Thoughts on impact of PoS on reservation demand?
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lol in what world can you borrow at the risk free rate? True borrowing costs may immediately be in excess of staking return for most people, especially when you incorporate rates forward curve and expected staking rollout...
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Way to miss the point. It's not about the RFR or borrowing at the RFR per se but about how any excess return over other types of investments will inevitably cause capital to flow into staking.
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> borrowing costs may be in excess of staking return I'm not sure you see the irony but you are arguing against PoS. If staking return is indeed lower than interest rates, people will want to sell their stake & chase things that have better returns. A recipe for disaster.
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Tbf, this (low rate of return compared to other types of investments) can happen to PoW mining too but since PoW requires extremely specialized equipment, it is a lot harder to sell a mining stake. Mining requires long term commitment, staking does not.
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To summarize this point: staking's primary cost component is financial. Therefore, PoS is a lot more susceptible to movement of financial capital & swings in interest rates than PoW, which requires large, upfront, long-term hardware investment.
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you need to understand that interest rates across assets are not apples to apples and have never been
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this isn’t even a pro pos argument. I wouldn’t even call myself a proponent of pos. this is a pro “let’s make good arguments” argument
End of conversation
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The bigger the staking return premium, the greater the influx of debt-based capital into staking.
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In the long run, staking return cannot be larger than the risk-free rate as money is a non-productive asset & staking a non-productive activity, so return cannot be perpetually above the returns given by productive assets. It is simply not sustainable.https://twitter.com/hugohanoi/status/1021918438678122496 …
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The subsequent transition from non-debt-based staking to debt-based staking will revert reservation demand back to its initial state, prior to PoS rollout.
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As more debt are taken on, people will become less & less incentivized to hold on to their stake. Reservation demand then will come purely from how good the PoS coin is as a Store-of-Value (not likely to be good), not from the requirement for staking.
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This thread gives a good summary of what I’ve written on the topic. From the engineering perspective, PoS is unlikely to work / offer any real benefit over PoW.
Let me try to unpack this.
Money is not equity, period.
When you park capital in a non-productive asset, it is OUT of the system completely. Decommissioned.
The non-productive asset value can only rise if it piggybacks on the success of productive assets.