PoS coins

[cloud36649]

Explanation from the Bitcoin wiki (excellent resource for everybody, though I've heard that some pages do suffer from some tonal friction, meaning that they are a bit political/opinionated): https://en.bitcoin.it/wiki/Proof_of_Stake

Wikipedia: http://en.wikipedia.org/wiki/Proof-of-stake

A nice little video: https://www.youtube.com/watch?v=ASCGQFZgcT8


Hope this helps!

[achimsmile]

some pages do suffer from some tonal friction, meaning that they are a bit political/opinionated):

They do. What guys on the bitcoin wiki write about PoS is kind of like asking Republicans what they think of Democrats.

[Amph]

many vulnerabilities

please name one

many newbiew leave pos coin on exchange, and we see what happened with mintpal

same with PoW. This has something to do with newbie behavoiur rather than proof of x

not really, because pos coin on exchange mean that the exchange can earn lot of interest, and control more coins than what they should have , with pow you can't do that

You are talking about two pairs of shoes:
1. newbies loose their PoS coins if an exchange runs away with their funds:

My answer: This has nothing to do with proof of x
It is not a weakness of a ferrari if I don't drive it correctly and crash it into a bridge.
Neither is it a weakness of PoS if users give their coins to strangers on the internet and loose everything.


2. The exchange can stake user deposited coins and get interest, "and control more coins than what they should have"

My answer: The interest may be nice for the exchange, but I don't see the weakness.
The largest exchange of a relatively prominent PoS coin had max. 5% of the total stake. Not enough to do any damage.
Exchanges are for PoS coins what mining pools are for miners: You give your power to potentially sign a block to someone else.
The largest mining pool I saw of BTC produced 51% of all blocks. Enough to destroy the coin.

sadly i can't find it, but there was a post of a guy, claiming that you don't need high % of interest to do a serious attack, you only need a small amount of the minted coin(not the supply but the coin minted via pos)

[achimsmile]

sadly i can't find it, but there was a post of a guy, claiming that you don't need high % of interest to do a serious attack, you only need a small amount of the minted coin(not the supply but the coin minted via pos)

yes, that was cynicSOB: https://bitcointalk.org/index.php?topic=897493.0

He was invited to try his attack on Nxt testnet:
https://nxtforum.org/testnet/nxt-security-audit-attack-simulations-on-testnet/

2 months have passed, no successful attack so far.

First he said:

So: one account with balance 10M is forging most of the testnet blocks.
I claim I can do better than him with only 2% - that's 200k

Then he said:

I can't attack testnet with only 200K.. that thing was an underestimation... but I could with 2M

Then:

51% attack requires 51% of the actively forging network weight

He would even get a bounty if he could successfully attack Nxt testnet. Nothing happened so far.

[GreenStox]

Can you outline one specifically? I only saw strengths:

I`m not an expert on technical issues but i saw many vulnerabilities.

The most obvious that i can think of is a structural problem. There is no incentive for miners to "mint" or as it is called, because the reward is significantly lower.

While in bitcoin, when the coins will be miner, the miners will then profit from transaction fees which would rise and lower depending on their greed.

In the POS enviroment they will have to leave the minting on thus only the ones with the highest market share can profitably mint, so most of them wont mint it.

See if the POS coin get's distributed evenly then the market will collapse, because if everyone would own almost equal amount of it then since the reward would be so little nobody would mint.

On the other hand in the POW anybody can join the mining game redardless of them owning any bitcoins, they are not required to own anything except mining equipment.

I think this problem will cause many POS coins to be destroyed.

[achimsmile]

The most obvious that i can think of is a structural problem. There is no incentive for miners to "mint" or as it is called, because the reward is significantly lower.

How come that in the PoS coin I know, the active forging stake is almost 50%?
Looks like enough incentive for every second stakeholder to mint.

Keep in mind that the incentive to mine bitcoin is subsidized by currently 10% inflation per year. That will get lower and stop once all coins are mined.

[GreenStox]

How come that in the PoS coin I know, the active forging stake is almost 50%?
Looks like enough incentive for every second stakeholder to mint.

Because now the coins are owned by a few geeks, wait until it spreads out into the mainstream, where people will own less coins (regardless of the price, they might own more wealth, but own less coins / capita since 1 coins would be more valuable) , then people would not care about doing it, or just forget about it, and then the security could be compromized.

Keep in mind that the incentive to mine bitcoin is subsidized by currently 10% inflation per year. That will get lower and stop once all coins are mined.

Yes and that 10% inflation affects everybody including the miners, so the effect cancels out. If they mint 10% /year then the price of bitcoin relative to other currencies also drops by 10%, so the effect cancels out. Yet this doesnt affect anybody, except investors.

Actually for bitcoin to succeed the inflation has to go down in order for wallstreet to be interested in it, that's the whole point of the deflationary currency.

[achimsmile]

Because now the coins are owned by a few geeks, wait until it spreads out into the mainstream, where people will own less coins (regardless of the price, they might own more wealth, but own less coins / capita since 1 coins would be more valuable) , then people would not care about doing it, or just forget about it, and then the security could be compromized.

Imagine what would happen to the number of transactions per day in your scenario: It would go up by magnitudes. This means minting/forging income per owned coin would go up drastically too.

[GreenStox]

Because now the coins are owned by a few geeks, wait until it spreads out into the mainstream, where people will own less coins (regardless of the price, they might own more wealth, but own less coins / capita since 1 coins would be more valuable) , then people would not care about doing it, or just forget about it, and then the security could be compromized.

Imagine what would happen to the number of transactions per day in your scenario: It would go up by magnitudes. This means minting/forging income per owned coin would go up drastically too.

Probably but if many people would own it, then not all of them would put it in forging mode, so less % of them would be staked, which compromize the security of the network.

Also if everyone would forge it then nobody would transact it because they dont have access to the coins if they forge right?

So it seems to me that either way (with many transactions ->big reward ->causing many people to forge but less people to spend-> less transactions) we are back to square 1.

And it only takes a few hours or days of imbalance, where enough security would be compromized to destroy the network.

So i`m skeptical about it.

[achimsmile]

Yes and that 10% inflation affects everybody including the miners, so the effect cancels out. If they mint 10% /year then the price of bitcoin relative to other currencies also drops by 10%, so the effect cancels out. Yet this doesnt affect anybody, except investors.

We were discussing other stuff: The incentive to help secure the network (=generate blocks)
You said the incentive in PoS coins is too low, and this is a vulnerability.
I said that bitcoin will face the same problem once inflation stops, and that in the real world it is not a problem: Prominent PoS coins have 40-50% of stake actively forging/minting.

Which point would you attack?

[achimsmile]

Probably but if many people would own it, then not all of them would put it in forging mode, so less % of them would be staked, which compromize the security of the network.

I would say this is highly speculative. How many is "not all"? And how/at which point would this compromise security? Since the coin would be widely distributed, it's even harder to do 51% attacks.

Also if everyone would forge it then nobody would transact it because they dont have access to the coins if they forge right?

So it seems to me that either way (with many transactions ->big reward ->causing many people to forge but less people to spend-> less transactions) we are back to square 1.

No, you can still transfer you coins freely, even if forging/minting.

And it only takes a few hours or days of imbalance, where enough security would be compromized to destroy the network.

True, but there are ways to make even 51% attacks impossible.  
This outlines the idea a bit (the text under the video): http://prisonorfreedom.com/what-is-transparent-forging-in-nextcoin-nxt/

So i`m skeptical about it.

this is good.

[exoexo]

Hello. Could someone explain or give a link to read about it - why PoS coins are popular and some people say that's the future of cryptocurrency? I understand PoW/PoS hybrid - this is really nice, but just 100%PoS? Why the hell anyone would need this? Why there is this hype about NXT, f.e.?

Are you one of the EXO coin stakeholders?
I just guess it from your name,.
If yes, then explain why you didn't like NXT as pure 100% POS, and like PoW/PoS hybrid.

No, it's just pure coincidence, i didn't even know any exo coin existed. I'll educate myself about this coin, just in case)

Thanks everybody for the discussion! Understood a lot. Seems that 100% PoS is just not for me, but good luck to it anyways.