What is power?

Last week, I discussed how a minority (10-20%) of blockchain participants will always own a controlling interest (51% or more) of the native currency (BTC, ETH, KOIN, etc.).

Andrew Levine (Koinos Group CEO) weighed in on twitter:

There is a faulty premise. Burns are not proofs of wealth. They are proofs of wealth sacrifice. Totally changes the analysis. If I burn all of my stake, I am no longer wealthy. I literally couldn't be poorer.

Let's unpack this.

First, Andrew is commenting on the premise that "the rich" have all the power. But what is power? Well, there are two key components of blockchains that determine who has power over the network: consensus and governance.

Consensus is an automated process. There's no vote. You help secure the system via the consensus algorithm (proof of work/stake/burn/etc.) and the system rewards you for doing the right thing. Koinos uses proof of burn and that's what Andrew is referring to in his tweet.

In order to participate in proof of burn, you have to literally destroy your cryptocurrency (making you poor, but you will make your money back with interest as long as you do the right thing). Then your "power" is based on how much you burnt. So, if you burnt 1 Koin and everyone else burns 99 (cumulatively), you control 1% of the power.

Second, governance. This is where people actually vote on changes to the system. This is more difficult to comment on as we don't know what design Koinos will use for governance yet. The important thing to note is that granting all the voting power to "the rich" is not correct here because of proof of burn. You wouldn't want to exclude the people helping to secure the network from voting.

I'll go into more detail on governance in the future.

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More tomorrow,

-Luke

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P.S. This week on the podcast, I had the pleasure of talking with Jonathan Stark about opportunities on blockchain. Enjoy!

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