[pcthrowaway]

> Proof of stake literally makes rich richer, thats the point of it

That's certainly true with a very simple PoS mechanism. I don't think that type of PoS is used in practice with any major cryptocurrency (please correct me if I'm wrong though).

The one I'm most familiar with (Cardano) uses delegated proof of stake, so users delegate their stake to a stake pool and share in the rewards. The platform supports, encourages, and enables this for users with only very introductory understanding of Cardano.

Stake pools also suffer a penalty when they amass too much stake (their rewards decrease), so decentralization is encouraged and no one would be able to get, say, 50% RoA by owning of 50% of the Cardano currency (ADA)

[gus_massa]

If some group owns 50% of Cardano, what prevents them to from crating two fake pools with 25% and 25% and avoid the penalties? (Or 100 groups with .5%, or whatever is needed.)

[pcthrowaway]

(TL;DR: operators can't make more than ~7% annual return on their stake in the long run, and non-operators (people with only 50 ADA for example) can earn ~6-7% by delegating to the most profitable pools.)

Longer answer: The most you can get from staking is an annual 6-7% return on your stake. I don't fully understand how their saturation parameter works, but here's the general idea: Currently a stake pool with .2% of all ADA staked is considered 'saturated'. This means (in my working understanding, I suspect things are a bit more nuanced) that ADA delegated to them beyond that .2% doesn't receive additional rewards. Therefore it's in the delegators' interest to avoid delegating to pools with greater than .2% of all ADA, and oversaturation works against the stake pool operators as well.

What this means in practice, is that this theoretical group owning 50% of ADA could set up 250 stake pools and fully saturate them for maximum profitability. However, other users can also delegate to those stake pools and share in the rewards. While the operators may receive 1-2% more rewards than non-operating users (there's a limit to how much 'extra' the operators can take, but this extra percentage is intended to incentivize running stake pools), at a certain point of oversaturation (if their pools are profitable enough), it would make more sense for them to just add more stake pools to (or delegate to other pools which are under-saturated) rather than let their existing pools be significantly oversaturated.

cardano.org has an insightful blog post: https://iohk.zendesk.com/hc/en-us/articles/900004671183-Chan... and a useful calculator: https://cardano.org/calculator/?calculator=operator

which are both worth looking at if you're interested in knowing more

[wmf]

Delegation has nothing to do with it. If you own, say, 1% of staked coins you get 1% of the staking rewards in perpetuity in exchange for doing almost nothing.

I don't consider this a problem but it's a fact that PoS works that way.

[pcthrowaway]

This is true (and honestly something I haven't given much thought to). It's true in any economy that the rich can leverage their wealth to get richer through investments at a higher earnings rate than the poor can.

I do like that cryptocurrency platforms can put limits on "how much" leverage they get, to significantly close gap between potential "percentage" return on investments between wealthy and 'poor', and remove the ability for third parties to operate which give preferential treatment to people with high concentration of total market cap.

If you own 1 billion USD, then sure, you're going to get a larger return on investments (when measuring in USD) than someone with 100 USD, even if the percentage RoA was the same. Because of how classical economic systems work though, these are very grossly disparate. Someone with 1 billion USD may be able to generate 5-20% return on investments in a year, whereas someone with 100 USD would be lucky to get 3% (certainly, larger returns are possible with luck and wise investments, I'm talking purely in the aggregate over low-risk investments, like holding your money in an account which pays interest).

But let's assume the person with 1 billion USD and 100 USD are both getting 1% interest annually; the person with 1 billion USD is still making more money from investments because they have 999999900 more USD which they are investing.

PoS doesn't solve that latter problem, but it can close the gap on the return expressed as a percentage of investment

[cwkoss]

No type of PoS is used in practice with any major cryptocurrency

[pcthrowaway]

If by major cryptocurrency you mean "only bitcoin and ethereum", then sure. Cardano is the third-largest cryptocurrency by market cap (currently; it's neck-and-neck with a couple more, so this is subject to change still), and has used PoS from day 1 (though I've read some people consider it not "true" PoS because of how they solve the issues of ownership consolidation, and it's also been called "delegated PoS")