Proof of stake rewards question

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I can’t see anything dishonest here. In my opinion the main problem with all @jb455 arguments (like “they will be pickpocketed” and “smoke and mirrors game”) is that he is blinded by the thought that he is for some reason ENTITLED to the value locked in the reserve.

There’s such thing as monetary policy. IOHK created their initial monetary policy and they have stated that:

  1. There will never be more than 45 billion of ADA coins
  2. ~14 billion of those coins are reserved in order to pay for the initial protocol execution

This monetary policy was transparent and available from day one. And anyone who buys a 1000 of ADA coins will possess 1/45 millionth of total supply, and will continue to possess 1/45 millionth of total supply always. The fact that part of this supply is temporarily locked does not mean anything. When people (at least relatively sane people) buy bitcoin they think how they now possess a portion of the 21 million supply. No one in their right mind will think how they possess a portion of the 17,090,800 supply, or 17,090,812.5 supply 10 minutes later, or 17,090,825 supply another 10 minutes later. Total supply is what matters.

So IOHK created this policy and said - the supply will be used to pay pools in order to motivate them to run our network (which is obvious), and also it will be allocated toward the treasury so ALL OF YOU get the right to decide how it gets spent. This is the whole point of the reserve and it is transparent from the very start.

Additionally IOHK say - YOU as stakeholders can also get some part of reserve money by helping to run the protocol. And in order to help run the protocol - you need to vote on pools, or run your own nodes. So you put your stake as a vote and you get additional coins for that. There’s no question whether this reward is bigger or lower than the “inflation”, since inflation will happen anyway, because this is how proper stable protocols are constructed. The only question here is that a user can allocate a part of this inflation to himself, by helping the protocol.

But then comes @jb455 and says: “this is bullshit, we don’t need inflation, the whole reserve should be allocated toward stakeholders so we get more value, the whole thing is a scheme, because if you get 1% of profit in a 2% inflation system then you’re in a loss.” Well, congrats on figuring out how basic economics work, but the existence of inflation is not a question. It will exist, since it is required by a realistic protocol. The question is how stakeholders are allowed to receive a part of this inflation to profit from it.

So as @Razvan completely accurately stated - stakeholder may buy 1000 ADA now, and have maybe 1030 ADA a year later just by holding it. Or he may buy 1030 ADA the year later. This is the whole difference. Existing of the inflation itself is out of the question here.

As I said earlier - anyone who does not agree with the selected monetary policy is very welcomed to create his own cryptocurrency of any kind, with or without inflation, and the market will decide - which one is better. This is the whole point of the “internet of money” after all :slight_smile:

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Bravo! Couldn’t have said it better myself.

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Just because it is transparent from day on does not mean it is correct. It may need to be voted into a different state or changed at some point. We may need to look as other people’s perspectives like @jb455 with out a jaded lens, as you seem to do. He may be right in some areas.

I work in the software industry as a trainer supporting the end users (and a tester and spec writer). I have seen on way to many occasions where the really smart people like the software engineers, including multiple people with PHD just get it wrong from day 1 and the end users just DO NOT want to use the software. When that happens, the end users just reject it and use a different software or they just go back to their old ways with the older software.

I have seen on at least 3 occasions where the software engineers thought they knew best, and thought they had the use cases properly laid out, thought had had good design, the thought they had a good UI, and all the math was vetted and validated. But the end users rejected it and there the software sits unused.

So what may appear to be good transparent monetary policy on Day 1 may need to be revised later based off of the user response and based on other peoples opinions and experiences as well.

Don’t get too locked in that Cardano got this right the first time. They are refactoring a heck of a lot of code already, don’t be surprised if they have to refactor their use cases and game theory.

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I am not locked on the monetary policy. It may be changed. My arguments was simply about how inflation is defined and why it is necessary. And how it is completely wrong to present it as something bad or even more so - as some secret scheme.

UPD: Btw, monetary policy IS revised, since IOHK is working on exact inflation and reward rates. And they are a part of the monetary policy. I just reckon they wouldn’t change the fact that there are ~14 billion coins reserved, and they wouldn’t change the fact that these coin are used to hire pools. Those facts are pretty essential.

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Of course I am not referring to the “secret scheme” stuff. I don’t agree with that at all. But his opinions on inflation, mining pools, and how rewards are distributed are fair enough.

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That’s a real risk in many traditional software companies. The beauty of Cardano is that we test our network with testnets BEFORE going live. Also, as was noted, once the network is up and running, it is up to us (the community) to chart the course for the project. We may end up firing IOHK and hiring IBM to complete the next stage of development or we may bootstrap it ourselves (just like linux has been kept alive). Whatever we decide, it will be our responsibility to make the best decision to grow Cardano and make it a really important pillar of global financial system.

I think Charles has an amazing vision. It will happen! Blockchain will evolve into a third generation of internet, with internal currency, no spam and the capacity to execute transaction at phenomenal speeds. Countries would need to hook up to our system to benefit from that and would have to use ADA to do what they want to do.

5 years from now, when the vision is realized, we will all be at awe with what it can do. I honestly think ETH and BTC may survive but will be dwarfed by the extent of Cardano’s network. They are good proof-of-concepts, but nothing more. Cardano is a serious project with serious applications down the road.

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Every software development community I know has done that for at least the last 20 years. Some of them still failed and no longer exist.

Edit : I want to add something funny to this. I am the guy who goes out to sometimes dark and dangerous places to verify the software is working correctly. You have no idea how many times I have heard these 2 phrases:

  1. “In theory it was supposed to do X”
  2. “Well it worked in the lab”
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I don’t understand what the argument on this thread is all about… The whole idea of a decentralized system is that individuals need to be compensated for their time and use of infrastructure resources. Who is going to pay this? Initially everyone who owns ADA will via inflation. As the network matures and more users come onboard, the network will be paid for with taxation alone. Where is the problem?

As I see it, the Cardano protocol gives you two options:

  1. Offer your own resources to contribute to the decentralization by running your own node.
  2. Pay a pool operator via inflation to run a node for you.

Everyone gets to choose between these two. If the first option is cost prohibitive based on your stake or technical expertise, then you will likely have to opt for the latter. At least in this POS model, the stake holders have the option/ability to maintain their percentage of stake in the system. This is much more difficult (if not impossible) in BTC, ETH, EOS, etc., etc… Yes, the inflation period will affect everyone, but once the network has real usage, then the users that put the most strain on the network will be the ones paying for it. This will be the most fair model that one could ask for.

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It’s a debate. It’s fun and thought provoking.

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The difference between your example and Cardano development is that market has already voted that it wants crypto in general.

If Cardano provides a better (read faster and infinitely scalable) and more secure network, why would anyone choose to stick with ETH or EOS?

From what I have seen, Cardano’s approach is based on science, that’s why it takes a while to get things up and running but the growth should become exponential once we are at cruising altitude.

IELE and KEVM testnets will open up crypto to the whole new categories of developers who never bothered learning solidity. I think it’s a compelling sell right there and no one has done it so far in this space.

But like you said, there could be unforeseen complications. Software development is always like that… the question is: will we as a community quit or keep chugging and reinvent Cardano’s proposition to get to a point where it is a big success. Companies lack resources to keep going. In crypto even the joke coins survive (dogecoin). Cardano has a lot of people with deep pockets vested in it and I don’t see it going away anytime soon.

We have till 2020 to see the results and make the choice. Till then IOHK has plenty of time to work with the community to create something that will truly add value.

In crypto time two years is a lifetime. We will see.

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Of course they are fair enough. Because all his opinions (if we exclude the conspiracy theory) are limited to:

  1. There’s inflation
  2. Pools are getting paid out of the inflation
  3. Treasury is getting funded out of the inflation
  4. Stakeholders are getting rewarded out of the inflation

All of these are fair points because they are plain and obvious truths. And then he uses these points to assume that the whole idea with the inflation and staking rewards is a hoax. And I just provide counterpoints to show that this assumption is blatantly invalid. My first response to him was about how he says completely right (and obvious) things, but additionally makes extraordinary claims. And extraordinary claims require extraordinary proof.

Anyone is free to discuss, comment, or criticise any IOHK decision at any time, with two remarks:

Form matters.

If someone creates a post in which he politely, respectfully, specifically, and accurately details out why exactly he considers some existing (or planned, or expected) solution suboptimal, and what changes are possible to be done, and why that would make the whole system or user-experience better - then that person would be taken seriously and with great respect. I would gladly read any such post and never attack any author for writing it. And I would try my best to equally politely and accurately either argue or support provided argument.

And if a person comes into a forum-thread and just starts throwing wild accusations, with almost zero understanding of existing work, zero respect for existing work, zero understanding of how things are created or improved, zero willingness to change his mind or even consider provided counter-arguments - it’s not a discussion, it’s preaching. And this person will be treated like a preacher, and not as someone who may provide any valuable ideas.

Discussion matters

Anyone is free to express any ideas and opinions, and anyone else is free to point out that these opinions are complete and utter bollocks.

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72

There is no difference between my example and Cardano development. I was not comparing Cardano development to Doge coin, you did that. We already saw with Daedalus that “it worked in the lab” on earlier non-beta release but once it hit the real world there were real problems.

I am comparing any major software project with any other including Cardano. All major software projects do a front end analysis and develop use cases. They do research and apply their experience. They develop specifications that can be written in code and tested. ALL major software projects do that.

The real difference is that when it comes to crypto currency, Cardano is doing it better than any one else. Better research and better processes make better crypto. (Just like the Papa John’s commercial for better Pizza). EOS is doing that also, but I believe Cardano is doing it better. I would compare Cardano to EOS, but definitely not Doge.

I also think Cardano’s openness and willingness to listen to users will make Ada the best crypto, especially over EOS. I had seen on occasions before where software engineers think they are smarter than everyone else and design code where nobody wants to use the final product. They only use it because their job requires it. I believe Cardano wont make that mistake because they listen, are open, and in general humble enough to ask for user feedback.

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Yes brother I know form matters. You should go back and read your posts where you called stuff retarded and posted that crazy picture of the conspiracy guy in reference to jb. Although it was kinda funny :grin:

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Thanks! And I would do all the same again :slight_smile: As I said - respectful people get respect in return. And conspiracy-theory preachers get treated as conspiracy-theory preachers. It’s only fair, imo. I expect absolutely the same rules for myself. If I ever get mad beyond any rationale and start accusing people of not seeing the truth without even being half-way decent or coherent - I expect everyone else to put me into place )

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Oh Just wait @vantuz-subhuman you have given me all the material I need in your recent posts, now I understand why you got it all wrong… You keep repeating it is plain and simple, but then you repeat non-sense as if you have no clue. Because in some way you seem to understand it, but you draw all the wrong conclusions… Now I know where that gap is… Ill be back.

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You are correct. However the network must be decentralised for it to be a serious contender, that needs to be paid for, and that is what you are looking at.

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Wow, there are a lot of “interesting thinkers” in this thread. I had to stop reading.

jb455 is totally correct

Let me say it again.

jb455 is totally correct.

When staking starts, you are not going to be making money, you are going to be losing money. Your holding is going to be diluted.

If you do not stake you will lose a larger percentage of value than if you stake. But even if you stake, you will still be losing value.

Yes, during staking even if you stake you will suffer dilution, i.e. lose value. You will be “skimmed”.

Who will get your value?

The stake pool operators and the treasury.

When the network goes decentralised, full node operators will need to be incentivised. This is not a bad thing, but it is also not a free thing. They need to be paid. The network will be better and worth more as a result of it being decentralised.

The treasury will pay for future development, which will make the network better and worth more.

So YES once staking starts YOU WILL BE PAYING for a decentralised network and future development, but this is not a bad thing. We want a decentralised network, right? And we want further development, right? It is true that 99% of people don’t understand, these people think they will make money when staking starts, quite the opposite, they will start paying! However what they pay for in dilution of their holdings will hopefully make the network worth more, and thereby be covered by capital appreciation.

There is no such thing as a free lunch.

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79

Not that simple either. When stake is driven by transactions fees primarly you will gain value by staking vs not staking. But that assumes there is not incentives for not staking.

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Amazing… :+1: There is that one in 1 in 10.000…

Yup, as I also said in some of the posts, this was designed in from the start… This was a more easy and exciting way because you get people to be excited to pay for things… and all the goals are achieved in a lenient way…

I totally get why the design decision was made, Its very clever…

I never argued it was a sound decision for ADA and Cardano, all I am saying is, is what it is… and yes when it is being tauted as a reward, when in reality it is paying a bill (or a much much lower reward) that is somewhat dishonest… and most people taut it, dont even know they are a part of it… But it is what it is… and I am always for the truth, so I think it is important that we are all as educated as possible of how things operate, because it is not just relevant to Cardano, but in many other aspects as well… Even thought it wont change much, cause very few will understand it anyway or have a interest to.

Also there was an alternative (for does who say it is the only way), and that was footing the bill through actual payments. For as long as we couldn’t finance things with fees, and then have no overhanging supply. But yes the logistics of this is less lenient, and we dont want the structure to be able to take ADA directly out of our accounts… also, this doesn’t have the same public ring to it… But It could be done, if we wanted to.

@Eystein_Hansen Yes you are right, but it is irrelevant for now, and @MARTIN_SMITH knows too what you are saying.

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