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

[cbeast]

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.  

When you say "tax the system" you mean the energy supply or what? Why can't miners improve efficiency to near perfect so the current hashrate can run on a car battery? What spinoff benefits would emerge?

[cryptogeeknext]

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.  

I'm cross-posting again. This place is addictive

Mining allows players to stay independent by funding their own security operations. It is similar to how large geo-political players fund armies to protect their share of land. Do you think their expenses are justified?

[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.  

When you say "tax the system" you mean the energy supply or what? Why can't miners improve efficiency to near perfect so the current hashrate can run on a car battery? What spinoff benefits would emerge?

By "tax" the system, I mean just that.  The miners are charging taxes on transactions.  Right now that tax is $0.04.  There are about 100,000 transactions per day give or take.  That is going to mean that about $4000 in fees are being paid to miners by people wanting to have transactions processed.  Yet, the miners are getting paid $1,300,000 a day.  So who is paying for the rest of those miners to run?  They are regularly buying new hardware and electricity. Where does that money come from?  It comes from the rest of the system getting taxed (existing bitcoin holders getting devalued). 

So when I am talking about the system being taxed, I am talking about all the money that it takes to buy new hardware, maintain it, and power it with electricity.  It is taking a ton of work to maintain the Bitcoin blockchain.  That money that those miners are using to pay for electricity and hardware doesn't just magically appear.  Maybe the miners are not cashing in the whole $1.3 million a day, but I am guessing we can safely assume they are cashing out more than a million a day.  That is a million dollar tax (minus $4000) a day to keep the system a float.  If they don't get their million dollars, the whole thing falls apart. 

Now, to your question of "if" miners were able to mysteriously come up with hardware at a cost of near $0 and run it for a cost of near $0, then yes, there would be virtually no tax at all on the system and very small fees would cover the cost of the miners.  In that case the Bitcoin blockchain could be managed and maintained for very cheap.  I am guessing that would be a great thing not just for Bitcoin, but for the whole world.

But if you want to talk about a system where the maintainers of the blockchain are having very little expenses for electricity and very little expenses for hardware to run nodes, then we should talk about some of the current PoS systems, not a hypothetical Bitcoin blockchain of a possible future.  For instance many platforms like NXT and NEM have shown that their nodes can be run off of a $50 Raspi B+.  Those in turn can be outfitted to be solar powered (though at that point it is probably just cheaper to pay for the minimum amount of electricity).   

 

[devphp]

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.

There is no connection between the cost to produce a crypto coin and the price, hence your conclusion is a fantasy.

Price is a function of supply and demand only.

If supply of a PoS is fixed or inflates at a predictable rate comparable to a PoW coin inflation rate, there is no reason for the market cap (and price too if total caps are the same) of a PoS coin to be below the market cap (price) of a PoW coin (Bitcoin has a first mover advantage vs all others, PoW and PoS coins, it shouldn't really be compared here for the purity of this experiment as it clearly wins now just based on the adoption numbers).

[cryptogeeknext]

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.  

When you say "tax the system" you mean the energy supply or what? Why can't miners improve efficiency to near perfect so the current hashrate can run on a car battery? What spinoff benefits would emerge?

By "tax" the system, I mean just that.  The miners are charging taxes on transactions.  Right now that tax is $0.04.  There are about 100,000 transactions per day give or take.  That is going to mean that about $4000 in fees are being paid to miners by people wanting to have transactions processed.  Yet, the miners are getting paid $1,300,000 a day.  So who is paying for the rest of those miners to run?  They are regularly buying new hardware and electricity. Where does that money come from?  It comes from the rest of the system getting taxed (existing bitcoin holders getting devalued).  

So when I am talking about the system being taxed, I am talking about all the money that it takes to buy new hardware, maintain it, and power it with electricity.  It is taking a ton of work to maintain the Bitcoin blockchain.  That money that those miners are using to pay for electricity and hardware doesn't just magically appear.  Maybe the miners are not cashing in the whole $1.3 million a day, but I am guessing we can safely assume they are cashing out more than a million a day.  That is a million dollar tax (minus $4000) a day to keep the system a float.  If they don't get their million dollars, the whole thing falls apart.  

Now, to your question of "if" miners were able to mysteriously come up with hardware at a cost of near $0 and run it for a cost of near $0, then yes, there would be virtually no tax at all on the system and very small fees would cover the cost of the miners.  In that case the Bitcoin blockchain could be managed and maintained for very cheap.  I am guessing that would be a great thing not just for Bitcoin, but for the whole world.

But if you want to talk about a system where the maintainers of the blockchain are having very little expenses for electricity and very little expenses for hardware to run nodes, then we should talk about some of the current PoS systems, not a hypothetical Bitcoin blockchain of a possible future.  For instance many platforms like NXT and NEM have shown that their nodes can be run off of a $50 Raspi B+.  Those in turn can be outfitted to be solar powered (though at that point it is probably just cheaper to pay for the minimum amount of electricity).  

You seem to be implying, that there is a way to achieve security without spending any energy/money on it.

It's like going to Russia and China and saying - hey guys all your expenses on army and firearms are futile and not sustainable. It's just cheaper to give it all up already and get your orders from Washington for free

[jonald_fyookball]

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.

There is no connection between the cost to produce a crypto coin and the price, hence your conclusion is a fantasy.

Partially true.  Actually there is a connection, but it is the opposite: price causes the cost because of competition.  That was one of the main points of the article in the OP.  Competition will always rise to spend as much resources as possible while still making a profit.  Maybe that is not the intention if the design of the poS coins, and maybe that isn't happening right now, but so far no one has been able to say why that wouldn't happen if there was a serious Bitcoin contender with a widely distributed stake.

@Jabo38, you are correct that the transaction volume needs to grow by orders of magnitude to maintain the same level of security with no block subsidies.  However, we have decades to get there, and even if the hashing power dropped by a full order of magnitude Bitcoin would still be secure.

[exoton]

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.

There is no connection between the cost to produce a crypto coin and the price, hence your conclusion is a fantasy.

Price is a function of supply and demand only.

If supply of a PoS is fixed or inflates at a predictable rate comparable to a PoW coin inflation rate, there is no reason for the market cap (and price too if total caps are the same) of a PoS coin to be below the market cap (price) of a PoW coin (Bitcoin has a first mover advantage vs all others, PoW and PoS coins, it shouldn't really be compared here for the purity of this experiment as it clearly wins now just based on the adoption numbers).

The cost to produce a coin is a function of it's price, as if the price declines, the difficulty will decline causing the cost of producing (mining) the coin to decline.

With PoS coins on the other hand, the cost of mining is simply the cost of holding the coins

[jonald_fyookball]

Right.   Until the stake holders start generating chains to earn more rewards.

[cbeast]

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.  

When you say "tax the system" you mean the energy supply or what? Why can't miners improve efficiency to near perfect so the current hashrate can run on a car battery? What spinoff benefits would emerge?

By "tax" the system, I mean just that.  The miners are charging taxes on transactions.  Right now that tax is $0.04.  There are about 100,000 transactions per day give or take.  That is going to mean that about $4000 in fees are being paid to miners by people wanting to have transactions processed.  Yet, the miners are getting paid $1,300,000 a day.  So who is paying for the rest of those miners to run?  They are regularly buying new hardware and electricity. Where does that money come from?  It comes from the rest of the system getting taxed (existing bitcoin holders getting devalued). 

So when I am talking about the system being taxed, I am talking about all the money that it takes to buy new hardware, maintain it, and power it with electricity.  It is taking a ton of work to maintain the Bitcoin blockchain.  That money that those miners are using to pay for electricity and hardware doesn't just magically appear.  Maybe the miners are not cashing in the whole $1.3 million a day, but I am guessing we can safely assume they are cashing out more than a million a day.  That is a million dollar tax (minus $4000) a day to keep the system a float.  If they don't get their million dollars, the whole thing falls apart. 

Now, to your question of "if" miners were able to mysteriously come up with hardware at a cost of near $0 and run it for a cost of near $0, then yes, there would be virtually no tax at all on the system and very small fees would cover the cost of the miners.  In that case the Bitcoin blockchain could be managed and maintained for very cheap.  I am guessing that would be a great thing not just for Bitcoin, but for the whole world.

But if you want to talk about a system where the maintainers of the blockchain are having very little expenses for electricity and very little expenses for hardware to run nodes, then we should talk about some of the current PoS systems, not a hypothetical Bitcoin blockchain of a possible future.  For instance many platforms like NXT and NEM have shown that their nodes can be run off of a $50 Raspi B+.  Those in turn can be outfitted to be solar powered (though at that point it is probably just cheaper to pay for the minimum amount of electricity).   

 

Let me rephrase the question since you seemed to just dismiss it. If you invented a miner that uses almost no electricity and is fairly cheap to produce and nobody else had anything close, what would you do?

[Fernandez]

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.

There is no causal relation between the two. If prices fall miners leave and difficulty goes down, it doesn't happen the other way.

[makoto1337]

I am lucky because I lived in one of the poorest places in the world, a poor village in one of the poorest countries in Africa (no running water no electric no telecommunications and so on).

An interesting story. Why do you consider them poor? Is it because they have no good work to earn money? Do you think they would not work for Western wages if they had the opportunity? Work is important. Wages are your Proof of Work. That's how you stop being poor. We all have to work. How can you morally justify someone getting rich without working when there are so many starving children in Africa?

LOL, so we should support resource depletion and wasting resources by "mining" cryptocurrencies when it is not mathematically necessary to do so? That isn't going to help the starving children very much.

[cbeast]

I am lucky because I lived in one of the poorest places in the world, a poor village in one of the poorest countries in Africa (no running water no electric no telecommunications and so on).

An interesting story. Why do you consider them poor? Is it because they have no good work to earn money? Do you think they would not work for Western wages if they had the opportunity? Work is important. Wages are your Proof of Work. That's how you stop being poor. We all have to work. How can you morally justify someone getting rich without working when there are so many starving children in Africa?

LOL, so we should support resource depletion and wasting resources by "mining" cryptocurrencies when it is not mathematically necessary to do so? That isn't going to help the starving children very much.

Mining doesn't deplete resources. Your argument is nonsense.

[devphp]

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.

There is no connection between the cost to produce a crypto coin and the price, hence your conclusion is a fantasy.

Price is a function of supply and demand only.

If supply of a PoS is fixed or inflates at a predictable rate comparable to a PoW coin inflation rate, there is no reason for the market cap (and price too if total caps are the same) of a PoS coin to be below the market cap (price) of a PoW coin (Bitcoin has a first mover advantage vs all others, PoW and PoS coins, it shouldn't really be compared here for the purity of this experiment as it clearly wins now just based on the adoption numbers).

The cost to produce a coin is a function of it's price, as if the price declines, the difficulty will decline causing the cost of producing (mining) the coin to decline.

With PoS coins on the other hand, the cost of mining is simply the cost of holding the coins

Yes, but we discuss what the price depends upon, not what the cost to produce depends upon.

Only miners would be interested in the latter, whereas investors and users are interested to learn what drives the price.

Cost to produce depends on the price, that's correct.

But price depends on supply (supply (increase rate) is predictably stable in cryptos) and demand only.

Price doesn't depend on the cost to produce.

[very rare fruit]

Mining with calculations is not a good idea. Must be invented a new method. For example, mining with bandwidth is a better idea and eco friendly.

[turvarya]

Mining with calculations is not a good idea. Must be invented a new method. For example, mining with bandwidth is a better idea and eco friendly.

lol
What?
How is that supposed to work? Miners are uploading and downloading random data?

[Flashman]

Must be from Korea (Stupid high bandwidth connections available compared to most of rest of world)

Anyway, ultimate consequence is, that as much bandwidth will be deployed as energy available for it. Proof of whatever, as much will be deployed as energy available. Memory intensive? Storage intensive? Same shit, different name. Per unit kilowatt, anyone inclined to mine, will run about a terahash of bitcoin ASIC, or half a terabyte of RAM, or ~200 terabytes of disk, or a hundred 10W nodes, VMed to 4 instances each or something.

The fact that POW now REQUIRES specialist hardware is a huge security advantage. Anything that ran on commodity hardware, whether it needs more nodes, more memory or more complex general purpose CPU, is suceptible to botnet, or buying, stealing or subpoenaing of amazon aws or digital ocean cloud datacenters for a period of time.

If the giant US Utah facility, had top end low power i7s, and every milliwatt of power available to them went into bitcoin mining, they'd probably only make the top 10 users list in a 1% of network pool.

[very rare fruit]

Mining with calculations is not a good idea. Must be invented a new method. For example, mining with bandwidth is a better idea and eco friendly.

lol
What?
How is that supposed to work? Miners are uploading and downloading random data?

Maybe. I don't know.

[turvarya]

Mining with calculations is not a good idea. Must be invented a new method. For example, mining with bandwidth is a better idea and eco friendly.

lol
What?
How is that supposed to work? Miners are uploading and downloading random data?

Maybe. I don't know.

You would ruin the whole internet with that. That's like a global DOS-attack.

[very rare fruit]

Mining with calculations is not a good idea. Must be invented a new method. For example, mining with bandwidth is a better idea and eco friendly.

lol
What?
How is that supposed to work? Miners are uploading and downloading random data?

Maybe. I don't know.

You would ruin the whole internet with that. That's like a global DOS-attack.

Maybe with a special torrent file.

[jabo38]

Let me rephrase the question since you seemed to just dismiss it. If you invented a miner that uses almost no electricity and is fairly cheap to produce and nobody else had anything close, what would you do?

If I found a way to mine Bitcoin for very cheap, I would mine the hell out of it. :-)  To some extent this is a flaw of the Bitcoin network because sometimes things like this come along; somebody develops a new tech and keeps it to themselves.  This to some extent happened when Bitcoin went from CPU to GPU and then again to ASICs.   The first ASICs were hoarded.  If there is another leap, it will happen again.  

The great thing about PoS is you can't really do this.  For instance with NXT, you can't just come across a bunch of NXT for close to 0.  If it was possible it would have been done by now. (but again things like this do and have happened in the world of mining)

With the ICO coins nobody can find a way to get a bunch of new coins for cheap like can be done with Bitcoin.  All the coins are created at once in the beginning.  The people that maintain the blockchain aren't getting subsidized at $29.96 per transaction.  The people that maintain the blockchain work for a very small transaction fee and these aren't new coins being created but the recycling of old ones.  In systems like PoS or PoI, you can't really make a substantial profit forging because there is no $29.96 subsidy.  

With these next generation coins, you don't get rich maintaining the blockchain, but at the same time it is super easy and light to do so.  You can just leave the program running in the background when using the computer (it doesn't use a lot of resources) or even set up a raspi if you so like and are an enthusiast.  Basically blockchain maintenance is transferred from the likes of greedy miners to cryto believers and enthusiasts.    

In the case that the person that found the new hypothetical hardware was a bad actor, it would be really bad. One of the scary things about Bitcoin is that if somebody amounts a big enough amount of hardware, they can take over the network. (this would be hard to do as things are right now, but a new device for mining maybe could make it happen)

And for NXT a person would need to buy up a ton of NXT.  In doing so the price would shoot up, and then if the person did attack then network then their investment would be destroyed.  It would take something like a cyrpto kamikazi.  

But for NEM a person would have to get a lot of coins like in NXT, and then get a lot of hardware, and then would have to make a lot of transactions with people outside of their network (the key is with people outside of their network).  At this point it becomes really difficult to take over the network.