Perhaps Proof-of-Stake Can Work Long Term | Hacked: Hacking Finance


Perhaps Proof-of-Stake Can Work Long Term

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Perhaps Proof-of-Stake Can Work Long Term


This article was posted on Sunday, 05:24, UTC.

Some of the largest Potcoin wallets are exchange wallets, and they’re not staking. In order to keep funds liquid in a proof-of-stake coin like Potcoin, you can’t stake, because your coins will occasionally not be available for sending. Here is an example of a long-term staking wallet that the author came across. As you can see, they’ve staked 30,000 coins in a couple of years, making no actual outward transactions in all this time. At present time, their stake represents around .63545778 BTC or $2,927, over a period of a couple of years. The price of the coin has fluctuated greatly in all this time, sometimes spiking, but whoever owns this address has felt sufficiently incentivized to continue holding. Currently they receive several small rewards per day, it’s almost like interest on a bank account, paid with high frequency. Certainly the price of Bitcoin has influenced their actual return.

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Here is the thing, however, that makes it less harmful to their economy: the holder keeps holding. So while long-term the value of the Potcoin network will be in a constant state of dilution, with new coins continually being generated, two things are true of this supply situation: 1) many coins are not staking or contributing to the stated inflation because they live on exchanges instead of staking wallets and 2) many of the staked coins do not immediately enter the economy, and certainly therefore don’t exit via the exchanges in a quick fashion. Their emission seems small enough that the delay is almost built in.

Eventually, Ethereum will go proof-of-stake. The author notices that the eBay and other markets are beginning to be flooded with older model GPUs, and reckons it’s just a matter of time before Ethereum miners sell off their GPUs and go to proof-of-stake. Unlike Potcoin, Ethereum routinely experiences double-digit percentage changes in price in its fiat pair – many dollars in change. This lessens, in the author’s opinion, the potential incentive to hold the coins, with people instead wanting to capitalize on spikes and buy back lows. This could lead to greater volatility, which isn’t the worst thing for traders.

While many people would simply hold for the stake in the Ethereum proof-of-stake model, many more still would simply sell the stake when price rose enough, creating some new inherent ceiling on price that might continually rise nevertheless. Perhaps a different approach would have been to cap the amount of Ethereum and make the stake rewards happen in a new base network token similar to NEO GAS. This might have in effect forced the long-term value of Ethereum, while still incentivizing people to stake the currency. One could argue that the new token would have no inherent value, but it could be required for sending transactions, or something. That would create a new paradigm, but it doesn’t seem to be what’s on the cards for Ethereum.

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We still think Ethereum’s value will long-term be floated by demand for money to invest into the many, many tokenized systems built on its impressive blockchain. While the author and others look forward to the influx of cheaper GPUs with which to mine Monero and other up and coming chains, the proof-of-stake change in Ethereum is bound to have some effect. In Potcoin, over time, the effect has been neutral at worst, and we can only hope for a similar or better result in Ethereum. The demand for Ethereum will likely rise without regard to the way in which new Ethereum enter the economy, and as such, the value is likely to continue its rise as well.

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P. H. Madore

P. H. Madore

P. H. Madore has covered the cryptocurrency beat over the course of hundreds of articles for Hacked's sister site, CryptoCoinsNews, as well as some of her competitors. He is a major contributing developer to the Woodcoin project, and has made technical contributions on a number of other cryptocurrency projects. In spare time, he recently began a more personalized, weekly newsletter at

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