Why Karma's PoW in particular is dangerously weak.
1. The table below shows that a large amount of Karma is needed to protect the network and demonstrates how the security of the network is getting weaker quickly. The network security is strongly correlated with the rewards under PoW. The gain from an attack is based on two things. The amount of currency currently on the market (seeking to buy the coin) for an instant reward and the total market value of the coin. Naturally therefore the percentage of coins used to secure the network every day is a strong indicator of security, it also allows a much smaller coin to be compared to a larger coin by ignoring market cap (obviously Bitcoin/Litcoin etc are far more secure than Karma due to their comparative sizes).
I believe October 2015 is the first reward halving for Litecoin, making Karma 1/4 as secure as Litecoin even if Karma had the same market cap as Litcoin after the end of the 155 days until then. As you can see from the table above Karma is only getting more insecure over time due to PoW rewards decreasing. PoS will not only be more secure, it will cost 75% less in Karma (not to mention electricity) to secure the network. After the table above Karma will get weaker and weaker with the number of coins being used to protect the network decreasing compared to the total supply. The reason I'm basing my analysis on Litecoin not DOGE (which is the other main currency Karma is based off and will almost mirror the comparative security of Karma) is because I'd prefer not to follow in the footsteps of a coin that was made as a joke.
2. A large portion of Karma's hashing power is in one pool, if this pool were taken offline or somebody even took control of it then it would make Karma an excellent target. I don't want to the write percentage of hashing power here because of just how bad it is. If somebody did take control of that pool to maliciously use it then Karma could be completely destroyed with ease because they would be able to maintain the attack for as long as they controlled the pool unless a white knight came to save Karma.
3. Karma does not have much hashing rate in total because the value of the coins is low. Unless Karma overtakes Bitcoin and all other PoW coins it will always suffer from this weakness. It is far more secure to be the biggest than the second biggest PoW coin because the hashing power can't simply be moved. Having said that as Karma's price increases it will be on more radars, which means the other weaknesses I've discussed will make it an excellent target.
Basically there are currently likely to be hundreds if not thousands of entities that have enough hashing power to take control of the Karma network which means they can create as many coins as they want, practically for free. The situation will get dramatically worse in 2 weeks, then again in 85 days, then again in 155 days. I think we should be looking to fix it well within the 85 days. One pool already has control of the network, aren't we just lucky nothing has happened yet?
I'm just trying to understand some of the points you made...
Firstly what is your understanding of how coins secure a PoW network?
Secondly what attack are you suggesting would allow a bad actor to take control over a pool indefinitely?
In response to your points..
1) The fast rate at which this coin was distributed has been our biggest problem. Both in terms of the sheer number of coins being pumped out so quickly and also the rate at which the reward drops off leaving miners with little incentive to hang on for the long haul. This is a problem with many other coins too (as you pointed out with Doge coin)
2) No attacker has any financial incentive at all to completely destroy a coin. The goal of any attack is to take temporary control of the majority of the network so that they can either A) take all the mineable coins for themselves and dump them on exchanges, or B double spend coins that they already control. Attacks such as 51% and Time warp cannot steal or spend
your coins, they do not affect users of the network in any way other than to cause problems for transactions while they have control of the network.. to my knowledge it is not possible for a 51% attack to fundamentally break a coin or its network, although it can shake peoples confidence in the system and cause many sleepless nights for the devs. If someone did manage to shut down or take over a pool believe me it wouldn't take long for the miners to notice and then switch over to another pool (hopefully P2Pool where that sort of thing cannot happen)
3) this weakness applies to all Altcoins that use PoW and is reflected in their respective market caps. Not only that but it is an issue that affects PoS as well when you think about it.. because a small cap PoS coin is very vulnerable to market manipulation and someone gaining 51% of the coin supply. In PoW if someone controls 51% of the network they can only mess with the network while they have control. This can only be temporary because the network can react and correct the situation.. in PoS if someone gains 51% of the coin supply they have control indefinitely, there is nothing anyone can do to take control from someone who has 51% of the coin supply other than for that person to give it up voluntarily. for example.. if some government agency or criminal network hacked the largest stakeholder and seized their wallet which had more than 51% of the coins.. then that organization would effectively be able to print their own coins at virtually no cost.
Ask yourself this... would you buy coins from a network that was controlled by a the government or a criminal syndicate? in my view this is effectively game over for the coin if it ever were to happen. if the same thing happened on a PoW network.. I doubt anyone would be worried too much because the organization that controlled 51% of a PoW coin cant simply print as many coins as they like and if they had control of 51% of the network then they wouldn't for long.
All in all you have some good points about the weakness of Karma.. I certainly agree that there will be some big challenges to be faced by the karma community over the coming months (especially as the block reward begins to drop down to a trickle)
but these issues aren't exclusive to Karma or even to PoW. Ultimately the thing that matters most about the success of a coin is its Network effect (i.e. the amount of individual people who use the coin and how evenly it is distributed)
PoW can lead to centralization of power through the centralizing of mining but the same can be said for PoS. PoS actively promotes the centralization of power by rewarding those who do not spend their coins.. i.e. those who hoard.
I agree that a hybrid solution would probably work best given the circumstances. Whether that be Mixed PoS/PoW OR Merged mining. My preference has always been for Merged mining as the easiest to implement and most efficient solution, but I do also understand why people are asking for PoS.
