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Comment by shadowgovt | Hacker News Reader

Among the things that are unfortunate about cryptocurrency as a model is the fact that it's not immune to the general capital-breeds-capital effect. For proof of stake, people with money to spare are likely to have newly-minted money granted to them in the future. For proof of work, people with money to spare can afford to buy the rigs to increase the odds they have newly-minted money granted to them in the future. I think it's fair to ask what the net benefit is to society for a wealth-distribution system to give more money to those who have the most money.

Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor.

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> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor.

Maybe, but it is much more common to summon money out of nothing and give it to the rich. At least in the US this happens in the form of buying securities from entities that hold them, which from what I understand is kind of similar to proof of stake (you stake some of your currency by buying a security for a chance to get more when you sell it).

Just to give context to others, it sounds like you're talking about https://en.wikipedia.org/wiki/Quantitative_easing

MS has a patent application on PoL (proof of life) so that crypto can be distributed to every human being that wants it.

https://www.pcmag.com/news/microsoft-patent-describes-tracki...

"By tracking brainwaves when someone watches an advert, Microsoft hopes to use the data generated as a “proof-of-work.” " Look like an episode of black mirror

The government authority doesn't go away just because cryptocurrency exists. Unless cryptocurrency somehow replaces fiat entirely, which seems unlikely. And even if that happened, governments could do the same by way of taxes.

> Unless cryptocurrency somehow replaces fiat entirely, which seems unlikely.

No the central banks of the world are all working on fiat crypto, so we'll get the worst of both worlds.

"fiat crypto", or if you prefer, digital currency, will neither be proof-of-work nor proof-of-stake. Neither mechanism is needed when there is a single trusted authority.

A "single authority", not a "single trusted authority".

"trusted" doesn't mean you want to, but that you have to.

PoS pays the people who run the infrastructure. Someone has to run it, and it's trivial for anyone to participate. If you have 5 dollars you can stake it in the PoS network and earn rewards. The barrier for entry in the legacy financial system is way way higher. Have you ever applied for a banking license?

you have to have 32 ETH, which is around $50K USD, but agreed other than that.

You need 32 ETH to run your own staking node, but there are many options for liquid staking, which can be done with any denomination of ETH.

Pooling should be possible, same as mining earlier. Collect ETH from a bunch of people and split the gains by ratio.

[edit: misunderstood the initial statement; disregard the part that was previously here]

> The barrier for entry in the legacy financial system is way way higher. Have you ever applied for a banking license?

One doesn't have to have a banking license to use the local fiat currency of one's nation (basically, one is born into it). And one must do almost nothing to get a check from the government if they decide to stimulate the economy by handing out money to those who showed they had very little on their last tax return.

You don't need to be a staker to use Ethereum either. You can also stake with a few clicks on a website if you're using a web3 capable browser. You don't need to buy anything fancy or even open up a terminal if you don't want to.

If you're into UBI type stuff, yeah, there are multiple UBI projects on Ethereum https://www.proofofhumanity.id

There are a ton of other projects that allow people to share storage space, compute, art, information, etc to earn cryptocurrencies. People contribute what they can to the network, and are compensated for their efforts. Projects like gitcoin are raising millions of dollars for people who volunteer to provide public goods, from performing security audits on large open source projects, to cleaning plastic out of rivers (https://gitcoin.co/grants/). Seems to me like the Ethereum ecosystem is far more altruistic than many current governments.

Yep. Parking your ETH in a staking pool much better than in a traditional bank saving accounts. There’s a proliferation of services that make it easier and easier and can put any amount.

My bank account didn't drop 63% YTD though

Or 100% when it got hacked.

My loss, I guess

1 ETH = 1 ETH still.

The numbers are irrelevant over time. Can you buy the same things for 1 ETH now as you could then?

Dollars have similar problems, for more depraved reasons.

That all depends on the time points you are comparing to. 1 ETH now is $1400. 3 years ago it was $180.

Can you buy the same things for 1 USD as you could then? (no)

No, but it's close. USD's swings are a hell of a lot less wild, even in high-inflation years.

They certainly are less wild. It also only trends in one direction.

Nor did it go up thousands of percent over the past decade

Nobody parks cash at a bank looking for returns. They're looking for a stable store of value. ETH appreciation is not a selling point for replacing a bank, even if the return happens to be positive (right now, with hindsight).

How will PoS not deflate the currency to zero? Why would you spend eth at all when you can make more money holding it via guaranteed returns?

Couldn't somebody ask the same about getting interest rate on their savings? Why spend money when you can use the money to grow more money?

False equivalence, why is your equivalent to staking (investing crypto) applying for a banking license rather than opening a brokerage account (investing dollars)? With the advent of fractional shares anyone can buy $5 of stocks too, but it requires zero technical know-how.

When you stake, you are still processing transactions and creating blocks/forming consensus similar to what mining did. This isn't really comparable to investing in a security.

Just because you can join a staking pool which often takes a cut and makes it easy doesn't invalidate what is actually going on.

Sending $5 to a third party pool so they stake it in your stead under the promise it remains your $5 does not make you a bank. It's more like sending $5 to Robinhood so they buy $BAC in your stead under the (legally backed up) promise it remains your $5. IMO.

That’s not really staking. It’s just lending your eth to a staker which is completely different.

Maybe I am misunderstanding what "staking" $5 means then, because I believe you need 32 ETH to be a validator.

>PoS pays the people who run the infrastructure

Both Ethereum's and Bitcoin's regular nodes don't make any money.

You are conflating several topics. (Background: through Ternary we run the Red Bike validator nodes on Cardano).

1. If you want to run a validator node, i.e. run the architecture you need to have 32 ETH to be eligible to provide this service. And it does not mean immediately that you will earn something. https://ethereum.org/en/staking/

2. If I stake the equivalent of 5 USD I will likely get a 5% return on it per year making it much less interesting from an investment perspective given volatility and opportunity cost.

3. Staked funds are locked and can't be used anywhere else or for anything else. At least GPUs can be used for mining AND general purpose computing.

4. It is much easier to go to any random money exchanger and go USD/EUR or USD/JPY

5. Getting a retail bank account can be done in a matter of minutes online.

> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor.

This is why I'd rather see development of privacy coins, like zcash, and less concerned with the decentralization issue (I've yet to see a project actually address centralization or even acknowledge the issue you're bringing up: momentum). We're moving away from a cashless society and while that has a lot of great benefits it also has a lot of detriments. So why not have digital cash then? ZKPs for transactions.

If you want to promote democracy you should also want to decrease the ability for authoritarians to arise, which in our modern era means how much data they can get their hands on and abuse. There's common cop-outs like how will taxes work etc, but society ran pretty smoothly on cash before. Companies still have to report incomes and salaries. We can still do consumption taxes. So we have our income and consumption easily solved. I'm even fine with a small transaction fee, which I know others aren't, but we already pay this in the world of credit cards (2-4%). I think we could really bring down the Visa/Mastercard tax (maybe something like 0.1%/0.5%?) and it would all be a win for everyone.

It is clear to me that cryptocurrencies aren't going to get us this world, so let's start thinking about other means.

> [crypto is] not immune to the general capital-breeds-capital effect.

Is there a currency - even theoretical - where 'capital-breeds-capital' is _not_ a side-effect?

Fiat currencies can defend against that phenomenon via wealth redistribution: simply creating more currency and handing it to the poor.

Most currencies don't have it baked it into the core workings of the currency.

In crypto, possessing money generates money, without investing it or putting the money "to work." This would be like if the dollar bills in your wallet periodically grew another dollar.

> Fiat currency has issues, but at least a government has the authority to conjure money out of nothing and hand it to the poor.

They also have the authority to conjure money out of nothing and hand it to the rich.

nothing stops crypto PoS with governance to hand money to the poor as well.

With fiat, there are at least some incentives. Not perfect incentives, but incentives just the same. Not sure what would incentivize crypto here.

If a cryptocurrency actually gained widespread use (competitive with cash), I'd imagine it would take on some aspects of a central bank -- being the only currency is only fun if the economy running smoothly. Money given to poor people more-or-less immediately enters circulation.

Seems like an interesting idea to spur adoption of the currency.

Depending on what you mean by money, there are unsolved problems. You need some kind of layer that maps real people to accounts, or people can just create lots of accounts for unlimited money.

There was some crypto startup that wanted to do this and was going to different cities and doing retina scans. I wonder what happened to them?

I suppose you could outsource it by donating to GiveDirectly, but that would require conversion to real money and then (by GiveDirectly) to mobile phone payments. In that case, the cryptocurrency isn't solving much of the problem.

"Unfortunate" is a very generous word in that case.

For a technology that claims to be decentralized, it is simply one more major flaw in an already terrible design.

This isn't unfortunate, this is deliberate. Bitcoin was birthed dripping in the amniotic fluid of right-libertarian ideology. Capital-breeds-capital isn't so much a side effect as much as it is the deliberate goal of capitalism: use money to make more money. And the core of right-libertarian ideology is to more or less let the capitalists do what they want.

This isn't exclusive to capitalism; there are other ideologies that work this way. However, they are ever more intolerably authoritarian than capitalism. Capitalists at least offer the promise of growing the economic universe alongside themselves - you can get 10x richer by taking 50% less profit in some businesses. But fascists, criminals, and dictators also play this game - not to create wealth and grow the size of the pie, but to shrink it so their share gets bigger. And without a government to enforce rules, capitalists will be out-moded, out-gunned, and out-played by thieves of various stripes every time.

Making this worse is the fact that Bitcoin mining is inherently and deliberately zero-sum. It has to be, because it pays in inflation (block subsidy) and confiscation (transaction fees). So capitalists can offer no wealth creation here.

In other words, Bitcoin is how authoritarians trolled right-libertarians into building and buying into a system that creates the thing they hate.

A deflationary system awards each market participant with an equitable increase of purchasing power relative to the increase in demand for earning more units through value creation. I'd imagine that would shift some social responsibility from being more centralized to being more decentralized. The Gini Index over time has only been trending up toward 100, signaling a growing environment of inequality. Having said that I do believe that we tend to oscillate between central and decentralized governance of social responsibility and technology innovation around how we transfer value (money) enables a shift away from one end of the spectrum.

> A deflationary system awards each market participant with an equitable increase of purchasing power relative to the increase in demand for earning more units through value creation.

What do you mean? Holding a currency involves zero value creation.

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