Staking LOC is Fair. For Everyone.
From the beginning, Bitcoin was meant for the people. And it has achieved a lot of its promises. Anyone around the world can easily send funds to any other person without the need of having a bank account and without paying a huge commission for the transaction.
But what about the other side of the industry? Does it provide the same chances and opportunities to miners?
Two miners having the exact same computing capacity will have the exact same chances of mining a block. The more computing capacity you have, the more blocks you will mine. So in theory, the system seems to be fair.
So why are we seeing huge mining farms popping up around the world while small scale miners are stepping back?
Economies of Scale
There is a physical factor that will always favor big players over small ones: economies of scale. It means that the bigger your operation is, the lower your costs per unit will be.
If you buy 100,000 mining rigs directly from the manufacturer, you will receive significant discounts compared to someone who only buys a single one from a store.
If you consume enough energy, it makes sense to build your own power plant to produce your electricity at much lower rates. Small miners on the other hand need to source it from utilities, paying transmissions fees, utility margins and additional taxes.
Such factors solely depend on the scale of operation and thus inevitably lead to the domination of a few big players over millions of small ones, who simply do not have access to such competitive prices.
The Return of Investment improves with the scale of operation.
Proof of Stake offers a clever solution to this problem. By decoupling the limiting factor of the operation from the physical world (replacing computing power by amount of staked coins), economies of scale are being fully eliminated.
Yes, you still get higher rewards when staking more LOC. But unlike the proof of work consensus mechanism, the relationship is proportional. Staking 2,000 LOC will yield you two times the reward compared to staking 1,000 LOC.
The Return of Investment remains constant regardless of the amount of LOC you are staking.
As a result, small players will have the same chances as big ones and will not be pushed out of the ecosystem. This will significantly improve the decentralization of the network and finally fulfill the initial promise of Bitcoin:
Giving the power back to the people.
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