USDC and DAI are both collateralized and doing fine at the moment and can operate as a decentralized currency and payment rail.
It is never 100% risk free, though. The best way to maintain peg to dollar is just to hold the dollar. Many stablecoin holders are taking on this higher risk as they seek yield in protocols like Aave and dYdX, or to have ready liquidity to deploy this in the crypto investment market.
Similar to how PoW distributes rewards: those with the capital to purchase mining power will reap benefits.
This model unfortunately also exists in stock markets and most aspects of a capitalist society. Arguably PoS returns in crypto networks may be slightly more equitable long-term as it is not a permissioned and closed-door system (validator queues cannot discriminate based on class, race, credit score, region, and family for example).
If you have significant fiat capital you can easily purchase mining power in PoW. Similar with purchasing validator power in PoS. The two are equal in that regard. Where they differ is that PoS is more resilient to 51% attacks of this nature than PoW is.
In PoW you can purchase miners. In PoS you can purchase validators. But PoS is easier than PoW to defend against a 51% attack as the offending validator set can be targeted.
Phone-a-friend consensus aka “weak subjectivity” doesn’t meaningfully differ from the administration of centralized Git repositories. If your blockchain requires human intervention to resolve disputes, as do all pure proof of stake implementations, you probably never needed a blockchain to begin with.
All blockchains require social coordination. How do you think Bitcoin operates? A protocol is developed and some facet of society decides to build a client to support that. Somebody adds a new BIP and the network of users may decide to coordinate in order to upgraded the protocol (soft or hard fork).
> All blockchains require social coordination. How do you think Bitcoin operates?
That’s a great question, and one Jude C. Nelson — who has a PhD in distributed systems from Princeton — is better equipped to answer [1] than me (or you, probably):
“PoW requires less proactive trust and coordination between community members than PoS -- and thus is better able to recover from both liveness and safety failures -- precisely because it both (1) provides a computational method for ranking fork quality, and (2) allows anyone to participate in producing a fork at any time. If the canonical chain is 51%-attacked, and the attack eventually subsides, then the canonical chain can eventually be re-established in-band by honest miners simply continuing to work on the non-attacker chain. In PoS, block-producers have no such protocol -- such a protocol cannot exist because to the rest of the network, it looks like the honest nodes have been slashed for being dishonest. Any recovery procedure necessarily includes block-producers having to go around and convince people out-of-band that they were totally not dishonest, and were slashed due to a "hack" (and, since there's lots of money on the line, who knows if they're being honest about this?).”
I haven’t looked through the entire thread but the challenge of recovering from a PoW 51% attack is that the attacker still holds ASIC mining power and can re-attack each new fork. The same is not true in PoS where the attacker’s funds can be targeted and effectively depleted in a fork, leaving it prohibitively expensive for the attacker to continually attack each new fork.
See the “spawn camping” description and defence in my prior link.
Several issues with using this metric to measure wealth inequality for crypto currencies, especially those with smart contracts like Ethereum.
- A single address might be a contract like WETH, which can hold tens of billions of dollars worth of tokens despite all users in the network having access to it. Similar with centralized exchanges holding many tokens. Addresses are not users.
- This metric often confuses “inequality of interest” with “inequality of wealth.” A user holding $10,000 of ETH and another user holding $100 of ETH may be in similar fiat-wealth brackets, but one is more interested & invested in crypto than the other.
- It is very easy to spin up a new wallet as it’s effectively just a random unique number. A single user might have 10-20 wallets with almost-zero tokens leftover, and all of their assets concentrated on one or two accounts, which further skews this stat.
- A number of tokens in the network are inaccessible due to being locked in a contract or sent to a burn address. The standard ETH burn address has $250M worth of tokens.
There is a lot of crypto disparity and inequality but this stat at face value is fairly meaningless.
The fact is still that the crypto sphere is even more unequally owned than the economy or the stock market, which is already extraordinarily unequal.
When I was first excited for bitcoin, it was because of its revolutionary capacity for people to transact without governments and banks, and to own and control that means themselves. Well that really hasn't panned out at all.
I'm sure this is true, but it's still not a good reason to put out bogus statistics. There are other ways to argue this point without hurting your credibility by lying about it.
> When I was first excited for bitcoin, it was because of its revolutionary capacity for people to transact without governments and banks, and to own and control that means themselves. Well that really hasn't panned out at all.
This has panned out. This is the exact reality of crypto right now. It has nothing to do with inequality whatsoever. Solving inequality has not panned out, but it was never expected to, nor possible.
Fortunately I live in a country where such thing is a big tabu. I only need to declare my gains (and only in case I'm holding less than a year) - and there are none if I am simply using BTC to send cash.
BTC has stayed the same price for the duration of my transfers. It's just a few hours most of the time. There is also allowance in the law for this case - I don't need to declare anything unless I profit over $1k/year.
I buy it when I need to transfer (usually using a Bitcoin ATM) and then transfer it immediately - and sometimes I deposit it to the target wallet directly.
> The fact is still that the crypto sphere is even more unequally owned than the economy or the stock market, which is already extraordinarily unequal.
What are the specific figures & sources you derived this claim from? Last time I looked into this it was somewhat surpising, but there are huge problems with the methodology (e.g. assuming that 1 address = 1 person is a really broken assumption)
Thanks for the link. The paper mostly only addresses one issue I that mentioned: attempting to distinguish intermediaries from individuals. It does not make any conclusions about how adoption of crypto as a whole will result in 100x more unequal wealth distribution than the regular economy which is what the OP tweets seem to be implying based on this 0.01% statistic.
The paper does point to the fact that holdings are skewed; 400,000 individuals control almost half of the circulating supply, so—like with the stock market—a very small handful of players stand to benefit if the price continues to appreciate significantly. This is particularly a problem for crypto currencies like Bitcoin that have a fixed supply capacity and are primarily used as a store of value. (Disclaimer: I own no BTC and feel it has inherent problems.)
Another study comparing Bitcoin, Ethereum and other coins to real world Gini coefficients finds similar results: that a small number of addresses hold a significant sum of tokens, but that overall wealth distribution in crypto currencies is often in-line with that of real economies.[1] The idea that crypto holdings mirror the wealth inequality of real economies is hardly surprising considering this is where the investors are coming from.
Two more interesting points raised by [1] worth noting:
> Results from both Bitcoin-like and Ethereum-like cryptocurrencies suggest that the wealth distribution is initially poor likely due to only a select few participants controlling the majority of the wealth. But this concentration often dissipates as more participants join the system, as observed in Bitcoin and Ethereum.
> Bitcoin-like coins often have capped supply, i.e., the number of these coins are algorithmically limited to a predefined quantity to provide intrinsic value to the asset. Ethereum, on the other hand, does not impose a strict limit on the supply of Ethers. ... Thus the figures reported in this subsection will likely change significantly over time, unlike Bitcoin-like currencies in which a large proportion of wealth is already distributed.
An invalid statistical argument that appears to support the truth is still invalid. Just like a proof for a mathematical theorem can be invalid even if the statement turns out to be provably true by other means.
Nobody is "denying wealth inequality" here either, the point is just that the headline statistic may be a bad way to measure wealth inequality in crypto.
There is no doubt crypto includes wealth inequality as the network exists within our capitalist society. If 10% of the world population were to purchase crypto today, it would mirror the same wealth inequality we see in our fiat economy.
But claims that crypto networks display 100x more wealth inequality is not supported by this statistic, and articles should not be basing their arguments on this stat without understanding the implications.
Mmmmhmmmm. Welcome to the User-Agent problem. Unfortunately, Society will take your idea and massage it until the rest of society "safely" (to their thinking) can make that assumption.
