$1.27 4.82%
ADA · 2w

Long term risk of Proof-of-Stake?

Hey All — I’m fairly new to the crypto scene, but have been doing my fair share of research and have come up against an issue I was hoping to discuss. Keep in mind I’m new to this, so apologies up front if my understanding is completely off base and/or this concept has already been discussed. Cheers. First, this idea originated after watching this Charles Hoskinson whiteboard on the merits of true PoS decentralization, particularly compared with PoW. Link here: My Understanding: PoW by nature of the relationship between price and time naturally evolves to a system of a few groups having the majority stake in a particular network. Charles explains that it now costs about $100M in hardware to profitably mine Bitcoin, a luxury that only about 10 groups now have. In short, “it takes money to make money”. On the flip side, PoS in theory democratizes authority in the network by decentralizing assets in stake pools. The more these pools are trusted, the more decision making they receive, the more benefits/rewards the stakeholders get. OK, makes sense... My Concern: Most stake pools I’ve looked into (not just for Cardano), offer a flat rewards percentage. Doing some compound interest math, it starts to become apparent that once again this concept devolves into the ones with more assets over time gaining more authority. Possible Issues/Risks: Someone with 50k ADA joins a stake pool and is joined up with hundreds of others who hold an average of 5k ADA. Rewards being equal (let’s assume 3%), compounded over time, the majority stake holder in this scenario dominates the security of the pool. You once again over time get into a scenario of “it takes money to make money.” What happens if the major stake holders leave the pool? Alternatively, what if major ADA holders decide to create their own stake pool, that dwarfs all others in market capitalization? Doesn’t this start to emulate PoW? Ideas/Thoughts: What if the algorithm *required* tier...
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