Economic Arguments against POS/DPOS

[monsterer]

So the idea is that value is whatever someone is willing to trade for something else? If so then value and flow of value is orthogonal to the creation and destruction of value. The equal and opposite force of buying coins with burning is buying burning with coins, and while this increases the flow of value strictly defined, it destroys value in the proper sense.

At equilibrium total value flow is 0, yet there is still an exchange taking place - in mining that exchange is electricity for coins.

[roadscape]

In either case, the price is determined by market demand, not your costs.

If you remove all the inefficiencies from the process,  the amount you burn on energy is exactly equivalent to value. Therefore, you are turning electricity into coins in a very real sense.

Isn't the mere act of burning anything inefficient?

Are there any other examples of useful destruction of resources, outside of crypto?

[roadscape]

The byline: 'So-called “alternatives” to Proof-of-Work “waste” just as much “work”.'

Part of his criticism of DPOS is voting in general. He also says the amount of resources "wasted" to political campaigning (among other voting inefficiencies) will equal the resources wasted to mining. Even if it was true, wouldn't such campaigns be more beneficial/productive for their blockchains than mining? He compares it to the "democracies" of today and assumes anyone can get voted in based on how much they spend. I don't think it's a fair comparison.

Parts of his criticism are parenthetical:
"Is vote-buying a bad thing? Who really knows (considering the long-run coordination problems facing this species…)? For today’s post, who cares?"

The article is long-winded and I admittedly skimmed a lot.

Also, I don't believe he addressed the centralization of POW, which would make the rest moot.

"Rational ignorance occurs when the cost of educating oneself on an issue exceeds the potential benefit that the knowledge would provide."

[CLains]

So the idea is that value is whatever someone is willing to trade for something else? If so then value and flow of value is orthogonal to the creation and destruction of value. The equal and opposite force of buying coins with burning is buying burning with coins, and while this increases the flow of value strictly defined, it destroys value in the proper sense.

[monsterer]

People willing to exchange one thing for another aren't giving it value, they're chasing it.

Now we're getting into a philosophical argument about the meaning of value. Instantaneous value is what someone is willing to pay for something.

There is an equilibrium here at 0 profit, which is break even for the miners - at that point electricity burnt must be equal to the value of the coins, by definition.

[triox]

In either case, the price is determined by market demand, not your costs.

If you remove all the inefficiencies from the process,  the amount you burn on energy is exactly equivalent to value. Therefore, you are turning electricity into coins in a very real sense.

Imagine a blockchain where developers give out new coins in exchange for physically burning USD banknotes in a furnace.
The burners aren't turning anything into anything. There's no physical, financial or logical connection between the burned cash and the new coins.
Yes, the burners are making predictions about the possible value of the coins they'll receive but it's no different than a bet or a speculative trade. You wouldn't say that the forex market gives value to the fiat currencies.
People willing to exchange one thing for another aren't giving it value, they're chasing it.

[monsterer]

In either case, the price is determined by market demand, not your costs.

If you remove all the inefficiencies from the process,  the amount you burn on energy is exactly equivalent to value. Therefore, you are turning electricity into coins in a very real sense.

[Stan]

A little less than what I could turn around and sell the reward for in the market.

...and therefore the amount you burnt was very close to the value of the coins?

Chicken and the egg:

The price is what the market will pay.
Then, if you can produce them for less than that, you do.

If, on average, it costs you more to produce them than the market will pay, you shut down your equipment and go out of business.

If, on average, it costs you much less to produce than the market will pay, you sell them for full market price and pocket the profit.

In either case, the price is determined by market demand, not your costs.

[monsterer]

A little less than what I could turn around and sell the reward for in the market.

...and therefore the amount you burnt was very close to the value of the coins?

[Stan]

* Coins are not worth what it cost to produce them.  Most of the bitcoins circulating right now cost very little to produce.  Miners sell them for what they can get in the market - independent of the cost to produce them.   Coins that have no new supply being introduced still have value that is solely dependent on supply vs. demand - Economics 101.

Here is an easy way to understand this:

* Replace miners by burners
* Burners take part in a action to win the block reward by burning currency

How much currency would you burn in order to win the reward?

A little less than what I could turn around and sell the reward for in the market.

[xeroc]

* Only the demographic known as "alpha-geek" gets the coins at first, then within days it switches to the demographic known as "professional equipment operators".  Either one of these groups then sells them to every one else.  Much more rationale to have the developers sell to everyone else directly and thereby raise funds to develop and promote the coin.

This!

* It is completely upside down logic to call an unnecessary expense (electricity) a "revenue stream."  Spend that money on development and promotion - don't waste it contributing to "global warming".

And This!

The number of economic fallacies being promoted by the bitcoin mining cartel are mind boggling.

Agreed ..

[monsterer]

* Coins are not worth what it cost to produce them.  Most of the bitcoins circulating right now cost very little to produce.  Miners sell them for what they can get in the market - independent of the cost to produce them.   Coins that have no new supply being introduced still have value that is solely dependent on supply vs. demand - Economics 101.

Here is an easy way to understand this:

* Replace miners by burners
* Burners take part in a auction to win the block reward by burning currency

How much currency would you burn in order to win the reward?

[monsterer]

This does not represent value flowing into the system.   Every coin mined must be sold to cover costs in a perfectly competitive system.  This means that mining represents nothing but sell pressure:  money flowing out of the system.

In a perfectly competitive system money doesn't flow in any overall direction.

[Stan]

I agree its a waste of time.

Like Bytemaster says, there are mind viruses that convince you that mining is good.

Mining has a couple of qualities which DPOS does not:

* Anyone can get into the coin simply by turning on their miners (at least initially)
* There is a constant revenue stream of electricity getting turned into coins

* Only the demographic known as "alpha-geek" gets the coins at first, then within days it switches to the demographic known as "professional equipment operators".  Either one of these groups then sells them to every one else.  Much more rational to have the developers sell to everyone else directly and thereby raise funds to develop and promote the coin.

* It is completely upside down logic to call an unnecessary expense (electricity) a "revenue stream."  Spend that money on development and promotion - don't waste it contributing to "global warming".

* Coins are not worth what it cost to produce them.  Most of the bitcoins circulating right now cost very little to produce.  Miners sell them for what they can get in the market - independent of the cost to produce them.   Coins that have no new supply being introduced still have value that is solely dependent on supply vs. demand - Economics 101.

The number of economic fallacies being promoted by the bitcoin mining cartel are mind boggling.

Someone has to tell them, "Yer using coconuts!"

[bytemaster]

Yes the only argument for it is that it can be a useful & fair initial method of distrubution. We already did that with Protoshares.

Not only. The constant conversion of electrical power into coins is a stream of value flowing into the system, which doesn't rely on other crypto-currencies or going through fiat.

This does not represent value flowing into the system.   Every coin mined must be sold to cover costs in a perfectly competitive system.  This means that mining represents nothing but sell pressure:  money flowing out of the system.