6 ms·

In Defense of Proof of Work

15 points by sword_smith 4y ago

sword_smith 4y ago
Many share the conviction that proof of work mining is a relic of the past, that the future of blockchain lies with its competitor, proof of stake. I attempt to rebuke some of the criticism that proof of work faces and argue why it is here to stay.
- arcticbull 4y ago
  They're both bad, and they both have their own problems. You know what solves it? Trust and a legal system. Time to throw this failed experiment into the dumpster and move on.
  - sword_smith 4y ago
    The current US inflation rate is 8.5 %. In Argentina its 55.1 %. Since the founding of the Federal Reserve in 1913, the dollar has lost 97-98 % of its value. How's that trust working out for you?
WaxedChewbacca 4y ago
trevelyan 4y ago
Saito consensus is simply superior on the cases author identifies. You can still use hashing to ensure fair payments without spending 100 percent of the block reward on it. Is the binding of the payment to the act of producing blocks which is the real problem.
arcticbull 4y ago
> The significant amount of electricity consumed by the mining process does not in itself emit CO2. Yes it does. [edit] Not only in the sense that you have to build the solar panels, build the wind farms, build the mining rigs, then throw out 97% of the mining rigs (!!) without them ever having validated a single block. [1] But also in the sense that any additional proof-of-waste operations run on the side steer that renewable energy generation away from productive applications on the grid -- failing to help decarbonize the grid, something we desperately need to do. [1] https://mobile.twitter.com/DigiEconomist/status/1438896477590409227 https://mobile.twitter.com/DigiEconomist/status/143889647759...
- sword_smith 4y ago
  Negative electricity prices is an increasingly common phenomenon due to an increasing supply from electricity sources whose output can't be controlled, i.e., wind and solar. Proof of work mining sets a floor under electricity prices, as mining can be spun up when prices are low. This means that proof of work acts as a subsidy for wind and solar, and increases the proportion of the total power production that can be delivered from these sources.
FargaColora 4y ago
Almost surreal reading this. The article suggests that energy consumption does not need to be considered because hydro-electicity exists. It's a fantasy that ignores any sense of economy, science and politics.
- BaseballPhysics 4y ago
  > It's a fantasy that ignores any sense of economy, science and politics Welcome to the world of crypto!
tromp 4y ago
While environmental damage is a serious downside to PoW, the alternative of PoS has some serious downsides as well: 1) It's not a fair coin distribution mechanism. A coin that launches with PoS has the creators holding the entire supply. 2) It's not objective. Resolving long range attacks requires social consensus on what is the correct chain (https://academy.binance.com/en/glossary/weak-subjectivity https://academy.binance.com/en/glossary/weak-subjectivity) 3) It's much more complex. I believe that the downside of PoW can be greatly reduced by having the emission be purely linear (fixing the block subsidy). Taking 20 years to reduce the yearly supply inflation to 5% will strongly discourage speculation and keep the price low, in turn limiting miner energy use. It would encourage use as an actual means of exchange / currency.
- arcticbull 4y ago
  I would argue that proof-of-work and proof-of-stake converge to the same thing, at the limit. In the proof-of-work model, a few folks make a lot of money (either by being in the right forum in 2009, rugging a community or lord forbid by actually doing something productive for society). These folks then go and buy shares in a mining pool using the PoW coin. These shares are basically the same as staked coins. They can go back and un-stake them at any time by selling. As owners of the pool, their largesse grows as transactions are validating and block reward accrues conceptually to them. This is conceptually identical to a proof-of-stake system where a few folks make a lot of money (either by being in the right forum in 2013, rugging a community, participating in a presale, or lord forbid, doing something useful for society). These folks then stake their tokens. As stakers, their largesse grows as transactions are validated and staking reward accrues to them.
  - tromp 4y ago
    > In the proof-of-work model, a few folks make a lot of money That's more a consequence of the poor emission curves that were chosen in the past. Practically no-one has made money on a linear emission PoW coin. > These folks then go and buy shares in a mining pool using the PoW coin. The mining pool sharing business is fraught with scams. Most bona fide pools require miners to operate their own rigs.
dale_glass 4y ago
I see some issues. We can discard Hydro pretty much immediately. There's not a lot of it that's sitting unused, there's not much opportunity for growth. If there was this much wasted energy, the problem would be solved already. If the price went negative really often, that'd be a perfect business model for building some storage. Storage on the whole should be simpler than a mining farm. Putting extra megawatts into a pump or electrolysis is a relatively simple proposition. The computer hardware needed to burn that power on demand is far more expensive and complex. Mining can cross borders, but cryptocurrency usage much less so. Yes, you can mine all you want across the border, but as governments sour on crypto they're going to make it much harder to transact in it. And your crypto isn't good for much if you can't sell it and get $ or Euros in your bank account. The countries most amenable to this kind of thing are not all that profitable. They've got weak economies, bad governments and bad infrastructure. They're also easily pressured by wealthier countries, so they can't do whatever they want. Long term if this worked it'd lead to centralization. Once you find some optimum -- which is probably a company that produces solar panels around the equator, they win the game and are hard to out-compete. And of course, in the end this is still all a pointless waste. It's still countless video cards, solar panels, ASICs, and other hardware being piled up higher and higher to just keep up a global competition going that doesn't really achieve any improvement. It doesn't add capacity, it doesn't improve speed, it doesn't solve any practical problems. It's just an arms race where you need an extra tank because the other side made another one.
- sword_smith 4y ago
  Energy storage is the deus ex machina solution that's always thrown around when real engineering concerns about the problem of electricity sources whose output you cannot control are presented. I might as well flip your argument on its head: if it was as easy to store energy as you propose, then electricity prices would never become negative. Government is an abstraction that might make us blind to the fact that political decisions are made and enforced by actual people. The more economic power that crypto currencies amass, the bigger a threat they become to big government's taxing abilities, yes. Granted. But at the same time it also affords its supporters more lobbying power. I think governments face a prisoners dilemma in this regard: most governments might be better off if they all banned crypto currencies. But even better off if only their neighbors banned them and they allowed them, so they would get an influx of people and businesses making money in this sector, and they could tax these individuals. Think e.g. Crypto Valley in Switzerland, or Bitcoin enthusiasts visiting (or moving to?) El Salvador. And we all know how the Prisoner's Dilemma plays out in the long run: to the detriment of its actors. And to you last points: ask modern day Venezuelans or North Koreans whether it's a waste to have sound money that can't be inflated by the whim of self-serving autocrats. Or ask a German citizen that was alive 100 years ago if sound money is a waste of resources.
deleted 4y ago
[deleted]
piva00 4y ago
In the end, a lot of the value of PoW cryptocurrency comes from the burning of energy it takes, let's get last year's 110 TWh for Bitcoin, at US$ 0,10/kWh we get US$ 10b burnt in electricity just to sustain PoW...
theocs 4y ago
Even if all PoW energy came from renewable sources, it's extremely wasteful and I'm sure we could have used that energy on something more productive. That's not to say the allocation mechanism in PoW isn't interesting, but that's not really good enough in itself. I've been experimenting with energy limited PoW, something called NuPoW [1], that reduces the reward if too much energy is collectively used. But this only works if you outsource the security to an underlying chain. [1] https://nupow.fi/whitepaper/ https://nupow.fi/whitepaper/
- sword_smith 4y ago
  The ever more prevalent phenomenon of negative electricity prices is a market signal that the energy could not be used more productively. If it could, prices would never be negative.

15 points by sword_smith 4y ago

Many share the conviction that proof of work mining is a relic of the past, that the future of blockchain lies with its competitor, proof of stake. I attempt to rebuke some of the criticism that proof of work faces and argue why it is here to stay.

arcticbull 4y ago
They're both bad, and they both have their own problems. You know what solves it? Trust and a legal system. Time to throw this failed experiment into the dumpster and move on.
- sword_smith 4y ago
  The current US inflation rate is 8.5 %. In Argentina its 55.1 %. Since the founding of the Federal Reserve in 1913, the dollar has lost 97-98 % of its value. How's that trust working out for you?

WaxedChewbacca 4y ago

trevelyan 4y ago

Saito consensus is simply superior on the cases author identifies. You can still use hashing to ensure fair payments without spending 100 percent of the block reward on it. Is the binding of the payment to the act of producing blocks which is the real problem.

arcticbull 4y ago

> The significant amount of electricity consumed by the mining process does not in itself emit CO2. Yes it does. [edit] Not only in the sense that you have to build the solar panels, build the wind farms, build the mining rigs, then throw out 97% of the mining rigs (!!) without them ever having validated a single block. [1] But also in the sense that any additional proof-of-waste operations run on the side steer that renewable energy generation away from productive applications on the grid -- failing to help decarbonize the grid, something we desperately need to do. [1] https://mobile.twitter.com/DigiEconomist/status/1438896477590409227 https://mobile.twitter.com/DigiEconomist/status/143889647759...

sword_smith 4y ago
Negative electricity prices is an increasingly common phenomenon due to an increasing supply from electricity sources whose output can't be controlled, i.e., wind and solar. Proof of work mining sets a floor under electricity prices, as mining can be spun up when prices are low. This means that proof of work acts as a subsidy for wind and solar, and increases the proportion of the total power production that can be delivered from these sources.

FargaColora 4y ago

Almost surreal reading this. The article suggests that energy consumption does not need to be considered because hydro-electicity exists. It's a fantasy that ignores any sense of economy, science and politics.

BaseballPhysics 4y ago
> It's a fantasy that ignores any sense of economy, science and politics Welcome to the world of crypto!

tromp 4y ago

While environmental damage is a serious downside to PoW, the alternative of PoS has some serious downsides as well: 1) It's not a fair coin distribution mechanism. A coin that launches with PoS has the creators holding the entire supply. 2) It's not objective. Resolving long range attacks requires social consensus on what is the correct chain (https://academy.binance.com/en/glossary/weak-subjectivity https://academy.binance.com/en/glossary/weak-subjectivity) 3) It's much more complex. I believe that the downside of PoW can be greatly reduced by having the emission be purely linear (fixing the block subsidy). Taking 20 years to reduce the yearly supply inflation to 5% will strongly discourage speculation and keep the price low, in turn limiting miner energy use. It would encourage use as an actual means of exchange / currency.

arcticbull 4y ago
I would argue that proof-of-work and proof-of-stake converge to the same thing, at the limit. In the proof-of-work model, a few folks make a lot of money (either by being in the right forum in 2009, rugging a community or lord forbid by actually doing something productive for society). These folks then go and buy shares in a mining pool using the PoW coin. These shares are basically the same as staked coins. They can go back and un-stake them at any time by selling. As owners of the pool, their largesse grows as transactions are validating and block reward accrues conceptually to them. This is conceptually identical to a proof-of-stake system where a few folks make a lot of money (either by being in the right forum in 2013, rugging a community, participating in a presale, or lord forbid, doing something useful for society). These folks then stake their tokens. As stakers, their largesse grows as transactions are validated and staking reward accrues to them.
- tromp 4y ago
  > In the proof-of-work model, a few folks make a lot of money That's more a consequence of the poor emission curves that were chosen in the past. Practically no-one has made money on a linear emission PoW coin. > These folks then go and buy shares in a mining pool using the PoW coin. The mining pool sharing business is fraught with scams. Most bona fide pools require miners to operate their own rigs.

dale_glass 4y ago

I see some issues. We can discard Hydro pretty much immediately. There's not a lot of it that's sitting unused, there's not much opportunity for growth. If there was this much wasted energy, the problem would be solved already. If the price went negative really often, that'd be a perfect business model for building some storage. Storage on the whole should be simpler than a mining farm. Putting extra megawatts into a pump or electrolysis is a relatively simple proposition. The computer hardware needed to burn that power on demand is far more expensive and complex. Mining can cross borders, but cryptocurrency usage much less so. Yes, you can mine all you want across the border, but as governments sour on crypto they're going to make it much harder to transact in it. And your crypto isn't good for much if you can't sell it and get $ or Euros in your bank account. The countries most amenable to this kind of thing are not all that profitable. They've got weak economies, bad governments and bad infrastructure. They're also easily pressured by wealthier countries, so they can't do whatever they want. Long term if this worked it'd lead to centralization. Once you find some optimum -- which is probably a company that produces solar panels around the equator, they win the game and are hard to out-compete. And of course, in the end this is still all a pointless waste. It's still countless video cards, solar panels, ASICs, and other hardware being piled up higher and higher to just keep up a global competition going that doesn't really achieve any improvement. It doesn't add capacity, it doesn't improve speed, it doesn't solve any practical problems. It's just an arms race where you need an extra tank because the other side made another one.

sword_smith 4y ago
Energy storage is the deus ex machina solution that's always thrown around when real engineering concerns about the problem of electricity sources whose output you cannot control are presented. I might as well flip your argument on its head: if it was as easy to store energy as you propose, then electricity prices would never become negative. Government is an abstraction that might make us blind to the fact that political decisions are made and enforced by actual people. The more economic power that crypto currencies amass, the bigger a threat they become to big government's taxing abilities, yes. Granted. But at the same time it also affords its supporters more lobbying power. I think governments face a prisoners dilemma in this regard: most governments might be better off if they all banned crypto currencies. But even better off if only their neighbors banned them and they allowed them, so they would get an influx of people and businesses making money in this sector, and they could tax these individuals. Think e.g. Crypto Valley in Switzerland, or Bitcoin enthusiasts visiting (or moving to?) El Salvador. And we all know how the Prisoner's Dilemma plays out in the long run: to the detriment of its actors. And to you last points: ask modern day Venezuelans or North Koreans whether it's a waste to have sound money that can't be inflated by the whim of self-serving autocrats. Or ask a German citizen that was alive 100 years ago if sound money is a waste of resources.

deleted 4y ago

[deleted]

piva00 4y ago

In the end, a lot of the value of PoW cryptocurrency comes from the burning of energy it takes, let's get last year's 110 TWh for Bitcoin, at US$ 0,10/kWh we get US$ 10b burnt in electricity just to sustain PoW...

theocs 4y ago

Even if all PoW energy came from renewable sources, it's extremely wasteful and I'm sure we could have used that energy on something more productive. That's not to say the allocation mechanism in PoW isn't interesting, but that's not really good enough in itself. I've been experimenting with energy limited PoW, something called NuPoW [1], that reduces the reward if too much energy is collectively used. But this only works if you outsource the security to an underlying chain. [1] https://nupow.fi/whitepaper/ https://nupow.fi/whitepaper/

sword_smith 4y ago
The ever more prevalent phenomenon of negative electricity prices is a market signal that the energy could not be used more productively. If it could, prices would never be negative.