The Benefits of Proof of Work [BLOG POST]

[carpet ride]

fyi social media buttons on the blog, at least Twitter, is not working

works for me

hmmm .. comes up for me with no link just text

[Method-X]

Prisoners didn't do that work for free. Someone had to pay to hold the prisoners.  The cost of slave labor is food, shelter, and clothing as well as guards.

How much did the prisoners get paid, then? They were expending the energy, not their guards. You attempt to bring in exogenous elements to prove a point about an objective measure.

It isn't what someone is "paid", it is what you would have to pay to get someone else to do something for you.  You are looking at it from the perspective of the people doing the work rather than from the perspective of the people who have to get them to do the work.

I like this way of defining work. You would be interested in this short TED-Ed video on the nature of power structures. The nature of "power" and "work" seem to be one and the same.

[abit]

How to "diluting speculators to compensate investors"? What if the stake holders sell on an external exchange? BTC38 seems to be able to lock up a big amount of stake in their cold wallet for a long time, but people can still sell those "locked" stake, in the meanwhile they'll get dividends paid by who trade on the BitShares exchange?

[Thom]

It was an interesting read for sure.

I pondered this when I read:

In practice, proof-of-work has created a pay-to-play model where those who are willing to spend the most to control the network win.

How does that differ from PoS, Delegated or otherwise? I might argue that funds spent to gain control, either of a PoW ecosystem by buying hashing power, or by buying tokens in a PoS ecosystem both benefit their ecosystems. In PoW by increased hashing power and in PoS by providing funds to get things implemented.

[Empirical1.2]

The effect of dilution in a ill-liquid market is not linear . Dilution at the scale of 15% does not mean only 15% value drop .
Diluting 15% of the shares to sell on the market could cost 100% or more price drop . And the chain reaction begins , where more people will sell after trigger a certain point of stop-loss .

Even only 1 million BTS sell pressure at 0.08 CNY could directly responsible for BTS to drop to 0.03 CNY if we use the theory in the stock market . Anyone decent trader who can read a candle chart could tell you that .

I'm surprised you have not figure this out yet , not even one year after the merger.

15% may be too high.  But it would be delayed I believe as in you may be required to lock up your stake for a year.

So for the next 12 months BTS would be removed from circulation without any additional dilution hitting the market.
Reducing supply would be price positive during that time, it would also increase value by decreasing the huge amount of stake centralized exchanges control and getting more stake to vote, thereby decentralizing the DAC and increasing the amount of stake an attacker would need. If in 2016 BTS continues adding value to the DEX at a reasonable cost, by way of additional features then combined it could be a very good move.

Agree 80%.  First of all, the speculator often gets a bad wrap, but she plays a vital role in bootstrapping these systems.  Investors are really just long-term speculators.  I believe in fact that successful speculators, the 5% that succeed (95% of traders fail), have the best understanding of money, markets, and finance than any other demographic and are an excellent group to bring to the table.

I like the idea of incentivizing stake-locked voting and I also think it could possibly be taken a step further.  Bts is a digital commodity with uses other than just currency or as a share in a company or blockchain.  For instance, a user could lock up some bts for 1 year but also create bitassets out of that locked bts to be traded on the dex for that period of 1 year.  A margin call would cancel this contract.  Perhaps users who do this could be paid more.  This would give the network the full benefit of those bts by also providing liquidity to the dex.

Using the locked up stake to somehow increase BitAsset CAP, use and liquidity would be great. Perhaps the reward could be paid out in BitAssets too.

[Pheonike]

You can argue that the prisoner is paying back to society by being in prison. He is in the negative and paying back the cost he took for becoming a prisoner.

[bytemaster]

Prisoners didn't do that work for free. Someone had to pay to hold the prisoners.  The cost of slave labor is food, shelter, and clothing as well as guards.

How much did the prisoners get paid, then? They were expending the energy, not their guards. You attempt to bring in exogenous elements to prove a point about an objective measure.

It isn't what someone is "paid", it is what you would have to pay to get someone else to do something for you.  You are looking at it from the perspective of the people doing the work rather than from the perspective of the people who have to get them to do the work.

[monsterer]

Prisoners didn't do that work for free. Someone had to pay to hold the prisoners.  The cost of slave labor is food, shelter, and clothing as well as guards.

How much did the prisoners get paid, then? They were expending the energy, not their guards. You attempt to bring in exogenous elements to prove a point about an objective measure.

[cass]

fyi social media buttons on the blog, at least Twitter, is not working

works for me

[Empirical1.2]

6 months later the Kool Aid finally starts to kick in.

https://bitsharestalk.org/index.php/topic,18013.0/all.html

how much longer will this hare continue to sleep while your competitors grow rich implementing your throw away ideas?

The idea you linked to, wanted increased voting power in return for locking up stake which would further centralize power into the hands of the tiny minority that currently controls voting & are already long term investors, thereby reducing the value of BTS further.

This idea, if combined with a voting requirement encourages BTS holders to move their stake off the centralized exchanges and vote  which increases the decentralization and security of the DAC thereby increasing the value of the BTS model, while also turning speculators into longer term investors and reducing the amount of BTS on the market thereby increasing value too.

[sittingduck]

Your definition of 'work' is wrong. Take the example of prisoners who worked tirelessly to build the rail roads in the US; by your definition, they did no work, since they weren't paid.

'Work' is simply energy expended achieving a task. And by that definition, your proposal cannot be a proof of work, since no work is done by doing nothing.

Further, your idea of having block producers hold stake as collateral does nothing to change the inherent security model of the system; attack cost will still be a constant in the amount of stake, vs true POW where attack cost is super linear in the number of blocks produced.

If you really want to stick with proof of stake, I have suggested before that simply auto electing the top N staking block producers ranked by their stake will resolve the problem of voter apathy, which is the true failure mode of DPOS.

Prisoners didn't do that work for free. Someone had to pay to hold the prisoners.  The cost of slave labor is food, shelter, and clothing as well as guards. 

[carpet ride]

fyi social media buttons on the blog, at least Twitter, is not working

[monsterer]

Your definition of 'work' is wrong. Take the example of prisoners who worked tirelessly to build the rail roads in the US; by your definition, they did no work, since they weren't paid.

'Work' is simply energy expended achieving a task. And by that definition, your proposal cannot be a proof of work, since no work is done by doing nothing.

Further, your idea of having block producers hold stake as collateral does nothing to change the inherent security model of the system; attack cost will still be a constant in the amount of stake, vs true POW where attack cost is super linear in the number of blocks produced.

If you really want to stick with proof of stake, I have suggested before that simply auto electing the top N staking block producers ranked by their stake will resolve the problem of voter apathy, which is the true failure mode of DPOS.

[merivercap]

Interesting post.

 I like how you defined work in the first section.  POW for Bitcoin is more about using cost as a proxy for value.  Nick Szabo wrote about this in Of wages and money: cost as a proxy measure of value  It works for Bitcoin more as a unit of account and analogous to a time-wage rate for labor.   I'll probably try to blog about Szabo's works one of these days.

I'm not sure that the time of holding on to coins is a good proxy for work in a POS system.  POS/DPOS is a more pure alternative to POW because it just focuses on value, rather than cost.  The proxy for value in a POS system is transaction revenue and is analogous to how people evaluate the value of companies.   

[cube]

Incentivising the bitshares holders who stay long and committed is a positive thing and it is necessary to encourage more such committed stake holders and voters.  Ultimately we like to encourage more individual stakeholders to vote and this results in a more decentralised ecosystem.  But I am not sure about getting this incentive at the expense of the liquidity providers.  They are useful in their own right in providing a liquid market.  In addition, dilution is something that could cost more than gain to bitshares especially at this early stage of growth.  Are there other ways to fund the incentive?