Author Topic: Why DPOS is better than other POS  (Read 11679 times)

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merockstar

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Re: Why DPOS is better than other POS
« Reply #30 on: July 17, 2014, 03:55:54 am »

ok BM, altered the above post to reflect that. hows it look now?

okay. the only point I haven't addressed from that list above is Ethereum Proof of Chain scaling.

where can i learn about that? Is it basically just proof of work?

It is a proof of work algorithm  that requires the block chain to be present to perform the work

Effectively bitcoin can be thought of as delegated proof of work then ether prevents delegation. 




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in other words, it's proof of work that prevents mining pools from happening?

and I can apply the same reasoning to ethereum as I would to bitcoin proof of work in writing this?

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Re: Why DPOS is better than other POS
« Reply #31 on: July 17, 2014, 04:50:43 am »
It doesn't prevent mining pools (pooling for the sake of reducing volatility), but it does make increase resource requirements from raw hash power to hash power + disk + bandwidth
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merockstar

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Re: Why DPOS is better than other POS
« Reply #32 on: July 17, 2014, 04:55:58 am »
so pow + increased hardware costs?

a google search doesn't produce jack shit

is adaptive proof of work a different name for it or something?

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Re: Why DPOS is better than other POS
« Reply #33 on: July 17, 2014, 05:01:53 am »
No, it's just POW but you require the whole chain on the computer since the POW is on data from random parts of the chain
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merockstar

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Re: Why DPOS is better than other POS
« Reply #34 on: July 17, 2014, 06:05:47 am »
No, it's just POW but you require the whole chain on the computer since the POW is on data from random parts of the chain

cool. thanks toast.

merockstar

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Re: Why DPOS is better than other POS
« Reply #35 on: July 19, 2014, 02:13:18 am »
second draft Proof of Stake Scalability

What is the problem?

Proof of stake systems are off to a great start. From our current vantage point these new ways of validating the blockchain implemented in currencies like Peercoin and Nxt, seem to adequately secure their respective blockchains while simultaneously promising to create a fraction of the carbon footprint that their Proof of Work based predecessors do. It has long been known that without increased transactions fees Proof of Work systems will eventually no longer be able to provide enough incentive to motivate a sufficient variety of miners to still call the network decentralized.

At smaller scales the effect of validation cost goes unnoticed. When you're only conducting a small fraction of the number of possible transactions, it doesn't cost that much to validate them, leaving all the attention on how decentralized the network is, and what is the cost per transaction.

With relatively few transactions in a market that has not yet gone mainstream it makes sense that validation cost has yet to become a serious matter in any as validation can be done with much less computer power. Already we see that in Peercoin and Nxt that to make gains from running a node, one must have a substantial amount of currency up for stake.

You can see this coming if you've ever tried to mint Peercoin with only a hundred coins to your name, or forge Nxt with only a thousand. It just doesn't happen in a timely manner, and that means you have to keep your node running for a longer amount of time to mint a given amount, and the longer a node runs the more resources it consumes. At this early stage, that extra time running a node is pretty much negligible because the electricity and computing resources to do so won't constitute much at this stage of the game, without very many people making transactions. Given more popularity, and thus more transactions that need validating, this problem will increase in time, given more general usage.

This problem can be mitigated with transaction fees but at a certain point, in order to remain profitable, transaction fees would have to increase to the point that spending the currency would become discouraging and people wouldn't use the currency for it's intended purpose so that's a non-option. This is less of a problem with Peercoin because it's designed to be leaner, and more oriented towards savings and larger transactions anyway, but Nxt is supposed to be more of a bread buying currency and this could lead to issues later.

Let's take a look at Nxt. Based on the number of transactions as of the time of this writing, information found here by Empirical1, the network is likely to bring in less than about $8000 worth of transaction fees a month. That's given their current number of transactions which is averaging about 0.8 transactions a minute, or 0.01 transactions a second. Increasing that rate to 10 transactions per second means 1000 times more transaction fees, or 80,000 a month from securing the network. Running a node for one person is going to cost on average about a hundred dollars a month for electricity costs. This means in a completely decentralized Nxt network that doesn't use leased forging, only those with 1/800 of all Nxt or more would be able to forge profitably at ten transactions per second. The costs for hardware go up even more as the number of transactions increase.

At 2000 transactions a second this means the network (assuming the transaction fee isn't altered) would bring in about 16,000,000 a month. However to cost to secure a network with that many users is going to increase exponentially as well. At this point a server capable of handling that many transactions is going to cost along the lines of $5000 a month. The end result is that only those with balances more than 1/3,200 (at this level that will be many millions of dollars) of the network would be able to forge profitably given complete decentralization. This seems like a reasonable number until you consider that to create that many transactions, the network will consist of billions of users.

The situation is similar with Peercoin, only the fixed transaction fee spreads the cost of running those nodes more evenly to each shareholder.

Then you have proof of work systems, which retain the same hardware costs as running a PoS node but also add artificial hardware resource costs to help facilitate distribution of currency. This already costly effect is amplified in Ethereum's proof of chain model which requires the entire blockchain to be downloaded to mine. Ultimately the primary difference in this model is that distribution is based on who has the most powerful hardware rather than who has the most stake, but as we've seen, even attempts to base it on who has the most stake eventually result in hardware costs exceeding profitability for but those who have the most wealth.

The only option is some degree of centralization, which occurs naturally in all of these schemes over time.

How to balance centralization with scalability?

It seems an inevitability that no matter how you spin it one of two scenarios will play out in the current systems left unchecked, either centralization will take hold, or transaction fees will get unwieldy. So how should we mitigate this? The most recently posed solution to this is Decentralized Proof of Stake. In a DPOS system centralization is anticipated, and introduced by design but voted on in a decentralized manner using a system similar to reddit's upvoting to determine delegates tasked with the duty of signing nodes and preventing the blockchain from forking. Delegates can be voted on automatically based on the systems own analysis of how it's performing, or in cases where it may be necessary, they can also be voted on manually. A vote happens with each transaction so it's like a continuously ongoing election.

In DPOS those delegates chosen to secure the system, unhindered by any process designed to enforce decentralization, are incentivised by transaction fees and the prospect of being re-elected, to do their job correctly. The difference here is that the number of delegates are limited, and the amount of stake one holds or amount of computing resources one owns is seperated from their ability to secure the network. This results in a much more financially efficient scheme for validating transactions while still achieving a measured amount of decentralization to keep the network from being taken over by a few small parties.

This extra efficiency could be used to benefit the network as a whole. In DPOS, assuming an operating cost of about a hundred dollars a month, this works out to a need for $10,100 per month necessary to compensate delegates. Assuming one transaction per second this necessitates a fee of $0.004 per second, but as the number of transactions per second grows, this the amount that must be charged goes down until improved hardware becomes a factor. Setting the fees to a competitive $0.05 or $0.10 per transactions would provide extra income for delegates to promote or market the infrastructure as a whole, and profit shareholders. As more and more people pile onto the network it becomes more possible to continue lowering fees and give more back to shareholders.
« Last Edit: July 19, 2014, 02:15:42 am by merockstar »

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Re: Why DPOS is better than other POS
« Reply #36 on: July 19, 2014, 02:55:01 am »


It seems an inevitability that no matter how you spin it one of two scenarios will play out in the current systems left unchecked, either centralization will take hold, or transaction fees will get unwieldy. So how should we mitigate this? The most recently posed solution to this is Decentralized Proof of Stake. In a DPOS system centralization is anticipated, and introduced by design but voted on in a decentralized manner using a system similar to reddit's upvoting to determine delegates tasked with the duty of signing nodes and preventing the blockchain from forking. Delegates can be voted on automatically based on the systems own analysis of how it's performing, or in cases where it may be necessary, they can also be voted on manually. A vote happens with each transaction so it's like a continuously ongoing election.



fix...
Decentralized Delegated Proof of Stake

Offline bytemaster

Re: Why DPOS is better than other POS
« Reply #37 on: July 19, 2014, 03:16:30 am »
http://www.nxtcommunity.org/nxt/nxt/nxt-network-energy-and-cost-efficiency-analysis

Quote
There are also other reasons to forge for Nxt such as those who have large numbers of Nxt who want to protect their own investment. Nxt is also talking about restricting the size of forging pools, so that no forging pools can be larger than approximately 1% of all Nxt (unless you actually own more than 1% of all Nxt). If this happens, then the low end case becomes closer to 100 Nxt forgers. The other restriction that goes along with this is that you need to own enough Nxt to be able to protect the network a reasonable amount of the time or it seems worthless to even forge.

This is  very tough article to write because it is making a ton of assumptions that are not clearly communicated.    I think you have made great strides, but I would like to suggest some ways that we can make the argument clearer and more concise:

0) Don't make it about electric costs... that is insignificant, make it about hosting costs and bandwidth because saying that a computer will consume $100 / month in electricity does not sound believable.    In the Nxt article I linked the point to $100 computers as the hardware that would power 1000 transactions per second (I call BS on that), but those $100 computers are a red herring compared to the bandwidth requirements.     In that article they also claim that Nxt will use 1 megabyte per second (8 Megabits) and waive that off as something everyone has..... ignoring the fact that an 8 Megabit connection costs at least $30 per month and leaves no room for protocol overhead and relay/rebroadcast overhead. 

1) Give the reader something to anchor them and put what they are about to read into perspective.   Namely, ask the question:  how many nodes does it take to be considered decentralized and which systems provide the best decentralization.   DPOS cuts to the chase and declares 101 delegates to be sufficient, yet many detractors claim that 101 is too centralized without asking the question "compared to what?"... then make the bold claim that the economics of Nxt and Peercoin will drive them toward fewer than 101 signing nodes.   

2) Ignore the "one day this will centralize" and instead focus on the fact that even TODAY it is not decentralized.   I would start by stating that in the interest of network stability and reliability serious "miners" or "forgers" must at least rent a low-end VPS system at $50 per month so they can make sure they do not miss their turn or have unexpected outages.    This means that on average every user that wishes to break even must earn $50 per month in fees.  Based upon the current value of Nxt fees ($8000 per month) and assuming all stake were evenly allocated, this means that Nxt & Peercoin can support at most 160 forgers.    It is a well known fact that Nxt, Peercoin, and Bitcoin have individuals that own large percentages (over 1%) and each of these individuals takes away from the theoretical maximum of 160 forgers or miners.   

3) Some may argue that it doesn't cost $50 to run the system from your home PC or a dorm room.   This may be true at todays scale, but if any of these systems hope to grow then the bandwidth requirements (not electric costs) will be the primary cost consideration that forces the nodes into the cloud. 

I think this particular article will become one of our most powerful arguments so I hope you continue to refine in light of these critiques.

Some other things to be aware of:
4) Throwing around unsupported numbers ($5000 per month, $100 in electric costs) while likely true is beyond the scope of this article to defend.  Lets boil it down to facts so easy to understand that there is little room to dispute the main point.   Put yourself in the shoes of someone skeptical of our claims, what is the first thing you would do?  A) attack every number we introduce and then claim the whole article is bunk.     The other thing people will do is claim that there is no reason for "one system" to scale and that it is "decentralized today". 

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Offline bytemaster

Re: Why DPOS is better than other POS
« Reply #38 on: July 19, 2014, 03:19:20 am »
I would like to refine my prior statements: 

Don't declare something centralized or decentralized, always use relative terms... something is more or less decentralized than something else.
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merockstar

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Re: Why DPOS is better than other POS
« Reply #39 on: July 19, 2014, 12:40:27 pm »
Decentralized Delegated Proof of Stake

I was very tired when I busted that out, and just woke up to find this and I'm laughing my ass off.

thanks for the input BM. definitely struggling on this one. will try to hammer out those changes today.
« Last Edit: July 19, 2014, 12:46:29 pm by merockstar »

merockstar

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Re: Why DPOS is better than other POS
« Reply #40 on: July 22, 2014, 08:28:29 pm »
I've tried to address some of your points BM. sorry it's taking so long. This is a rough one for my brain.

do you think I should just outright do away with the paragraphs that use supported numbers as an example and just focus on trying to explain the concept?



draft trois Proof of Stake Scalability

What is the problem?

Proof of stake systems are off to a great start. From our current vantage point these new ways of validating the blockchain implemented in currencies like Peercoin and Nxt, seem to adequately secure their respective blockchains while simultaneously promising to create a fraction of the carbon footprint that their Proof of Work based predecessors do. It has long been known that without increased transactions fees Proof of Work systems will eventually no longer be able to provide enough incentive to motivate a sufficient variety of miners to still call the network decentralized.

At smaller scales the effect of validation cost goes unnoticed. When you're only conducting a small fraction of the number of possible transactions, it doesn't cost that much to validate them, leaving all the attention on how decentralized the network is, and what is the cost per transaction.

With relatively few transactions in a market that has not yet gone mainstream it makes sense that validation cost has yet to become a serious matter in any as validation can be done with much less computer power. Already we see that in Peercoin and Nxt that to make gains from running a node, one must have a substantial amount of currency up for stake.

You can see this today if you've ever tried to mint Peercoin with only a hundred coins to your name, or forge Nxt with only a thousand. It just doesn't happen in a timely manner, and that means you have to keep your node running for a longer amount of time to mint a given amount, and the longer a node runs the more resources it consumes. At this early stage, that extra time running a node is pretty much negligible because the hardware and bandwidth to do so won't constitute much at this stage of the game, without very many people making transactions. Given more popularity, and thus more transactions that need validating, this problem will increase in time, given more general usage. If networks are already becoming partially centralized then what happens when a cryptocurrency goes mainstream?

This problem can be mitigated with transaction fees but at a certain point, in order to remain profitable, transaction fees would have to increase to the point that spending the currency would become discouraging and people wouldn't use the currency for it's intended purpose, so that's a non-option. This is less of a problem with Peercoin because it's designed to be leaner, and more oriented towards savings and larger transactions anyway, but Nxt is supposed to be more of a bread buying currency and this will lead to issues.

Let's take a look at Nxt. This is back of a napkin style math, but should give an idea of the point being made. Based on the number of transactions as of the time of this writing, information found here, the network is likely to bring in less than about $8000 worth of transaction fees a month. That's given their current number of transactions which is averaging about 0.8 transactions a minute, or 0.01 transactions a second. Increasing that rate to 10 transactions per second means 1000 times more transaction fees, or 80,000 a month from securing the network. Running a node for one person is going to cost on average about a hundred dollars a month for bandwidth and hardware. This means in a completely decentralized Nxt network that doesn't use leased forging, only those with 1/800 of all Nxt or more would be able to forge profitably at ten transactions per second. The costs for hardware and bandwidth go up even more as the number of transactions increase.

At 2000 transactions a second this means the network (assuming the transaction fee isn't altered) would bring in about 16,000,000 a month. However the cost to secure a network with that many users is going to increase exponentially as well. At this point a server capable of handling that many transactions is going to cost substantially more than what most are able to provide. The end result is that only those with balances which contain an awful lot of money would be able to forge profitably, assuming as much decentralization as possible.

The ultimate point being touched on here is that even in a Proof of Stake network, as more and more people start crowding into the network, the cost to maintain the network is going to increase more than the transaction fees are going to be able to offset, limiting the number of people actually able to do so to a very small number.

The situation is similar with Peercoin, only the fixed transaction fee spreads the cost of running those nodes more evenly to each shareholder.

Then you have proof of work systems, which retain the same hardware costs as running a PoS node but also add artificial hardware resource costs to help facilitate distribution of currency. This already costly effect is amplified in Ethereum's proof of chain model which requires the entire blockchain to be downloaded to mine. Ultimately the primary difference in this model is that distribution is based on who has the most powerful hardware rather than who has the most stake, but as we've seen, even attempts to base it on who has the most stake eventually result in hardware costs exceeding profitability for but those who have the most wealth.

The only option is some degree of relative centralization, which occurs naturally in all of these schemes over time.

How to balance centralization with scalability?

How does one define what is and isn't decentralized? How many nodes have to be confirming transactions for a network to be considered decentralized? Today, in Bitcoin, we see a few big mining pools doing the majority of the transaction verifying, as the ASIC arms race continues the number of people capable of profitably running a node, even within a mining pool continues to decrease.

It seems an inevitability that no matter how you spin it one of two scenarios will play out in the current systems left unchecked, either further centralization will take hold, or transaction fees will get unwieldy. Even today system's aren't truly decentralized because there is a minimum amount of stake necessary to be able to recoup profit in a timely manner. So how should we mitigate this? The most recently posed solution to this is Delegated Proof of Stake. In a DPOS system centralization is anticipated, and introduced by design but voted on in a decentralized manner using a system similar to reddit's upvoting to determine delegates tasked with the duty of signing nodes and preventing the blockchain from forking. Delegates can be voted on automatically based on the systems own analysis of how it's performing, or in cases where it may be necessary, they can also be voted on manually. A vote happens with each transaction so it's like a continuously ongoing election.

In DPOS those delegates chosen to secure the system, unhindered by any process designed to enforce decentralization, are incentivised by transaction fees and the prospect of being re-elected, to do their job correctly. The difference here is that the number of delegates are limited to 101, and the amount of stake one holds or amount of computing resources one owns is seperated from their ability to secure the network. This results in a much more financially efficient scheme for validating transactions while still achieving a measured amount of decentralization to keep the network from being taken over by a few small parties. Is 101 too few to call "decentralization?" The argument I'm presenting is that current Proof of Stake implementations are bound to only be profitable for fewer than 101 parties anyway. Why not cut it off at the head and benefit from the reduced costs of being prepared for that inevitability?

This extra efficiency could be used to benefit the network as a whole. In DPOS, assuming an operating cost of about a hundred dollars a month, this works out to a need for $10,100 per month necessary to compensate delegates. Assuming one transaction per second this necessitates a fee of $0.004 per second, but as the number of transactions per second grows, this the amount that must be charged goes down until improved hardware becomes a factor. Setting the fees to a competitive $0.05 or $0.10 per transactions would provide extra income for delegates to promote or market the infrastructure as a whole, and profit shareholders. As more and more people pile onto the network it becomes more possible to continue lowering fees and give more back to shareholders.
« Last Edit: July 22, 2014, 09:19:44 pm by merockstar »

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Re: Why DPOS is better than other POS
« Reply #41 on: July 23, 2014, 03:05:00 pm »
Let's take a look at Nxt. This is back of a napkin style math, but should give an idea of the point being made. Based on the number of transactions as of the time of this writing, information found here, the network is likely to bring in less than about $8000 worth of transaction fees a month. That's given their current number of transactions which is averaging about 0.8 transactions a minute, or 0.01 transactions a second. Increasing that rate to 10 transactions per second means 1000 times more transaction fees, or 80,000 a month from securing the network. Running a node for one person is going to cost on average about a hundred dollars a month for bandwidth and hardware. This means in a completely decentralized Nxt network that doesn't use leased forging, only those with 1/800 of all Nxt or more would be able to forge profitably at ten transactions per second. The costs for hardware and bandwidth go up even more as the number of transactions increase.

Souldn't the transaction fee increased to 8,000,000 (1000x) a month?
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Re: Why DPOS is better than other POS
« Reply #42 on: July 26, 2014, 02:11:42 am »
Discussing scalability, delegation and centralization on the NXT forum https://nxtforum.org/general-discussion/nxt-pos-vs-bitshares-dpos/msg70835/#msg70835

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Re: Why DPOS is better than other POS
« Reply #43 on: July 26, 2014, 04:15:12 am »
 +5%

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Re: Why DPOS is better than other POS
« Reply #44 on: July 26, 2014, 11:40:46 am »
Discussing scalability, delegation and centralization on the NXT forum https://nxtforum.org/general-discussion/nxt-pos-vs-bitshares-dpos/msg70835/#msg70835
Wherein do the costs for a delegate exactly lie that are described in the OP (assumption: visa size network)? I assume bandwidth, reliability, what else and why?