It is counterproductive to back any cryptocurrency other than Bitcoin. The Handicap Principle even describes an observation in which one bird fed a worm to another bird only to have the same worm forced straight back down his own throat! There are other more subtle complications even without considering the reward. The community of bitcoin miners settled upon the version 0.7 branch as the one they would recognize even though it was the shorter one. On the other hand, to hold so as to try to produce a more favorable block is very risky because he would have to convince enough of the rest of the miners to go along with him that he can establish a new consensus. All miners may work harder, but none is better off. The essential features of the Prisoners Dilemma are that each player is better off choosing to defect regardless of the other player’s choice, and that the greatest benefit goes to him who defects when the other cooperates. The Handicap Principle solves the problem of the Prisoners Dilemma by allowing an earlier step to the game in which each player has the option of doing something that convincingly removes the benefit of defection over cooperation.
The Handicap Principle has been applied successfully to a diverse range of biological phenomena. In a social species, the handicap principle explains much about ethics and altruism. The Bitcoin proof-of-work system can be compared to both antlers and altruism. Just as members of a species can differentiate themselves in strength and heath with a handicap like horns or antlers, members of a social species can use altruism as a handicap to distinguish one another. If he does not, then he knows that the first prisoners only viable option is to defect, but if he does, then both prisoners can be expected to cooperate. This would make his first payment invalid, and he would therefore end up with a good he did not pay for. Although this is a popular presentation without mathematics, it is not dumbed-down and it uses sophisticated biological arguments to make its point. This is necessary because without it there would be little incentive for anyone to do the accounting in the first place; but with a reward available, each miner naturally would prefer the new block to be his proposal rather than anyone else’s. However, there is no reason to expect the creator of Bitcoin to be a math genius.
However, when everyone upgrades, the mining does not become more efficient as a whole. It is rather like a forest, in which every tree tries to grow as tall as possible so as to capture more light than its fellows, with the end result that most of the solar energy is used to grow long, dead trunks. Babblers do not like to be fed by other babblers of a similar rank because they do not like to feel inferior. The general rule is that the first block mined is not self-interested because no one can plan on being first. There is, first of all, the reward that comes from generating a block of a set of new bitcoins. If proof-of-work had been understood when email was invented, there might never have been a spam problem. All the blocks in the Bitcoin block chain have a short string of meaningless data-called a nonce-attached to them.
Because the proof-of-stake is used up as new blocks are generated, there is continual turnover in who is able to mine, and thus less incentive to specialize in maintaining the block chain. If blocks are generated randomly by a difficult computation, there will be only one proposed new block at a time. If they are not, then reaching a consensus is difficult. The correct way of thinking about the proof-of-work concept is as a means for a group of self-interested people, none of whom is subordinate to any other, to establish a consensus against a considerable incentive to resist it. A proof-of-stake system demonstrates investment in the coin itself whereas a proof-of-work system in the underlying network. 1. See Back, A., “Hashcash – A Denial of Service Counter-Measure”, 1 Aug 2002, for a description of the proof-of-work concept and its applications by its original inventor. There is only supposed to be one new block every ten minutes regardless of how hard the network is working.
