POW Versus POS


#1

Finally got around to updating the above spreadsheet.
I created 2 theoretical investment strategies, 1btc split up evenly among several POW cloud service providers and 1btc split evenly among several POS coins. Here are my findings.

Maintenance fees for POW I based on what the provider charges in usd and converted that to btc with the current exchange rate. POS fees I didn’t account for. Why? Because 1 raspi barely pulls 1 watt or less when idle, and it costs the same to stake 1 coin as it does 1mm or 10mm, as you invest more, your already near 0 % fee drops even further. If you chose to use a desktop that stays on 24/7 anyway, you aren’t paying anything extra over your current power costs.

The #'s.
I based the POS earnings in the current exchange rate to BTC, I plan on adding the math to account for an average % drop in value against btc for the same average time frame as difficulty increases for BTC POW.

1 BTC invested in cloud mining will currently net you
0.003348/BTC In daily payouts at the current difficulty after an average of 68.18% was taken for fees.
1 BTC invested in POS coins will currently net you
0.005912/BTC In daily earnings if you cashed them out at the current exchange rate, virtually no fees to run a raspi or a desktop that stays on 24/7 for media streaming or gaming, etc.

The winner? POS by a long shot.
POS doesn’t have any real minimum to get involved, IE, you can take 10$/week from your paycheck and buy a variety of coins to build up your staking balance across multiple coins.

You have access to your investment at all times, with POW some sites let you sell your GHS, usually at a much lower price than you originally paid, Others don’t offer the option at all.

If you let your stake compound, over time your average cost per coin drops and your more likely to sell it at a higher price than you paid for it, of course this is not guaranteed.

Does this mean that POW is worthless? Not in my opinion, POW is here to stay for the time being until POS proves itself to be better in every way, including security.

*The above was brought to you by Crypto Stake Coin, the crypto communities first fully managed POS backed smart asset hedged with POW.


#2

So comparisons eh? Well I like the POS no hardware aspect as I have limited resources. If I could have mining equipment that I wanted. Lots of freedom with mining.

Both aspects take their own time-frame to return dividends. Both methods end in one pile which is BTC. A school of thought I have seen on a certain exchange is that POS coins are made for the dumping. I don’t think this covers the spectrum of POS. Some POS like HYPER and GAIA have an end purpose. Some POS are just for ■■■■, but there are a few purposeful coins. In the end most other coins depend on BTC.

BTC can be gained directly without trading.

I do like the POS concept though. I like the “interest earning bank account” feel. Makes me feel even more control of my money.

I don’t know. Each have their good points


#3

I’m still letting things percolate in the back of my brain on these two earnings methods. I’m leaning towards four term logic for the answer, rather than a simple binary y/n. When you add “neither” and “both” as possibilities it takes you to a different place entirely. More on that when the ideas start bubbling up together :wink:


#4

This is the correct answer. While I personally believe that a version of pos will supplant pow some time in the future, pow is here to stay.


#5

I prefer POS myself, It dont feed the hardware supplyers all the profits and leave miners still broke, no arms race for the fastest hash, less scams (from undelivered/late hardware).

POW is fine also if you need your house warm. have free power, or like to tinker.

To each their own.


#6

POS is ultimately a better solution for a number of reasons, green, efficient etc but its weaknesses will remain until such times as a coin gains large scale use/support straight from the off.

So, for example, TescoCoin would work as they would have immediate network effect through the stores all beings main nodes. That kind of thing.

And of course the biggest issue with POS is distribution, in the above example they could just swap Clubcard points for an amount of coins/tokens in a smart phone app and bingo, solved.

New currencies, from scratch stand very little chance IMO unless they are backed by mega bucks or have been around since 2009 …


#7

I have been wondering for quite some time when the first retail stores would start doing this. It would eliminate the transaction fees from visa/mc/etc. They could use the coin for loyalty points and store prepaid funds. They could even offer a discount for buying the store coin, say 95c on the $ or something to give people an incentive to use the coin over cash/credit/debit.

I go could on, but I need coffee.


#8

We are approaching a few companies to do just this :wink:

No guarantees of success and don’t buy our stock on the strength of my statement!! LOL

I’ve learned many things in this business and counting chickens too early rarely has positive result hehehe

But, don’t ask, don’t get so we call them, talk about it and we wait and see… it IS the future after all, we know it’s coming!!


#9

Yep, sales is all about the #s you approach. You can have a 1% success rate, but if you hit 1k doors you will make 10 sales.


#10

I look at these from a financial point of view.

PoS is like making a deposit at the local bank, where the proceeds are basically treated as interest. As with PoW, this is only worthwhile when there is something supporting the coin, such as wide-spread merchant adoption. Otherwise, PoS creates only inflation which has a compounding affect on price reduction in the marketplace. The rate of inflation is typically controlled in the design of the coin (except in the case of XPY apparently). In other words, you do not suffer a two prong inflation from both mining and staking. The main regulating factor is supposed to be the difficulty rate, which tapers yields as the amount of coinage grows. However, you can restake yields in this environment, which increases net compounding. Inflation is created by both initial staking and re-staking of proceeds.

PoW has only one element of affect on coin inflation, but it is not regulated nearly as much as PoS. Regardless of difficulty rates, the rate of inflation is dependent upon the amount of hardware being expended to solve blocks. There is only one element causing inflation and that is the speed at which coins are created through the solving of blocks. Unlike PoS, there are no coins created through “investment” of the coins themselves. The only influencing variable is the rate at which mining grows. Although the difficulty rate is tied to the overall amount of hashing power on the blockchain, it cannot be capped to a set rate over a predefined period of time. In effect, with the right amount of hardware mining, you can mine all of the coins in a shorter period of time, being completely driven by total hashing power applied.

Both PoS and PoW activities are price sensitive, one more than the other. If the price is near zero, both production rates drop precipitously. If neither have merchant adoption, or cannot be readily traded for other usable cryptos, then production rates will eventually approach near zero.

PoS = Inflation rates set in the blockchain (staking rate). Inflation affected by compounding. Low sensitivity to market price. Lower staking activity as market price of the coin rises. Higher staking rates as the price of the coin falls.

PoW = non-compounding or straight line production. Inflation rate is dependent upon hardware investment levels. High sensitivity to market price. Amount of hardware investment is proportional to the price of the underlying coin. The higher the market price of the coin, the higher the hardware investment rate.

Just my two cents’ worth. :smiley:

Edit: Swapped Higher with Lower, and vice versa, in PoS


#11

interest rates in POS coins is, in my view, a joke as a rule.

They’re usually created with very little economic understanding and are frequently used as a means to deliver BTC into a Devs pocket.

A useful POS coin in my view would be configurable on the fly, non destructive to this economic model and closed enough to allow this to happen in such as a way as to be meaningful. Using my TescoCoin as an example, this methodology works well.

Blackcoin, to my knowledge, is about the only coin out there where the interest rate was a key consideration and even now is discussed. BLK was and still is a leading POS coin in my view. Yes it has issues, one Dev (single point of failure), a now defunct/ineffective Foundation and distribution that’s not wide enough for the real world, but from a technology view its great and is an example of what is possible.

So, a peoples coin that has the network effect of TescoCoin but the sleeker tech such as BLK, a bit of teamwork and some investment and you’d have a contender. Would I support it on my BTC platform? No. Same as I wouldn’t support any Alt at this time.


#12

The other big difference is that POS will inflate at a slower rate if people keep their coins offline or on an exchange/in a wallet that doesnt support staking. POW will inflate at the preprogrammed rate regardless of whether the network is 1 machine or 1000.

My take? The coins that either went from POW to POS or are a hybrid are the most legit in my eyes. Not counting the 99% premine, short pow life, etc. You know who i am talking about. POW provides the fairest distribution possible on a coin launch, migrating to POS then provides guaranteed network support as long as your coin and devs have something to offer.


#13

This is a very big concern when I look at POS coins to support. I like the idea that nxt and clam are doing, pay 1 coin per block minted, this not only keeps the inflation monster at bay it also decreases the inflation rate over time as the coinage grows in size. BLK is not the only coin that has concerned inflation, PPC has a negative inflation rate iirc, if not negative its damn near break even. No matter what coin we are discussing if a large # are sitting in an exchange or an offline wallet then the inflation rate isn’t X% of the total coins, its X% of the coins actively minting.

POS is the only viable option for store coins as you have rightly pointed out. With a store coin, they could rightfully do a 100% premine before they launch to the public. If a store that I use frequently or would use paid even .5% to support the network, I would. I would love to be able to spend crypto at a local store, even if that was their coin and from their own app.


#14

I would say that this applies to all cryptos presently, because they create the coin without first ensuring a vibrant and active merchant marketplace.

Creating a coin for the sake of the coin is economically similar to Venezuela or Argentina fiat currencies. The production rate is its own worst enemy. Moreover, certain premine only coins, such as XRP, are supposedly designed for a specific task or purpose. You can only “buy into” coins such as XRP. This works if there is an underlying incentive to participate. For the masses, there is not presently an underlying incentive to participate in XRP, for banks, possibly.

Again, without the understanding of economics being part of a coin’s design, there is no utility to be had. It always reminds me of this:

Edit: I will add this as well: Those wishing to create new cryptos need to sit down and actually determine what social need is being unfilled first. You define a market potential for any product, then build the infrastructure for the product to service the market demographic you are targeting. Without understanding the characteristics of markets, creating a product could be disastrous in the short and long-term.


#15

Im carefull most of the time, Im partial to BLK, and wont hold BTC because of the price lemmings. That being said I tend toward POS coins because i hate the “making just enough profit to get the next machine” treadmill.

I do wish more places took crypto for EVERYDAY use, but with the latest set of scams/fails that looks to be a long way off.


#16

This day is closer than you think. I will have to google to get the names, but a couple of major point of sale companies are adding or looking to add btc and others to their software. With everything going touchscreen and with the ease with which you can accept any combination of cryptos as a merchant, I don’t see it being very long before I am presented a scan qr or nfc option when checking out at the grocery store or target, etc.


#17

http://www.ingenico.co.uk/en/ is one


#18

Check the OP, finally did a basic breakdown and comparison of sha256 POW and POS. No need to do scrypt at the moment, its pretty much running in the negative no matter what coin your mining.

I know there is an issue with cex and the fact that they are suspended, not sure how to account for that in the sheet.


#19

This is not really completely accurate. Coinwarz gives you the basic calculation of profitability, reducing gross mining proceeds by the estimated electrical costs. Other than that, there are a number of alts that are very profitable, if you are willing to run a miner management program (pool switching) to switch the rigs from one to another scrypt coin. Also, I might add that historical trend analysis tells you which coins have long-term price stability. Even if a coin sucks this month, it may have a very stable long-term pricing history. You mine and hold until the average price is reached in the future. I will not say all alts have this, but many actually do. Furthermore, you have to account for the periodic “nut” being tossed out by the arbitrageurs (pump & dump), where there are periodic price spikes that you can take advantage of once or twice a month. :wink:

Can you tell I am a long-term investor? People seem to focus more on the short-term (dumping).


#20

This is all true. There is also the fact that there aren’t any legitimate or semi legit scrypt service providers. Genesis halted all scrypt mining, we know what happened to zen and scrypt.cc gives me the heeby jeebies.

If/when I do a comparison to hosting your own hardware, I will likely also add x11 and other gpu algos as well. For now, the cloud mining is most apt because the average person can throw 100$ at genesis-mining, but you can’t find locally hosted hardware for less than a few hundred, plus you have to cover PSU costs, setup, etc. With POS, if you can send email, you can get staking.