I am skeptical of the argument that proof-of-stake will decentralize ownership. The argument in favour of it is that POS has lower capital requirements, so easier entry to the market. That makes sense, but I think it is naive.

Suppose person A has 1,000ETH and persons B, C, D, ... have 1 ETH each. Under POS, if everyone participates in the mining, they will maintain these ratios.

Under POW, the new coins are allocated to participants in proportion to their hashpower. If person A has only 10x the hashpower of persons B, C, D ... then over time person A will have a shrinking proportion of the coins. I argue that this is the realistic scenario, for the following reason.

The richer you are, the greater opportunity you have to diversify -- to invest your capital elsewhere (person A will probably not buy 1000x the hashpower of the other players) -- creating market opportunities for smaller competition in the vacuum they leave behind. Under POS, the rich remain rich and the poor remain poor. (Also, persons B, C, D, ... being poorer, need to spend a greater proportion of their capital, rather than invest it.)

In other words, POS strikes me as being regressive.

Am I right, or is there an argument that, taking the above into account, POS will decentralize ETH holdings?

closed as primarily opinion-based by Richard Horrocks, Matthew Schmidt, Badr Bellaj, Nicolas Massart, Herman Junge Jun 18 '17 at 21:35

Many good questions generate some degree of opinion based on expert experience, but answers to this question will tend to be almost entirely based on opinions, rather than facts, references, or specific expertise. If this question can be reworded to fit the rules in the help center, please edit the question.

  • Hi there. This sort of question isn't really a good fit for Stack Exchange, which is more geared towards specific technical answers, as opposed to long-form discussions which tend towards speculative, opinion-based answers. One of the Reddit boards is probably a better place to ask: www.reddit.com/r/ethereum – Richard Horrocks Jun 17 '17 at 20:20

Hate to be so blunt but I think you're very wrong. The RoI on on PoS is actually quite low, especially once mining rewards are eliminated. There will be so many people who want to stake but so little new ether to distribute (due to disinflation) that it will only be at best a modest source of income. The lion's share of the wealth will still go to people who create good new ideas and improvements that they can sell to others, I.e. inventions, innovations, and better ways to do things. Staking will be a minimal source of income for most people. I plan to stake to support the network but I know competition will be stiff and returns low because staking will be literally one of the easiest ways to make money in an Ethereum based economy. Like collecting popcans is an easy way to make a few bucks if you're homeless, everyone with a computer will be staking some ETH if they can do it, but most ETH will be traded, sold etc directly not given as staking rewards.

  • That's fairly convincing. Can you cite some numbers? – spraff Jun 18 '17 at 8:16

I think you are totally right....a proof of stake system will be pretty much the same as in fiat...the one who has, is the one who gets....(and with only the hodling nessesary which is pretty easy work to do). pos is the direct opposite to dezentralisation (remeber...the thing lots of people think this is about) With pow the one who has, at least has to build and maintain mining facilities...(and i know...this can be omly bought money, so why not grant them ones that have the shortcut of pos? its all the same in the end, or isn^t is?)


I had some ideas for a mining system that is directly based on Casper, but that would not have the problems you mention.

Instead of staking ETH, validators (I call them "betting pools") are "powered" by people-vote, and so "stake people". The mining rewards (and gas fees in the block) go to the people who "power" the validator, and also partly to the operator (who is anonymous. )

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