Quote from: bithic on January 23, 2014, 11:19:46 PM

Quote from: klee on January 23, 2014, 09:23:44 PM

"...

It seems to me that the distribution of wealth in a bitcoin economy can be altered much more easily in comparison to a 100% PoS coin economy simply because of the fact that spent coins do not somehow reappear in the wallet of the spender just because he happens to own a lot of coins.

..."

From a discussion in my FB page (I quote the other guy).
What are your thoughts?

Here's my take on it klee, complete with example economies.

That guy has some good thoughts, but he doesn't consider the fact that with PoW, due to economies-of-scale, it will always be easier for the rich to secure an increasingly greater percentage of the profit from mining. For example, the average joe will have to spend top dollar to buy one miner, but someone (or government/corporation) who has a lot of money can either buy them en-mass and receive a huge discount, or manufacture them directly at an even larger discount. This means that the little guy's slice of the PoW pie will get increasingly smaller because it will always cost him more to maintain his hash rate, while the rich who are already making a much higher ROI will always be able to maintain their advantage at a discounted cost.

In PoS the ROI is the same regardless of how much money you have. As a simple example, suppose we have a PoS network of 100 people, and they all have their accounts open for forging 100% of the time. The richest person has 5% of the total wealth, the poorest person has 0.01% of the total wealth, and everyone else has something in between. For simplicity's sake, let's assume this is a closed system and no new wealth enters the economy. Let's also assume the the richest person decides to be a "parasite to society and offer NOTHING back", i.e. he just sits on his 5% and collects fees from forging. Now, the poorest person doesn't have this option, so he decides to be industrious and starts a business that provides him a moderate amount of income that allows him to earn more than his cost of living/doing business. After one year in this economy the poorest person will still have no less than 0.01% of the total wealth thanks to the interest he earned on forging, and will in fact have gained wealth thanks to his successful business. Let's say he now owns 0.02% of the total wealth. Now let's look at the richest person. After one year of doing nothing except collect transaction fees from forging, he still owns no more than 5% of the total wealth thanks to the way PoS forging works. However, he had living expenses, so we must subtract that from his total wealth. Let's say he was wise and didn't exceed the amount that he earned from forging; however, when you subtract his expenses from his forging profits, his net income for the year is obviously less than 5% of all profit earned from forging that year. Since everyone else was also forging 100% of the time, this means he now has LESS than 5% of the total wealth in the system. Suppose this continues unchanged for the next 10 years. Each year the richest person has a little bit less, and each year the poorest person has a little bit more. This is just a little scenario to illustrate that in PoS, while the rich may be able to sustain their lifestyle by doing nothing but forge, their wealth will decrease over time so long as everyone is forging. Forging is a trivial task, so there is no reason why everyone shouldn't be able to forge. Who is rewarded the most in a PoS system? The industrious, just like in every other healthy economy.

Now let's take a look at a simple PoW economy. Again, let's suppose this is a network of 100 people, the richest person has 5% of the wealth and the poorest person has 0.01% of the wealth, and no new wealth enters the system. Lets be optimistic and assume everyone is committed to mining, and they all set aside 10% of their wealth to pay for mining hardware and electricity costs. The poorest person can only afford one of the newest ASIC miners, and since he is only buying one, he pays the full retail price. The richest person realizes that he can save a lot of money by manufacturing his own ASIC miners, and he can even sell some to the other members. So he sets up a nice little ASIC farm of 1000 miners for himself which he was able to finance for much less than full retail, and he pockets the money the poorest person and many of the other members gave him to buy one of his miners. So, at the end of the year, the richest person owns a large percentage of the 10% everyone set aside to pay for their mining costs, and he was also able finance and operate his miners much more cheaply, giving him a much higher ROI. So the richest person has earned much more than 5% of all mining profits for the year, and the poorest person has earned much less than 0.01% of all mining profits for the year. The poorest person is a pretty industrious guy though, so he has his own business which has enabled him to earn a small profit, and he's doing okay, and he might just be able to justify upgrading to one of the new model of ASICs that the richest person is releasing for next year. His neighbor is not so industrious though, and he is thinking he won't be able to afford a new mining rig next year. Obviously, the richest person in this example is also industrious, because he set up an ASIC manufacturing business, but this is an opportunity that is only afforded to the rich. Lets say his neighbor, who is not quite as rich, and not as industrious, simply bought 800 ASIC miners from him at a 40% discount rate from full retail, and then sat back and did nothing all year except to be a "parasite to society and offer NOTHING back". Well, he is still receiving a MUCH higher ROI than the poorest person who could only afford one miner at full retail.

So, your guy was right in saying "the distribution of wealth in a bitcoin economy can be altered much more easily in comparison to a 100% PoS coin economy". It can be altered much more easily in favor of the rich than a purely PoS economy.

I like PoS MUCH more then PoW without a doubt. Of course it's a good idea to buy ASICs and figurally "print money", but from the other hand, you are investing in hardware and power, doing nothing usefull. With PoS, you can use your investment in coins to generate an extra profit. I realy like this idea.

But, your example is "little" unfair. In first situation, rich guy is "parasite" just spending his money, but in second he is ASICs manufacturer, that is I believe is not the easiest business and I am sure that at least 99% of bitcoin holders would not be able to effectively control such enterprise. So you are compairing, let's say CryptoRockefeller's grandson spending millions on drugs, drinks and girls to a CryptoRockefeller himself)