Proof of stake rewards question

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Yup, and that 20K ADA is the only reward there is to be given out…

There are no remaining tokens, this is just inflation, the remaining tokens is just a smoke and mirrors game. All of these new tokens will get their value by stealing from the current, if they were all equally distributed out to us we would all still have the same. No one would be a penny richer. But they wont, and here is where the scheme comes in, they will land unequally in the treasury and mining pools.

This is why staking rewards are in actuality, negative, though if enough people dont stake, yes they will be positive for the stakers.

Cardano is absolutely great project, but it is not due to staking, the PoS model is the cost to run the network. If we could remove staking that would be awesome, because that meant we could run the network for free, but we cant, because we need it.

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22

I don’t want to disturb your discussion but it looks staking will last at least for 1 epoch (currently defined to 5 days)
You can spend durring the epoch but nobody can “double-stake” his earning on the ongoing epoch.

BTW: This raises the question whether large traders (I mean real use cases like an online shop and not day traders) will only pay their suppliers on the first day of each epoch, because they can then earn the rewards for the next 5 days.

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23

@werkof

good to know, thanks for chipping in.

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Holy cow @werkof that is some serious deep thinking game theory kinda stuff right there. Thanks for pointing that out.

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25

@rickymac

I dont know if we are on the same page yet…

But yeah Charles knew that the 20K ADA from low fees when no one was really using the network early on wasn’t going to be enough to fund the treasury or mining pools in 2020, that is just tiny drip in the bucket. So this inflation scheme was created instead, everyone gets more ADA, everyone is happy, the treasury gets funded, mining pools get funded, and not one in ten thousand will even know that they paid for it (through value reduction)

That also means even if the price goes up, it would just have gone up more had it not been for the inflation… That is why it is such a easy way to hide it into things - because people have such a hard time comphrending that concept…

It is a lot fancier than just withdrawing 2-6% (or whatever is needed) from our accounts to fund it, nobody would like that idea, even though it is the same. Just one way we know we paid, and what we paid, and the other way it becomes a complicated shell game of who foots the bill and how much.

Now what Ive also stated is that the ADA that goes to the treasury should be neutral or benefit us all, since it will be spend on improving the network and should generate ROI, that is at least the goal. So this will come back in form of price increase over the longer term. Its basically forced investment being made.

The only part that should evaporate is the mining pools electricity bills and hardware cost, that should be the only waste and true cost - as long as we keep the treasury efficient and not use it for stupid things.

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26

Now I get what you are saying. I had to put on my Ron Paul style thinking cap, but now I get it.

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27

Interesting discussion on staking and the impact of an inflationary system on price and psychology. Question for the group - what do you see as the greatest use cases for Cardano and what does that demand look like? I don’t see much value in staking or holding if the tech isn’t adopted (i don’t follow the investment thesis that cryptos are only good for trading).

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28

I don’t think you understand the dynamics here. Yes, I get it. You are saying that the network is effectively paying for maintenance through inflation. I would choose my words carefully here as you well know, no one who is staking will see his holdings “taken away”.

The sleight of hand you imagined here from Charles just doesn’t make sense. Here is why:

  1. True Incentives: Charles and Co. have a huge stake in Cardano. Their rewards will dwarf those earned through treasury if Cardano is a success. To suggest that Charles is using the platform to earn his keep as a developer is equivalent to saying: “Charles flies on expensive trips, because he likes the free peanuts”

  2. Accumulation of Value: Treasury money will be collected and spent on positive NPV projects. So, it’s not only just maintenance but also projects that add value to the network beyond the initial costs. It’s not a zero sum game. It is accretive to the whole network. Those who stake will benefit a great deal from them.

  3. True Network Costs: The calculation of treasury funds will amount to just a small portion of tx fees + inflation (20-25%). So if inflation is set at 2.5% you will be giving up 0.625% of your stake to make sure that network improves. For the amount of upside the network can generate as a result, if anything, it’s dirt cheap!

  4. Reputations at stake: Cardano is being developed by a network of PhDs and renowned cryptography/game theory, etc. academics around the world. As far as I know, these people wouldn’t lend their good name to a platform that is geared to defrauding people. In many cases we are talking about someone’s life’s work at stake. They have a say on how the network will distribute the value and I am sure they wouldn’t be ok with something that is intentionally designed to be unfair for the vast majority of stakeholders.

All of this actually is designed to improve the utility of network to generate maximum value for the stakeholders and the end users of the platform.

The end users will use ADA to power their private/public sideshains because these will ultimately be much cheaper alternatives to their current systems. That will generate enormous value for the end users, who will be happy to pay the tx fees to extract it.

This will drive the demand for ADA and push the price up in the markets to a true equilibrium. This will, in turn, encourage some stakeholders to sell their ADA on the open market, which will shrink the total stake thereby increasing the return on stakeholders.

Now multiply this across many hundreds of sidechains and you will see that Cardano will be absolutely HUGE! That’s how the system overall will create value and distribute it!

Peace :slight_smile:

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29

Ohh. I totally get what is going on here…

That is exactly what you will see, the so called “return” is a mirage and smoke and mirrors game. That will fool many people under a false premise, because it is not what it gives out to be… When we do the math yeah there might be an actual return, if a large chunk doesn’t stake, but again, its not the headline number that will be thrown around - sure you can say this is the fault of the user then (though this excuse wouldn’t hold up in any court)

Doing it through inflation is dishonest, there is just no way to argue it isn’t, none of your points argue against that either… But sometimes decisions like that have to be made for the greater good, cause we are competing with the same everywhere.

  1. Irrelevant, never said that. Though the only point to take away from that is that they are being deluded too, even though they have already sold a huge chunk in the market.

  2. I’ve already covered this, you are right, again this is the goal and only true with a efficient treasury… A chunk of it will go to waste, who knows what % that will be. Also you use the word “collected” and that is the whole point, it wont be collected, it will be funded through the depreciation of value of the holders… also what is worth noting the so ROI of investment would be coming in on the backend.

Eventually yes, when all the ADA is mined, it will finally just rely on collection.

  1. No, this is going to be much much higher. But lets play and say it was set to 2.5% and 25% goes to Treasury, and 10% to mining pools, thats 35%, that 35% has to make up for what the stakers have to take from the non stakers, for their staking to be positive. `Someone could do the math if interested.

  2. Well they are, cause they dont understand it. Academia knows nothing about economics. You could run the exact same scheme on them, and they wouldn’t know. Also never used the word fraud - because everything is technically transparent.

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I like how you never fail to present your “two first paragraphs of a wikipedia article” level knowledge about complex topics as something new or even profound. Do you understand how silly it looks from the side of anyone who knows at least anything? “Inflation causes equal decrease in value!!!” Yes, welcome to the 5th grade economics. There’s no conspiracy here, this is how things work. You are always welcomed to design your own system with no inflation and market will decide wether it is better or not.

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But it is not equally distributed, it is unequally distributed, which is exactly what I say.

Mining pools have no ADA
Treasury have no ADA.

They will not be inflated, they only gain, not by collection but from the newly minted tokens. That is where the scheme comes in, see you dont even understand it. The comment you stated proves that. That is why it is so smart, that even intelligent people have trouble grasping it.

There is no conspiracy in anything Ive said, it is absolute fact.

The only conspiracy element I guess you could pin me on, is that Charles knows what he is doing, but sure I might give him too much credit. But I believe he does, I understand the strategy, and it is a sound decision, but I still think at least the information should be out there, if people really want to understand how things operate.

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  1. Yes.
  2. Everyone knows it.
  3. There’s no scheme.
  4. THIS. IS. HOW. THINGS. WORK.
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@vantuz-subhuman

Ok I get your logic, so telling people they are going to make 5% return (knowing that most people will only understand this part) while in actuality, they will be paying for things or make a much lower return, is not a scheme. If you want to take that stance, go ahead.

Since you also used equal distribution as a argument, I actually also think you dont really understand the whole complication, maybe you do now, but not before. So you stating it as the obvious now, is kinda funny.

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Your arrogance is truly proportional to your ignorance. Ok. Stay woke. Peace.

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Here is another fact for you, inflation was never part of your staking rewards calculator for someone being so woke. Maybe it will be now after I’ve brought it up, at least that is progress :+1:

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You know what I meant - and it isn’t that.

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So I have an investing (staking) scenario and a question for both @vantuz-subhuman and @jb455 and any one else who wants to chime in, but you two are both very smart and hold opposing viewpoints.

Here is the scenario: Bob is a normal person, not a crypto-geek, and Bob has $100 left each payday to invest. Bob is familiar with stocks because they are well known and he recently heard of this cool currency from a family member called Cardano that he knows little about. Bob is presented 2 investment options:

  1. Buy a medium risk stock that has on average 6% ROI this year and has a long track record.

  2. Buy a high risk Ada that has an expected 2.5% ROI this year and has a short (but good) track record.

Which option would Bob the average person choose?

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@rickymax

But the return will come from capital appreciation not from staking.

Its like stock that doesn’t have a dividend, your return will be on capital appreciation. No one in their right mind would invest in ADA if the expected reward was going to be 2.5% ROI/Year at this stage… But you need to isolate the whole staking thing… Its not going to deliver rewards, in the future, sure if there are a high amount of fees yeah you will get a little extra, but it is not determining anyone’s investment decision…

The reward is capital appreciation, and if ADA succeeds, that will be many many X returns.

As long as Staking is paid by inflation it will deliver either a very very low return, and if more than 70% of people stake, it will most likely deliver a loss (you will just lose less than people who dont stake) depending on what taxes/mining pool fees are.

But the whole point in the future is that no one will really be investing in ADA, you basically just use ADA, or perhaps park some value in it. It wont be an investment, just like you dont invest in money. That is where the whole investment part comes in, that is being early you will capitalize on this revaluation but ADA will never be intended to be a investment vehicle…

It is only an investment in the way that you speculate on this reevaluation that will come, but in the future when this reevaluation has taken place, Its no longer a investment/speculative vehicle… If it achieves that, it will be more like a place where you can park some value, and make sure it isn’t inflated away… and those who bought in before that reevaluation, yeah they will make a killing should it succeed in that.

Staking is completely irrelevant to all of this, Its just something we need to do, and participate in. It will just be something that you are automatically involved in, in the future no one will be thinking of this, the wallets will prob automatically stake whatever is not being used. Those offering wallet software, will prob have it stake to their pools etc.

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@rickymac

a good analogy.

Buying ADA is basically like buying Oil before it can or was used for anything. If no one is going to use your the Oil in the future, well then you have a lot of oil on your hands. If people need it for gasoline, for running their cars and all kinds of others thing, then this oil has value. Most people dont invest in Oil, or even have this idea, they just use and have it, sure you could park some value in it (more would do that if it was ADA than Oil though) cause ADA is build with monetary features…

The idea is for ADA to reach Oil status, where the investment thesis is evaporated, now the product is finalized.

Now you wouldn’t be investing in ADA, but investing with ADA, then we know it succeeded.

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