Peercoin project purpose and description
What is Peercoin?
Peercoin (short form PPC) is a peer2peer cryptocurrency that uses both proof of work (PoW) and proof-of-stake (PoS) consensus algorithms. The cryptocurrency is premised on a paper released by Sunny King and Scott Nadal on August 2012. Note that Sunny King is a pseudo name that was also involved in the creation of another coin referred to as Primecoin. But the other Peercoin founder, Nadal, diminished in 2013.
Peercoin creation was largely inspired by Bitcoin and, therefore, has a lot in common when it comes to the source code as well as technical implementation. The code of the network is issued and distributed under the MIT/X11 open license. However, it features some fundamental differences from Bitcoin and other similar coins such as Litecoin and Namecoin. For example, it does not have a hard limit on the coins, though it is designed to achieve inflation of 1% per year.
What is the problem that Peercoin Solves?
Since the inception and introduction of Bitcoin by Satoshi Nakamoto, the main consensus model in the industry has been proof of work (PoW) algorithm. However, this algorithm opens serious flaws in the industry including the following.
(i) Centralization of mining
Use of proof of work (PoW) protocol at Bitcoin and other cryptocurrencies meant that only those who could manage the ever-growing hashing power could mine the coins. Things moved from bad to worse as expensive ASIC mining equipment hit the market. Most of the common miners for proof of work (PoW) based cryptocurrencies were edged out as mining pools and those who could afford the expensive equipment took center stage. The idea of decentralization that Satoshi wanted to advance was being pushed away.
(ii) Higher security risks
With centralization taking over in most proof or work cryptocurrencies, related security threats also became predominant. The commonest of these risks was the threat of 51% attack. This is a threat where more than 51% of tokens for a cryptocurrency are held by one party or mining pool. In such cases, the controlling party takes full control and could decide to harm the network.
(iii) High energy costs
Proof of Work (PoW) algorithm model used at Bitcoin and other coins is highly energy intensive. The respective nodes have to work against an ever-growing complex algorithm to mine blocks and earn native coins. The high cost of energy has brought to fore the argument on whether mining makes sense in the light of the high energy costs. In the Peercoin whitepaper, the founders ask the question; must miners maintain energy to run a decentralized cryptocurrency?
How does Peercoin Solve the problem?
To address the above issues, the Peercoin founders discovered the concept of coin age. This concept simply denotes currency amount times holding period. Take the example of Johann who received 20 Peercoins from Dennis, and held them for 60 days. The founders argued that Johann accumulated 1200 coin-days of coin age. Therefore, when Johann spends the 20 Peercoins, the coin age has been destroyed/ consumed.
The new concept (Coin age) made the team dig deeper and come up with an alternative consensus protocol referred to as proof-of-stake (PoS). They decided to implement the proof of work (PoW) and proof of Stake (PoS) together.
1) The application of hybrid model of PoW and PoS consensus models
- The application of coin age to strengthen the Peercoin model
The proof of work algorithm in the Peercoin is used to facilitate spreading of the distribution of new coins. However, PoS is used to help secure the network and prevent it from mining-related attacks. Remember that since Peercoin still utilizes the SHA-256 hashing model, you can also mine it with common Bitcoin mining rigs.
The Proof of Stake (PoS) notion implies having some form or ownership in the network. This means holding a significant amount of peercoins. At Peercoin, the Coin age consumed when a transaction is completed is considered part of the stake. The philosophy of stake was meant to help strengthen the monetary system and preventing it from forgery.
- Block generation using proof of stake (PoS)
In the Peercoin’s hybrid model, the blocks are separated; proof of work blocks and proof of stake blocks. The proof of work (PoW) blocks are generated pretty the same way it happens in other POW platforms such as Bitcoin. You have to use the computer’s hashing power to solve a complex mathematical puzzle to find and add new blocks into the public ledger. But using PoS is a little different.
Proof of stake in the new design blocks is a different type of transaction referred to as Coinstake. In this model, the transaction block owner is required to pay. This implies that he has to consume his coin age in order to generate a new block. The first input is referred to as Kernel and it is aimed at helping to make the proof of stake (PoS) blocks as similar as possible to those generated via proof of work method. However, it is important to appreciate that in the PoS model, hashing is implemented over a very limited search space compared to the unlimited search space in PoW. This implies that there will be no significant consumption of energy when using PoS.
The hash target that each stake kernel is required to meet is only a target per unit coin age consumed in every kernel. This is a major contract from the PoW model used in top networks such as Bitcoin where nodes have to meet a specific (fixed) target value. This implies that the more the coin age that gets consumed in a kernel, the higher the chances of hitting the target protocol.
It is important to also appreciate that in both the PoW and PoS protocol application systems at Peercoins, the hash rates (mining difficulties) are adjusted continuously as opposed to a fixed period of time. For example, Bitcoin has a set hash rate adjustment interval of two weeks which opens the gateway to a sudden network generation rate when a miner/s discovers the hashing rate.
2) The Peercoin’s protocol shift to reliance on consumed coin age
The protocol that determines the competing block that wins to become the main chain in Peercoin was changed to use consumed coin age. What this implies is that proof of stake was expanded to encourage nodes to use the native coins more. Therefore, the transactions in every block help to contribute to the overall consumed age. Then, the blockchain that has the highest total coin age is selected as the main chain. This model differs from the PoW application where the main chain is determined primarily on the work done.
This is one of the lesser known components of cryptocurrencies. It is used to help maintain the integrity of the network through a careful recording of the networks. The focus of checkpointing at Peercoin (protection of history) is helping to verify the checkpoints against the main blockchain copy and ensuring that the chain has not been retroactively rewritten in a 51% attack. In practice, the checkpoints operate as a safety switch in the case of double-spending attack.
The application of Checkpointing at Peercoin has often fallen under sharp criticism. The community accuses the development team of trying to take the network back to centralization.
What makes Peercoin better than it’s competitors?
- By employing the PoS protocol, the Peercoin system is less susceptible to 51% attack. This makes the network safer because an attacker would have to struggle and own more than 51% of the entire coin age of the total Peercoins. Whether you are mining the network or simply holding the tokens waiting for the price to shoot up, this is one network that provides high security.
- The average transaction charges at Peercoin are relatively lower compared to other networks. Take a random example such as mid-2018. The average cost of transactions in Bitcoin was $1.20, Ethereum was $0.28, and Bitcoin Cash was $0.076. However, transactions on the Peercoin only attracted a small fee of $0.034. This has been cited as a major reason for the large inflow of users even from other networks.
- The Peercoin development team progressively researches the blockchain technology to take the industry to the next level. For example, the development team hinted at the possibility of introducing a new consensus protocol referred to as proof-of-excellence. If the new protocol comes to fruition, it implies that tournaments will be held occasionally to mint coins depending on the performance of participants in the competition. It mimics live tournaments in standard sports competition. This is an indication that Peercoin is likely to grow even better in future.
- The Peercoin has continued to grow progressively and delivering a high return on investment. Between May 2013 when the price of Peercoin was $0.11 and mid-June 2018, investors experienced a growth of more than 1200% ROI (Return on Investment). This is huge ROI at a time when many cryptocurrencies have been struggling to survive.
- Application of proof of work protocol alone would imply that when the mint rate is tending zero, the incentives to mine goes very low. This could make the miners to completely stop mining and risking the network. However, Peercoin is better than others because even if such disincentives hit the network, the proof of stake would still protect the network.
How can Peercoin be categorized?
Peercoin is one of the most important cryptocurrencies that have helped redefine the blockchain sector. With its founders being the first to discover the concept of proof of stake that has become so crucial in the industry, people can only expect better things. But this is not all. The cryptocurrency network also demonstrated that the current technologies do not have to be thrown away when crafting something newer.
- It demonstrated the ability to use proof of work together with proof of stake algorithms.
- The founders demonstrated that proof of work can also be improved to deliver better results.
- Their suggestion for better technologies such as the proof of excellence demonstrates that people should indeed expect more from the platform and its development team.
What’s Peercoin’s vision on Security?
The Peercoins vision for security is to become the most secure blockchain network in the market. At this point, it is important to note that Bitcoin and other early blockchain networks were faced with serious security threats. For example, Bitcoin suffered the worst attack when a bug known as Number overflow error was planted by an attacker in 2010. Other serious security threats of the time included the hack at Mt. Gox and the Silk Road Scandal. All these lapses made Peercoin developers work harder to keeping the network more secure.
- Proof of stake protocol was designed to help with better distribution of Peercoins and avoid the threat of 51% attack.
- Advanced encryption is applied in the platform to help keep the details of users and their accounts as private as possible. Even when miners follow back the network, they can only pull out balances in the respective public addresses as opposed to personal details.
- Checkpoints, though heavily contested, were crucial in helping to help solidify the Peercoin’s history. They are used to reduce the danger and lower risks associated with double spend.
- The Peercoin system also applies the duplicate protocol to help protect the system from the proof of stake getting copied by attackers. Every node in the Peercoin system collects a pair of all coinstake transactions that it has seen. Therefore, when the node notes a block with a duplicate, it is ignored.
Examples of Peercoin’s use cases / applications.
- Sending value on the Peercoin network on a peer2peer basis.
- Mining the network to earn Peercoins.
- Trading Peercoins in the cryptocurrency markets.
- Investing and saving on the network. Many people opt to buy the native coins and hold them waiting for the price to grow over time.
- You can opt to use Peercoins directly on the stores that accept them. These include VerbenaProducts.com, 1eo.us, and Vintage furniture. Others are WoodShotGlass, Cryptoart, and CryptoTotal.com.
- If you want to trade Peercoins in the markets, you can also use the native coins to pay the transaction fee.
- Buying and holding the Peercoins can also help you to increase your coin age and raise the chances of getting selected to mint the next block.