Proof of stake rewards question

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81

I understand you are talking about software testing after it hits the market. No one disputes that. Software will always have bugs and there will always be updates.

Same pretty much applies to Daedalus and many other solutions IOHK will develop. But an imperfect version 1.0 doesn’t mean Cardano failed and should pack up go home.

Software companies fail because they produce the stuff no one wants to use and they don’t have the resources to develop a second version that does take into consideration customer feedbacks. Or maybe version two is too expensive.

We do have that risk here but not to the same extent. The whole crypto space is really want a product that’s safe and scalable. This is what Cardano offers. Judging by how they approach product development, they will be light years ahead competition in terms of usability and quality (I mean have you used ETH native wallet?).

I mentioned dogecoin to illustrate a point that the space is hungry for a good solution. Whoever delivers it will be an absolute winner!

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@MARTIN_SMITH and @jb455 and @vantuz-subhuman
I really am trying to wrap my head around “Will we be making money on staking” because I am trying to figure out if I should invest more in Proof of Stake or Proof of Work. Here is the story.

My friend and I built a CPU mining rig and had started mining with it in mid January of this year. My friend runs it at his house since I am on travel a lot. The rig cost $9,000 to build and has 16 - GPU GTX 1070 Titaniums (which are cheaper now). The rig finally finished paying for its self this month.

We made a grand total of $13,000 in 5 months so far in mined coins and traded enough to pay for the rig and electricity which is $5 per day to run a 2K watt rig. This comes out to a daily average of $80 per day total income. So $13,000 total minus the $9,000 rig is $4000. Then we take the $4000 profit minus the $750 to pay 5 months (150 days) of electricity with puts us at $3250 profit.

So we have a $3250 profit on a $9k investment in Jan. The daily average profit the last 5 months is $21 per day.

And NOW for the fun part, the mining rig is completely paid for. So the daily profit will be $80 per day if we can keep pace. $80 a day sounds like a lot, but it does take some effort from my friend since he has to change mining pools sometimes and keep looking at the charts to make sure we are mining the right coins. Then he has to trade those coins at the right time and pay fees. So he gets the lions share for all the effort.

So what I am wondering now, is Proof of Work superior to Proof of Stake to make profits?

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I am talking about testing BEFORE it hits the market, and it still ends up going to market with what the engineers believe to be “acceptable” bugs and short comings. The users don’t always agree.

But you do bring up some really good points here about why software companies fail, or their products require new versions. I also agree that whoever delivers that best solution in crypto space will be a winner. I am betting on Cardano to win.

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So do you. I underappreciate how much effort it takes to get things right and in software it is even more important.

It seems like you are saying ego gets the best of the bright engineers, who fail to account for user preferences.

Let’s hope we don’t have too much ego in Cardano. Charles doesn’t come across as an asshole, from how ge approaches the problem of adoption at least. He really seems to be interested in tech and not in inflating his ego.

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@rickymac

If you have a mining Rig yeah go mine the most profitable coins! take advantage of it while it is there… But dont over-invest in this, (by making huge long term investments out) be moderate and take profits of the table… and perhaps invest some profits back… Look at the stats, and price in dramatic drops… You wont keep making profits in this, or at least it is very unlikely… So take advantage of it while you can…

Happy you are making money! just dont get greedy, and turn that profit into a loss, that is something many people end up doing…

You guys are doing really well, making money in this bear market.

Proof of work, is not going to be the future, because the concept is silly and very wasteful… But it is there now, so make some money of it… and even where proof of work will be used, its going to get more and more competitive.

You invest in ADA for the capital appreciation not the staking, forget that the staking is even here, cause it wont mean anything for your investment (it is just something you will be forced to do, when you hold ADA)

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86

We got lucky on the 0xbitcoin mining and got burned on the Nano trades. But overall average still worked out pretty good :+1:

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You are assuming that increase in supply always means loss in value, btw. Which is not really true. The whole thread would be times easier if there would exist a simple definition of “value”, but there isn’t one.

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Yes it will with 100% certainty without no doubt - there is nothing to assume, this is how it works by definition - the reason you say something nonsensical like this, is because you dont understand what you think is so plain and simple…

The only argument one could make for a immediate value-neutral/posite-supply increase would be if ADA represented a asset and a equal represented swap was made. But that is not the situation here. Dilution for expenses, unequal distribution or capital investment do not go into the same category.

One major part that leads to your failure of comprehending this is that you think that the un-minted supply is a reserve… There is no reserve, there is nothing there… there is no value locked in… There is only unrealized inflation with a cap… There are a few other things, but this is the main part… and I know you believe this, because of the things you said in your post.

The market can technically price in to a certain and very limited degree (never fully) the decrease beforehand when it is calculated inflation, but it can only do so to a certain extent. Since it is pricing in supply not yet affecting the supply/demand… and this would only be seen in very mature and professional markets - certainty not the crypto and this specific situation with unknown variables, large volatility, and long time frames . So that is irrelevant for any aspect here. It still doesnt change the dilution though, it just takes place beforehand, instead of after. Even if irrelevant - I just want to add this note to keep everything completely accurate.

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89

This is an argument of definitions and it will get us absolutely nowhere. Especially with your level of arrogance. I was agreeing with you in all my previous comments, but you decided to not see it. We are saying absolutely the same thing from two different viewpoint and there’s no way for us to resolve it since we will just keep assuming other’s inability to understand things properly, even tho we are talking about the same thing.

This is exactly where our misunderstanding is coming from.

You are claiming that the whole staking deal is a bad deal and not profitable for a user, because markets poorly account for known max supply, and because of this there’s no point to think of staking as of profit.

I am arguing that this is irrelevant, since staking allows user to increase his holdings as a portion of max supply, and if he invests in the coin for price appreciation then he will also make profits from staking.

That’s it. We just use different definitions of “value”. You cannot argue about staking as a phenomenon separate from all the other nuances that give the coin “a value”. Inflation is not a “spherical horse in vacuum”. The only condition in which inflation\staking “scheme” would actually cause all the users to “lose value” is if the price of a coin (which is the only value marker we have atm) would decrease proportionally to the inflation. If a loaf of bread would cost in 2019 2.5% more in ADA than it would cost in 2018 - then I would agree with the way you put it completely.

But in a complex reality your cannot argue that inflation causes loss of value, because in our particular case inflation may bring much more value by incentivising participants, promoting popularity of the platform, increasing liquidity, etc.

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90

This does not change the dilution though, it only artificially “actualizes” parts of the dilution before it actually takes place by front-running the expected supply increase. The net result remains the same, except for day-traders.

The difference of this is that repricing can be taken back (people who repriced would lose money if it wasn’t actualized as expected, as this would require a artificial push-down) and a actual supply increase is permanent and cant be taken back. It affects the actual supply/demand dynamics permanently.

It is impossible for MAX-supply to be priced in, even if it was perfectly equally distributed it wouldn’t be priced in, the drop and repricing would come on distribution day.

I am not claiming staking is a bad deal, I am claiming there are no staking rewards, as it will be a payment, or in best case they they will be tiny compared to headline number, that is all. The only reason this could be achieved, would be if there is a large part that are not staking… They would then pick up the bill.

Even if something goes up in price, you can still have lost value, because your individual unit you use for measurement has been diluted. It would have gone up more had it not been for that value decrease. Yes you will have more ADA in your wallet, but you wont have more value. And yes ADA can definitely increase in price in the same period.

Even if ADA goes up 10% and lets say the dilution and expenses was 3% that year (lets play and say we could access the raw number) then it would have been up 13% without… You still “lost” 3% , even if you gained 10%…

You are right on the back-end that the funds that go into the treasury and mining pools generate value for ADA and hopefully the plan is that this will be positive ROI, and creating value that goes beyond the cost… But this is NOT staking rewards… This is a funding treasury reward

This reward wont be priced in today, we dont even know what we will use the treasury funds for lol…

Regardless of what value is created in the future, it is a payment today, that part cant be argued.

Supply increase that go to expenses, capital investment and unequal distribution is a dilution and loss of value depending where you are in this chain.

91

Here is why it is impossible for markets to take into account max supply in the way you want it to.

Imagine the perfect scenario… Where we have complete equal distribution of the total “reserve” supply.

There is a announcements tomorrow, we all get 1 ADA for every 1 ADA we have. everbody and their mama knows it… Everybody understands it… It doesn’t get more clear to the market than this…

The Current Price at announcement is 10 USD

So tomorrows expected price is 5 USD

If you sell today, right now, at less than 10 USD, you wont receive 1 more ADA… So if you do that, and have to buy back 2 tomorrow at 5 USD… You will have sold at a loss… and if you sell at 10 USD its the same, as just staying in…

Before repricing value is = 10 USD
After repricing value is = 10 USD

The repricing happens when it is distributed, not before…

If it went down 50% on day of announcement, before the distribution, you could be getting ADA 50% cheaper… You would end up with 4 ADA instead of 2 ADA…

and have 20$ value USD value for 10$ after distribution…