Cryptocurrency: PoW over PoS

[grarpamp]

Privacy-enabled coins ftw!


All commodities require energy.
Since crypto is a commodity it can
serve as global digital money.
The economic function is to provide property rights
to 8B people as well as a global settlement network
that has already cleared $17T in 2022.

https://www.youtube.com/watch?v=FIj-r7kR6N4

https://preview.redd.it/o04z31jyocn81.jpg?width=1199&format=pjpg&auto=webp&s=86e73f13b0b3f2001b27b1a61facccb2aa29432d


Proof of Work is the most important innovation within blockchains and
why blocks in blockchains even exist.

The key aspects as to why Proof of work is so important and cannot be
replaced by PoS are:

1) Fair Coin Distribution No scammy ICO , premine or instamine is
created and miners are forced to sell most of their coins to cover the
expense (mainly ASICs + electricity) which allows a fair distribution
and competition in the minting process.

2) long term incentives With coins that have premines/instamines/ICOs
the incentives are such that the creators benefit from pumping and
dumping and creating more altcoins/ICOs to "fundraise" more rather
than miners who have sunk infrastructure costs on mining a particular
algo(The more we approach Moore's cliff the longer these time
preferences become as we have been seeing)

3) Decentralization of Minting Since mining BTC is so competitive,
profit margins are typically thin and thus new entrants that either
use a better tool to mine (ASIC) or find cheaper sources of
power(typically green due to the economics) can quickly gain market
share making lasting monopolies difficult. Even if a main ASIC
manufacturer appears to have a large market share we can see this
quickly change due to a single malinvestment or a mistake when
developing the newest ASIC. Power is a resource that comes from many
sources and allows many locations around the world to remain
competitive for unique reasons.

4) Sybil resistant Proof of work allows miners to order transactions
where there are real tangible costs to transaction selection and fake
nodes cannot simply flood the ecosystem in order to attack the network

5) Game Theory The game theory of Bitcoin is such that it is more
profitable to mine bitcoin and secure the network than attack it
because any attempt at a 51% attack or reorg the chain would quickly
be caught once the attack was executed and the loss in resources would
be profound.

6) Objective Security - Proof of work gives us an objective and
measurable degree of security where risk assessments can be made with
greater precision that isn't afforded with more subjective forms of
security.

6) Less Regulatory Scrutiny - One critical aspect to how securities
are defined and regulated by governments(for the USA research into
"Howey Test" but other countries have similar regulations) deals with
who controls the money/investment and a common enterprise profiting
from it. Because Proof of work allows anyone to become a bank that
mints and secures the network that no-one can control courts have
already determined that Bitcoin cannot be considered a "security" and
thus would not fall under those regulations like other coins/ICOs that
lack Proof of Work. PoW alone is not the only determining factor on
defining what is and isn't a security but an important one.

7) Incentives to resist centralization The game theory and incentives
of Proof of stake all lead to centralization because there is no
external need to compete for energy and efficiencies. The creators or
large whales who buy into the coin will all form a controlling
oligopoly who can simply collect taxes (fees) for no effort and censor
with no effort unlike with proof of work





Proof is stake has nothing at stake. They all try to somehow
artificially make up for the fact there's no cost to attack. They're
all basically trying to fake work without doing work. The slashing or
whatever the preminers are calling it is after the fact. After the
rich guys have forked off, which they can do because they're both
producers and validators, they don't care about the value of that
other chain left behind. The majority staked coins have already
decided what's the main chain. Now if you want to overrule them, the
CEO of that blockchain is going to need to repeatedly roll back and
convince everyone to stick to the chain he decides by his authority as
the valid chain. This has already been done after an embarrassing
smart contract hack where the premine gang lost their coins.

Proof of work attack cost is upfront cost and easily identifiable so
the rogue miners will have lost money doing nothing except attempt a
single double spend before nodes reject their blocks. Yes they can
carry on attack for a long time and publish a long reorg which would
have massive cost but a small fork choice change to automatically
reject reorgs past certain number of blocks including any double spend
will fix that. All it takes to overpower rogue miners in bitcoin is
$50 rasp-pi rig.

When security of blockchain depends on the coin created by itself and
only people with staked coins can validate blocks, you're FUBAR when
someone with enough coins wants to attack the chain or force changes
to their own benefit.



Moores cliff means old ASICs do not become obsolete as quickly. The
newest ASICs are already down to 3nm , to put things in perspective
Intels most expensive retail chips are still at 10nm , there really
isn't that much more room for BTC ASICs to shrink which means
decentralization of mining . There are also many fundamental
misunderstandings people have towards the advantageous and
disadvantageous in industrial mining.

A few things you need to understand about mining –

Chipmakers like TSMC and Samsung as 2 examples (Soon to add intel to
this list) are the ones that are commissioned to make most ASIC
chips(not the full assembled ASIC miner) based upon designs from
Bitcoin ASIC manufactures. These foundries are involved in diverse
chip making and obviously aren't directly involved in Bitcoin or its
politics but fulfilling large orders from whoever commissions them.

The most popular ASIC manufacturers for Bitcoin right now are
Whatsminer, Innosilicon, Bitmain, Caanan, Ebit, and Ebang. Many more
ASIC manufacturers exist but they come and go based upon merit in a
highly competitive race. For example Bitfury used to be one of the
best manufacturers , and now has very little market share. Bitmain
used to dominate , and than made some poor design decisions (lead
engineer left them) and now competes with at least 4 others for the
most efficient ASICs. This is a highly competitive and changing
ecosystem.

Large miners main advantage is economies of scale over smaller miners.
If you are an ASIC manufacturer you have large advantage over others
because you can premine off your newest hardware and sell you last
generation ASICs to others. This does occur , but is simplistic view
and not the full picture. The reality is ASIC manufacturers Sell their
newest ASICs with partners for industrial mining , sell their latest
hardware to smaller miners for a premium, and mine themselves, while
at the same time selling older ASICs on the market. Why do they do
this? Because ASIC manufacturing is highly competitive and they need
to hedge their investments as quickly as possible and de-risk from
regulatory concerns as well.

Amateur mining doesn't come with many risks of manufacturers who come
and go (they are forced to make huge investments in ASIC orders and
have long development pipelines fraught with risks)

Amateur mining does not have the overhead of employees , security,
regulatory compliance, building costs, tax liabilities , etc...

Now here is what is interesting, this last generation of ASICs that
went from 7nm to 5nm in size did not have the same efficiency jumps as
previous drops. This is because 5nm is already at the edge of what can
be done with silicone, we can possibly shrink down to 2-3nm but it
gets extremely difficult as the gates start to get the size of a few
atoms wide and quantum concerns and heat become a very big concern.

Why is any of this important?

In the past when ASICs went from 14nm to 12nm there was larger
improvements in efficiencies which gave an advantage towards those who
could manufacture and mine themselves and their partners. ASICs would
become obsolete sooner 8 months to 1 year at times which makes it
difficult for amateur miners to recoup their investment in an ASIC
especially those that by the slightly older generation equipment.

As moore's cliff approaches (we are already there as I don't see 2nm
anytime soon) this means that this latest generation of ASICs will
have a much longer shelf life which means the variable above is much
less important and the greater importance is a complex mix of what
sort of electrical rates you can get - overhead costs. Now remember
what I said about the advantageous of amateur mining. Industrial
mining has other advantageous too like economies of scale and
specialization but many disadvantageous as well.

What this ultimately means is we are entering a period of
commoditization in mining(the opposite of centralization). The
economics force this direction. industrial miners will still exist but
more and more amateur miners will enter the ecosystem. Eventually new
companies will be also created that create products to recycle the
waste heat (already exists , but prices will start to drop
considerably for consumers)

    In POS, as far as I understand, any small time player can stake
and get the same return on investment a huge whale would get.

The largest whales will always get more and more stake for 0 effort
due to collected fees from staking which is proportional to their
stake . Thus even if you equally distribute all the stake initially it
will become centralized over time.

https://youtu.be/bBC-nXj3Ng4
https://youtu.be/ncPyMUfNyVM


The "environmental impact of using electricity" seems very pedantic
and cherry picks cases for criticism.

There are countless other uses of electricity in the world which no
one is talking about which provide very little contribution to
societies.

People are so brainwashed it's sad, when presented with a system to
move away from the global rot of fiat currencies and central banks, as
well as solving the unbanked crisis (to name but 2 crucial benefits).
All they can talk about is energy use.

Nothing of value can exist without energy. "Physics of value". How
much energy do sport events use and environmental damage do they
cause, for entertainment purposes. God forbid humanity uses some of
it's electricity so countries can have financial security and
protection from the countless financial crashes imposed on the
populous. No let's stick with the same corrupt and limiting system
which only serves the 1% I.e. those living furthest up stream and
closest to the source.

Excellent logic, at least you'll all be able to blame your respective
governments for the continued increase in cost of living, lack of
access to education, housing, food and energy. Because of
course....these issues couldn't possibly be linked to the current
system for value exchange and "wealth preservation". No let's stick
with the debasement of fiat currencies and the completely unbalanced
distribution of economic gain leading us to war and social unrest.
Yeah that sounds so much better for the planet. Our children will be
eternally thankful we were too manipulated to create a better future.






Privileged middle and upper class people living in the developed world
can easily ask; "Yeah, but, do we need to use so much energy for
something that presently provides so little benefit?"

But try asking someone in Africa, South America and any of the other
financially ravaged countries where people have their fiat savings
taken away by governments the same question. I think you'll get a far
better answer from them than you will on Reddit.

As for energy think of how much energy countries, people and creatures
require to protect themselves. Is the amount of military spending
carried out by America and Europe useful energy consumption. I would
argue yes, you cannot protect your way of life without energy and
force. Again, physics, energy and force. You require energy for
protection, most things require energy to exist. You are falling
straight into the elitist trap of daring to tell people what they can
use their energy for which they either create or purchase. Very
slippery slope which will not end at Bitcoin mining.

The Bitcoin network requires energy to protect itself, the energy to
protect it's network participants stake. It's never been hacked. The
most secure digital network with a non biased approach to users and
participants, accessible 24/7, border-less and with no single point of
failure. No to think about it, you're completely correct, there's no
benefit to such a digital facility in an ever increasing digital age
with debasement of fiat and soaring inflation.

This narrative will be proven baseless eventually like so many other
misinterpretations of positive developments in human history. The lies
and manipulation always get uncovered in the end, just a shame so many
people have to suffer as a consequence of propaganda and conformist
indoctrination.

Those opposing it are supporting oppression on the unbanked and those
impoverished by their centralised currencies and governments. But
Bitcoiners are the ones being questioned on their ethics and morals.
How beautifully ironic this tale currently is.