And this is a flaw. There is a law of conservation at work here, whereby to create one source of value, another has to be destroyed. You can't destroy that first source "in a non-wasteful manner". It's not actually destroyed in that case and you've effectively double-spent it and cheated the system in a way that has subtle ramifications on the incentives and security. Even in blockchain, incentives matter and there's no free lunch.
Their incentive is in controlled network inflation, between 1-5% per year and paid to the 21 block producers running the network.
In block chain more than anything incentives matter, just look at bitshares if you want to see how a network can collapse if the incentives aren't calibrated properly.
Raw materials + innovation + labor + capital + time = waste byproducts + new utility added to the world in the form of convenient personal transportation that is sometimes (hopefully all the time) worth more than the sum of its inputs (profit). But all of those inputs get consumed in the process and one thing of value is the result.
Dual purpose mining consumes the inputs but creates two things of value, such that the miner is able to hedge, and to recoup their losses if the cryptocurrency fails. The fundamental problem is that reduces the cost the of attacking the currency, rewriting the ledger from some past point in history, should the miner decide to attempt that. In order for cryptocurrency to be secure, it requires that the miner be fully committed to the currency and that attacks are maximally costly and risky, unhedge-able (at least within the system, they can always short on third party exchanges and whatnot, but there's nothing the protocol can do about that), such that the miner's highest expected value is follow the protocol honestly.
Bitcoin cash would like a word, I expect. Sure, the value of both currencies would drift down until ~the same total value is achieved initially (or some approximation of that), but after a while, we essentially multiplied the value without destroying Bitcoin it was created from.
And how exactly does it do that?
In return they're entitled to be paid from network inflation. A rate which is agreed on by vote and divide up amongst the 21.
The users receive a decentralized network, free of any costs to transact (no fees) and infinitely scalable.
The arms race in crypto mining has led to an impossibility of solo-mining. Miners now join a pool or will never see a dime for their efforts. Overtime smaller pools dwindle and merge or die out until only a few survive.
Believe it or not bitcoin has less than 10 pools controlling the network - which is highly concerning due to a possibility of a 51% attack and ethereum is no different.
There's much more to the project and a lot of brilliant people with over a billion dollars in funding making sure this thing is bulletproof. So if you're interested in learning more about it I'd recommend you read their whitepaper as it will be a much better source of information.
However to quickly answer your comment, the 21 are elected by vote and are easily replaced by vote from the users they serve.
Not to mention that you have to pay the delegates more than their actual costs as you have to pay them a premium to prevent them from cheating.
Also, the voting under dPoS is fraught will all sorts of worries (imagine sockpuppets and all sorts of fake news).
This is addressed in the article, under "MAKING THE “WORK” USEFUL (WON’T WORK)"
> Secondly, this only works because the benefits are externalities, they are public and not owned by the miners. So there is no incentive for Miners to switch to such a system or even adopt such a system.
By this logic there is no incentive for Folding@home et al to exist either, but they do.
The incentive to switch to it is that it solves the collective action problem. That itself is another collective action problem, but it's an easier one. The difference to the miner between e.g. folding proteins and hashing is much smaller than the original difference between folding proteins and doing nothing, while still providing the full public benefit of protein folding.
IMO this is clearer if you use the word "spend" instead of "waste".
> but does so in a non wasteful manner.
s/non/less/
But otherwise I agree.
"If any cryptosystem is to periodically release coins, without immediately creating an incentive to “waste” an amount equal to the value of those coins, the cryptosystem is going to have to release the coins in a manner which is totally independent of all possible human activities."
And he's absolutely right. When you break it down all cryptos need to waste an amount of resources equal to the value produced by the coins. In bitcoin it's mining equipment and electricity but there's another coin which is setup to use these resources more efficiently than BTC or ETH.
EOS is releasing as a dPoS blockchain which converts the energy the 'miners' (block producers) use in a way that's beneficial for the users (server and network resources). It still expends resources, but does so in a non wasteful manner.