and the price didn't increase,
it would only be $680,000/day.  Competition would force some miners out.  
The network hashrate and difficulty would drop.  
But it would still be enough to secure the network.

Now, if you want to look at the long term and how much the fees would need to be to
support the miners when the block subsidies are gone, then
you need to look at the number of transactions, how big the network will be by
then, and how much security is needed.  But you haven't done that -- you haven't
worked out those figures.

[jabo38]

I think you might be slightly confused.

First of all, the "dilution" you speak of happens regardless of the price of Bitcoin, who is mining, how much they are spending on mining, etc.
New bitcoins are being released according to the protocol -- there is a steady, predictable rate of inflation and issuance.

Yes, it is steady and predictable and I can even use that prediction into my evaluation of how much a bitcoin should be worth.  But just because it is steady and predictable doesn't mean it is not a dilution.  It is still a dilution and that dilution which is essentially a tax on all previous bitcoins is still subsidizing miners.  It is just a predictable dilution instead of a random one.

Second, you say it "doesnt seem sustainable", but what are you basing that on?  You have to remember that
supply and demand set the price of Bitcoin, and everything else follows.  Miners are claiming $1.3M/day in
block subsidies (and the same amount is being spent on security)
because that's how much Bitcoin is worth right now.  
Competition is going to make sure that happens.

If the subsidy reward were cut in half today to 12.5 BTC and the price didn't increase,
it would only be $680,000/day.  Competition would force some miners out.  
The network hashrate and difficulty would drop.  
But it would still be enough to secure the network.

And then what if it halves again to $340,000 and then again ton $170,000 and then again to...... $0.  You are right that a single having of the block reward won't kill bitcoin (thus I still own a lot) but eventually that kind of system catches up.  Do you know about the law of exponential growth?   Well, this is the law of exponential decline.   It is just as equally unsustainable.  

Now, if you want to look at the long term and how much the fees would need to be to
support the miners when the block subsidies are gone, then
you need to look at the number of transactions, how big the network will be by
then, and how much security is needed.  But you haven't done that -- you haven't
worked out those figures.

oh yes I have done the numbers, I just didn't post them.  to keep the hash rate the same as today, but have no subsidies for miners then the network will need to process 320 times (32,000%) the amount of transactions per day than it currently is.  That is assuming that the miners and hash rate stay stagnant.  

Now here is where I admit my knowledge is a bit thin.  I don't know if a Bitcoin network with 32,000% more transactions can be maintained well enough with today's hashrate.  If it can be than that is okay.  When it comes to this fact, I readily admit I don't know.  

To be clear, I love Bitcoin and think it is amazing.  I just think a better system where the blockchain is protected by a system that doesn't cost so much would be better if it was just as strong (PoW for my criticisms is definitely strong).  When I look at the long game of Bitcoin far off, it just seems unsustainable to me.  If I am wrong on my numbers, please help me out. I hate being corrected but I hate spouting wrong information even more.

[cbeast]

I think you might be slightly confused.

First of all, the "dilution" you speak of happens regardless of the price of Bitcoin, who is mining, how much they are spending on mining, etc.
New bitcoins are being released according to the protocol -- there is a steady, predictable rate of inflation and issuance.

Yes, it is steady and predictable and I can even use that prediction into my evaluation of how much a bitcoin should be worth.  But just because it is steady and predictable doesn't mean it is not a dilution.  It is still a dilution and that dilution which is essentially a tax on all previous bitcoins is still subsidizing miners.  It is just a predictable dilution instead of a random one.

Second, you say it "doesnt seem sustainable", but what are you basing that on?  You have to remember that
supply and demand set the price of Bitcoin, and everything else follows.  Miners are claiming $1.3M/day in
block subsidies (and the same amount is being spent on security)
because that's how much Bitcoin is worth right now.  
Competition is going to make sure that happens.

If the subsidy reward were cut in half today to 12.5 BTC and the price didn't increase,
it would only be $680,000/day.  Competition would force some miners out.  
The network hashrate and difficulty would drop.  
But it would still be enough to secure the network.

And then what if it halves again to $340,000 and then again ton $170,000 and then again to...... $0.  You are right that a single having of the block reward won't kill bitcoin (thus I still own a lot) but eventually that kind of system catches up.  Do you know about the law of exponential growth?   Well, this is the law of exponential decline.   It is just as equally unsustainable.  

Now, if you want to look at the long term and how much the fees would need to be to
support the miners when the block subsidies are gone, then
you need to look at the number of transactions, how big the network will be by
then, and how much security is needed.  But you haven't done that -- you haven't
worked out those figures.

oh yes I have done the numbers, I just didn't post them.  to keep the hash rate the same as today, but have no subsidies for miners then the network will need to process 320 times (32,000%) the amount of transactions per day than it currently is.  That is assuming that the miners and hash rate stay stagnant.  

Now here is where I admit my knowledge is a bit thin.  I don't know if a Bitcoin network with 32,000% more transactions can be maintained well enough with today's hashrate.  If it can be than that is okay.  When it comes to this fact, I readily admit I don't know.  

To be clear, I love Bitcoin and think it is amazing.  I just think a better system where the blockchain is protected by a system that doesn't cost so much would be better if it was just as strong (PoW for my criticisms is definitely strong).  When I look at the long game of Bitcoin far off, it just seems unsustainable to me.  If I am wrong on my numbers, please help me out. I hate being corrected but I hate spouting wrong information even more.

You are not addressing jonald_fookball's point about competition. That is the incentive for mining. It also determines the security. Competition is a function that makes the security predictable. Without cost/benefit analysis of the competition you have nothing to base trust. You would have no mathematically predictable way to establish risk. Trust based on unknowns is called faith.

[smoothie]

PoS isn't horrible but the cost to produce coins vs PoW coins is a lot less so the price for PoS coins will always be much much lower.

You can't get something for nothing forever.

[Fernandez]

Of course, whatever functions longer has more credibility: PoW ~6 years, PoS -1 year, PoI - 0 (still in testing). However, dismissing flaws and vulnerabilities in systems that have run for a long enough time is not constructive. "Good enough" may be not enough for some rare case situations, which can happen under certain conditions, those rare case situations should be foreseen and measures should be applied prior to such events, it's only common sense in engineering.

Precisely. Its always good to look at ways to innovate rather than stagnate. PoW has flaws, that can be accepted or a better alternative may be searched for.

Besides being wrong about there only being a dozen Bitcoin miners when there are hundreds or thousands, what other flaw do you think exists?

I must have missed have missed your mythical hundreds of thousands of miners as I see that only a dozen producing blocks.

A miner is someone with the ability to sign blocks. They decide which transaction to include.

[cbeast]

Besides being wrong about there only being a dozen Bitcoin miners when there are hundreds or thousands, what other flaw do you think exists?

I must have missed have missed your mythical hundreds of thousands of miners as I see that only a dozen producing blocks.

A miner is someone with the ability to sign blocks. They decide which transaction to include.

Or not of. Miners are also nodes even when they don't find blocks they relay transactions and keep a blockchain.

[jabo38]

PoS isn't horrible but the cost to produce coins vs PoW coins is a lot less so the price for PoS coins will always be much much lower.

You can't get something for nothing forever.

I agree with this general observation for what is going on right now.  It very accurately explains why Bitcoin is worth so much per coin and every single PoS coin is worth very little.  But in the long game, I think the cost of maintaining the PoW system (because it requires so much work) will start to tax the system (especially when the subsidies expire).  Where as with a different proof-of-x system in the long game, it will be cheaper to maintain the system, thus making the coins ultimately more valuable.  

Both provide essentially the same utility, but one has hire taxes.

This of course would assume that all things being equal.  When in fact they are not.  Right now Bitcoin has a huge first mover advantage and a better marketing advantage.  Those alone might make it very difficult to disrupt even if a different platform is technically superior.