
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.https://twitter.com/hugohanoi/status/1021831408489136128 …
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From the economic perspective, PoS has zero impact on “reservation demand” beyond what’s being offered by PoW. Any extra reservation demand that comes from staking will only exist to the extent that MR stays > MC: this demand is fleeting & won't last.
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I actually disagree here. I think the transition from [no stake] to [stake] should induce some amount of reservation (assuming stake returns exceed some acceptable threshold). but this only happens once, and it actually gets priced in prior to PoS.
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Replying to @nic__carter @hugohanoi and
if you see people saying "PoS is coming, better buy now" – that's the market pricing in the expected scarcity inducement... so the effect should be minimal on rollout. but I do think PoS should induce some reservation, again assuming sufficient returns
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I’m not sure we disagree?
Let me try to unpack this.1 reply 0 retweets 0 likes -
Replying to @hugohanoi @nic__carter and
It’s true that the initial switch to PoS will probably induce a one-shot, temporary boost in reservation demand, as people flock to “stock up” on tokens in preparation for staking, but this reservation demand is indefensible.
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Replying to @hugohanoi @nic__carter and
As long as there’s a premium on staking returns over the risk-free rate, capital will flow into staking, i.e., people will start taking on debt to participate in staking, until the premium is no longer there.
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Replying to @hugohanoi @nic__carter and
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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Replying to @jimbo_mr @nic__carter and
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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Replying to @hugohanoi @jimbo_mr and
> 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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Replying to @hugohanoi @jimbo_mr and
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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