Developers Forum for XinFin XDC Network

Discussion on: XDC Network Protocol Upgrade Proposal: Fully Proof-of-Stake (PoS) Network

xdc_to_the_moon profile image
Labababaa Abababa

Hello, I have read the proposal and I am trying to understand the reason for the switch from DPoS to PoS.

Is the purpose of this proposal to bring in the central bank/institutional node investors? The average retail node will not be able to compete once the 10m staking limit is taken out.

A recent IMF paper discussing blockchain consensus mechanisms says “Because ownership directly correlates with the chances of being selected, PoS consensus mechanisms can theoretically create a community where richer individuals or entities are more likely to be selected. This means those participants are also more likely to be rewarded, fueling an environment where the rich get richer. This scenario can lead to those participants with smaller holdings exiting the network if they aren’t able to generate rewards. In effect, PoS consensus mechanisms could create conditions where the network isn’t inclusive, as certain members (that is, those with larger holdings) are more likely be favored over others, increasing the potential for centralization.”

If the reason for this proposal was to clear the way for institutional investors, this would be huge for the ecosystem and is the only reason that this proposal would be beneficial in the long run.

Regulations are coming, most/all
non-compliant consensus mechanisms will be regulated out of existence.

The IMF and BIS seem to speak more favourably about DPoS compared to PoS.

Unless this is a move to bring in big money investors, why is there a proposal to give up the compliant/preferred DPoS? It doesn’t seem like there’s anything wrong with DPoS.

So my three questions are:

  1. Is this proposal a way to make room for big money institutional investors(elite, central banks), who will be the only ones able to compete, to step in and reap the rewards? If true, this would be huge for the ecosystem and greatly benefit adoption, and seems to be the only potential benefit for this proposal.

  2. If it is not to bring in institutional investors, why is there suddenly a proposal to give up a system that’s compliant/preferred with the people who are making the regulations?

  3. Regulations have the potential to become the biggest of black swans. Co-Founder Ritesh Kakkad seemed to be unfamiliar with the IMF papers discussing DPoS that people were referencing on Twitter, and did not respond when provided the documents. Are the founders, co-founders, and development team familiar with the regulations and recommendations to remain compliant coming from the BIS, FATF, IMF and similar global regulatory bodies?

Thank you for reading, I hope to get some answers to my questions and some more clarity on this proposal.

riteshkakkad profile image
Ritesh kakkad Author

Answer to your Question1: Purpose of proposal to get more institutional and community participation. Many Institution like to become a masternode but right now they are unable to be a validators.

Answer to Question 2: Upgration is continues process and always required to get more adoption and participate from more validators, Right now Masternode numbers and growth fully restricted for new master node-holders. We wanted to make it more open frame-work so new members can participate with more contribution and become a validators. In short, this is more like Quote by Hazrat Inayat Khan: “Movement is life; stillness is death.”

Answer to Question 3: BIS, FAFT, AML and KYC etc comes whenever we speak to the regulators. But many countries came out with various rulebooks and proposed framework (very opposite to each other) so it’s also important to aligen with most of the countries and not stick to one specific country. ITFA, D2A2, all discussion related to compliance, AML, FAFT and regulation. Limited community members aware about XDC's founders are part of new digital negotiable instrument law initiative. XDC Network so far most regulators friendly network and we want to keep enhancing as per the revised rule books. Other important task is to see technical viability as well so this may need extensive communication and brainstorming with developer’s community as well. Also i asked to specific link as IMF came with many papers including CBDC, Risk with crypto trading, crypto risk to emerging counties, crypto mining and energy consumption, financial system risk etc.

Feel free to create any additional proposal to get more community participate and adoption.