Opinion: PoS is reigniting the debate over inequality and wealth distribution

Author: John deVadoss, Cryptoslate; Compiler: Songxue, Golden Finance

The prospect of cryptoeconomics lies in its ambition to create a new economic platform, based on the ideal concepts of decentralization and democratization and achieve an inclusive and equitable governance model to create a level playing field for ordinary people.

We are at a decisive fork in the industry, with most energy and capital being prioritized for proof of stake and staking, liquidity staking, re-staking, etc. Let’s take a quick look back at history and examine the impact this had on the average person.

History of Capital: Wealth and Income

In Old English, the word "capital" seems to have been used As an adjective, it means "of or related to the head." It comes from the Latin root capitalis, meaning "of the head", and is used to symbolize the head of a bull. Cattle have been a source of wealth for many years. Whether it's milk related products in the short term or herd growth and growth in the long term.

In the process of moving from pasture to market, the term "capital" came to be used to describe the near-term dynamic dimensions of an asset as well as the long-term potential dimension of creating surplus value. In the vernacular, capital is conflated with money, and money is often conflated with capital.

Capital can be tracked in money, and money can be used to facilitate capital transactions, but money itself cannot and will not initiate additional production. In other words, Capital is about returns, while money is primarily about liquidity,

Income is temporary; wealth is permanent. But how does wealth last and grow?

The Mystery of Capital: Growth and Distribution

Nobel Prize winner Simon Kuznet He was a pioneer in studying the relationship between economic growth and income and capital distribution. Kuznets collected data on economic growth and income inequality in the United States, the United Kingdom, and Germany. His hypothesis is thatAs countries develop and GDP grows, inequality first increases but then peaks and begins decline.

Early criticism of the so-called Kuznets Curve was directed at the small data sets he observed, particularly during periods of a series of economic shocks—the Great Depression, The outbreak of the world wars and the Cold War. However, his theory is consistent with mainstream economics and provides a reassuring case for accelerating growth.

The task of finally dismantling the Kuznets Curve orthodoxy was left to the unconventional French economistThomas · Piketty. Piketty examines the evolution of income and capital inequality from the 18th to the 21st centuries and compiles a large amount of data. His analysis ultimately proved that capital grew faster than income. As economic growth matures, inequality does not decrease.

As Piketty said, when he began to study theoretical models of economic growth, he realized that there was often little real data involved in the creation of these models and projects. . His judgment was that economists tended to spend too much time doing theory and too little time on data collection and analysis.

Piketty’s main idea is the correlation between wealth-income ratio and return on capital and nominal economic growth rate . Looking at the data from the past 200 years, the only significant weakening of capital’s share of the economy and the resulting reduction in economic inequality can be attributed to the impact of the two world wars, which had an impact on capital It caused a devastating blow.

According to Piketty's analysis, the mid-20th century era of declining inequality was an outlier, largely due to the burden of multiple wars and the accompanying need for high taxes. His analysis shows that In the long run, inequality does not stem from the gap between high and low earners; The gap between those who inherit large amounts of capital and those who do not.

Talking about the concentration of capital and its inheritance leads to a question:Encryption What is the distribution of capital in an economic network?

The Dilemma of PoS: Decentralized Proof of Inequality

Proof of Stake is considered a way to prove that network participants have put something of value into the network, and may be punished if their behavior does not comply with the rules set by the network administrators. Participants who behave in compliance with the rules will receive rewards proportional to their stake.

Generally, to participate in a PoS network, you must deposit a minimum amount of capital ("stake"), and play as long as you have capital.  

For example, in Ethereum’s PoS model, validators invest capital in the form of ETH into smart contracts. Validators are then responsible for verifying that new blocks broadcast over the network are valid, and may also choose to create and propagate new blocks themselves. If a validator attempts to violate the rules, some or all of their stake may be penalized.

PoS may be seen as superior to PoW; however, Piketty’s evidence-based insights foreshadow the inevitable economic crisis that this digital decentralization inequality will lead to. Cryptocurrency economists would do well to incorporate Piketty’s data-driven insights into the mix.