PoW vs PoS: who can maintain a long life?

Author: Jan

Cost paradox

The value provided by block chain technology is centralization security, and security can be measured by attack cost. How high is the cost of a chain attack and how safe it is.

The product provided by the consensus node of the block chain is secure, and the consensus node is the producer of the network service. We also know that there is a basic law in economics. In a perfectly competitive market, the marginal revenue of producers in equilibrium is equal to marginal cost. That is to say, if the consensus algorithm of block chain creates a perfectly competitive market, how much production cost will it provide?

Attack cost = safety = production cost

How much marginal cost does it require to provide marginal safety? Now PoS tells us that we can provide the same amount of safety, but it costs only 10% or even 1%, wouldn’t it be strange for you? Why did PoS break the economic rules so easily?

One case is that the actual cost of PoS of the same security level is the same, but only part of it is hidden. Take DPOS as an example. If you want to do Validator, you need to collect enough votes for yourself by some methods and enter the list of the first X Validator. What is the cost of collecting enough tickets? Is the cost the same for different people / organizations? If not, is it a good thing or a bad thing? Is the cost a public information? If it is not a public information, is it a good thing or a bad thing?

I like the saying:

Financial institutions make people feel safe by hiding risk behind layers of

It is the PoW’s characteristics to expose costs in the clearest way to everyone.

PoS is not a real Permissionless.

Another case is that PoS did not create a fully competitive market.

In PoS, the consensus group in the future is determined by today’s consensus group. Any new node who wants to participate in a consensus needs to be realized through at least one transaction (e.g. mortgage, vote, etc.), and whether the transaction is processed is determined by today’s consensus group. They can handle the transaction or not deal with the transaction. If we do not deal with this transaction, the new node will never be able to participate in the consensus. At the same time, “not dealing with transactions” is a disguised and difficult punishment. I have not yet seen a solution to this problem in a consensus agreement. PoS often assigns block proportions (not related to the number of nodes) according to the weight of Stake. Taking into account the concentration of stake in most systems, this is a very practical problem.

PoW is a thorough Permissionless. Whenever you like, you can buy mines and power to join the blocks, and no need for any kind of permission from today’s miners. You may say, I still need to buy mines and electric power. Is this a form of license? Yes, from a lower level, this is also a license. Unfortunately, in all Proof of XXX, this is the most decentralized form of license. After all, the degree of de centralization of mine production and power resources is much higher than that of Tokens. We should always try to centralization as much as possible, otherwise we can use the centralized system.

Someone may ask: if you design a transaction that you don’t need to send to the chain, if Token puts it there, you can participate in the consensus PoS. Do you solve the problem?

This brings about two problems:

1, if Token can be put there to participate in the consensus, it means that users have no commitment to participate in the consensus, do not participate in the consensus, there is no cost and punishment (users may not have been on-line at all), such a consensus is very difficult to design.

2, there will be the problem of Nothing at Stake. There will be no more words here.

Layer 1 must use PoW

Layer 1 is the foundation of the encryption economy, and the block chain that bears the role of Layer 1 must be a network without permission, because Layer 1 must be a shared and neutral facility all over the world, just like the Internet, and “needing permission” means that it is controlled by a certain group of people and is fundamentally conflicting with this goal. From the above analysis, we can draw a conclusion that if we want Layer 1 to be centralized and secure as much as possible, Layer 1 will have only one option for PoW. PoS is not useless, but just not suitable for Layer 1.

For PoW vs. PoS, the discussion continues: https://talk.nervos.org/t/pow-vs-pos/1732

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