Proof of Stake Uber Alles!
There’s a really simple and powerful reason proof of stake is going to explode with the mainstream: it fulfills a long-held dream of computer users to run a piece of software and have it make money for them without having to do anything besides run the software.
In practical execution, the more funds one spends to gain a position in a proof of stake ecosystem the more one stands to make over time. It is not a ponzi, it is a reward for processing blocks on the network. The trick is to give that network value *before* the public comes.
It’s also a lottery, so payouts aren’t on any sort of predictable schedule but the amount one is owed is a matter of time it takes. There’s no loss for smaller participants, only the amount of time it takes to achieve their payout. If it takes 10 years, you get 10 years of interest. That interest is paid out no matter if the government changes hands or if your bank goes insolvent. The blockchain keeps moving until the world ends. You keep making money until the world ends. That’s the power of proof of stake.
If being a store of value is a potential property of a cryptocurrency, proof of stake cryptocurrencies are naturally superior to the average consumer. Would you rather spend $100 to get 0.001 BTC just to spend it or $100 to get 0.001 of something else that next year is 0.00104?
At scale this effect becomes more profound, as casual participants are then incentivized to support the use case even if they don’t actually understand it. They still get their annual 4% as long as the sun still rises… and there’s still an ecosystem to justify a market price. Building that ecosystem, to justify that market price, which justifies the participation of normies has been the most difficult challenge of my career, bar none. We built it for Tao from scratch in our garages and without VC funding.
Now there’s 100 people on the network staking coins, competing for a rare 192 blocks per day, and the competition is only going to increase from here because the public has only the barest inkling of what we’ve actually built.
In a proof of stake network such as Tao, there are no “useless eaters.” Every node creates new value and it doesn’t matter if you’re some person in Indonesia staking coins, an exchange offering a market platform, or a wallet provider. Suddenly every node matters.
Proof of stake isn’t perfect. It does pose its own challenges, however it is a superior design to proof of work in many aspects which are in fact important to both consumers and technologists, like it or not. As I’ve discussed on Twitter in public with the folks from UIUC who created the most comprehensive study on proof of stake every produced, their own work concedes that every single vulnerability they exposed is a matter of a failure of network design best practices. As we’ve seen with currencies like Verge, a failure of design best practices can lead to network exploits in proof of work as easily as it can in proof of stake, however the impact of those best practices in proof of stake are distinctly less well understood.
What we also know is that execution is as important as code, and there’s a wealth of information regarding what not to do if one knows where to look for it. I suppose the final word on the viability of proof of stake at scale has yet to be written, but given the current quality and depth of discourse I’m quite sure that it won’t be written by any coin currently in the Top 50 on CoinMarketCap.
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