In sunny kings’ interview #2, he said PPC’s long term goal is to be a backbone currency and the goal does not necessarily include high transaction volume. That explains why 0.01PPC is set as a fixed fee for each transaction. Compared to BTC/LTC, the two major merits of PPC will be security and energy efficiency.
However, as the problems of BTC’s security and energy efficiency are not likely substantially revealed in short term, the community is expecting more features based on current block chain technology. Mastercoin and ColoredCoin, for instance, could offer lots of really attractive features such as multiple asset, decentralized exchange and so on. As a matter of fact, the level of transaction cost and the ability to process high transaction volume of BTC are crucial to these high-level coins.
I do believe PPC is a perfect backbone currency. But, I am also in favor of that more advanced features could be added to it. Its long term strategy should not be like: “For the purposes of security and decentralization, PPC is not designed for high transaction volume, and consequently not welcome high-level protocols and their advanced features.” I am a little bit worried about this attitude may lead us to a failure among this highly competitive market before PPC’s advantages are fully realized by most of the community.
What would you say?
In regard to the .01 transaction fee. I think it is good and important for long-term stability, decentralization, and scalability. I think within the next year or so, we will need to start working on implementing more ability for off-block-chain transactions. Also, once Peercoins become valued at about $400 USD, each, the tx fee would be $4 USD. So developing new and improved specialized exchanges that minimize excess fees would probably be necessary. Exchanges may make it so that the minimum trade would be 1 ppc instead of fractions of a coin.
What do you think about transaction fee as a function of difficulty?
I’d like to see the .01 static peercoin fee change. I also wouldn’t mind seeing some portion of each transaction fee going to the miner that confirms it, thereby increasing the incentive to include transactions in blocks promptly.
I don’t think 0.01 is a magic number, and I don’t want fees to be prohibitively expensive either. Eight cents a transfer is not unreasonable now, but for peercoin to have a real future as a means of exchange its network fees can’t go that much higher. I’m not going to use peercoin if it’s >$1 to make a transaction and I doubt many others would either, but I hope peercoin has at least some chance of being worth >$100 some day.
Tying the transaction fee to difficulty makes sense. Difficulty goes up as the value of peercoin goes up and as technology improves. Higher value of peercoin means transaction fees become more expensive in real terms, so lowering the transaction fee would counter this. Better technology means that it is cheaper and easier for the peercoin network to support greater number of transactions, so lowering the transaction fee would incentivize people to use the peercoin network for more trade and transactions.
One way or the other, I think this has to be changed. I think some sort of dynamic system of tweaking the fee destroyed by the network per transaction, as well as allowing miners to keep some portion of the transaction fee (perhaps allowing users to specify a fee for the miners for higher priority transactions), is the way to go.
Full comments from Sunny on his thoughts on this topic:
[i]
Both PPC and XPM are designed to last. PPC is designed with energy efficiency, XPM is designed with energy multiuse. Bitcoin has a long term uncertainty as to whether transaction fees can sustain good enough level of security. Before that the main concern is how to balance transaction volume and transaction fee levels. Currently I get the feeling that bitcoin developers favor very low transaction fees and very high transaction volume, to be competitive against centralized systems (paypal, visa, mastercard etc) in terms of transaction volume, to the point of sacrificing decentralization. This also brings major uncertainties to bitcoin’s future.
From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, or more, that maintains high degree of decentralization, maintains high level of security, but not necessarily providing high volume of transactions. Thinking of savings accounts and gold coins, you don’t transact them at high velocity but they form the backbone of the monetary systems.
PPC is designed to serve even better as a backbone currency. The proof-of-stake technology in PPC is not only energy efficient; it also maintains high level of security without relying on transaction fee. Thus PPC could be safely designed with strong scarcity property yet serving well as backbone currency.
Both PPC and XPM use protocol enforced transaction fees, which reflects my preference that high transaction volume is discouraged in favor of serving as backbone currencies.
On the other hand there is no promise that minimum transaction fee wouldn’t be adjusted. If processing capacity of personal computers continues to advance at the current pace, both max block size and minimum transaction fee could very well be adjusted at some point. However I do take a very cautious approach to adjusting transaction fees, as opposed to bitcoin devs. The impact to the fitness of the currency as a backbone currency is of great concerns to me.[/i]
[quote=“MeBeingAwesome, post:5, topic:760”]Full comments from Sunny on his thoughts on this topic:
[i]
Both PPC and XPM are designed to last. PPC is designed with energy efficiency, XPM is designed with energy multiuse. Bitcoin has a long term uncertainty as to whether transaction fees can sustain good enough level of security. Before that the main concern is how to balance transaction volume and transaction fee levels. Currently I get the feeling that bitcoin developers favor very low transaction fees and very high transaction volume, to be competitive against centralized systems (paypal, visa, mastercard etc) in terms of transaction volume, to the point of sacrificing decentralization. This also brings major uncertainties to bitcoin’s future.
From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, or more, that maintains high degree of decentralization, maintains high level of security, but not necessarily providing high volume of transactions. Thinking of savings accounts and gold coins, you don’t transact them at high velocity but they form the backbone of the monetary systems.
PPC is designed to serve even better as a backbone currency. The proof-of-stake technology in PPC is not only energy efficient; it also maintains high level of security without relying on transaction fee. Thus PPC could be safely designed with strong scarcity property yet serving well as backbone currency.
Both PPC and XPM use protocol enforced transaction fees, which reflects my preference that high transaction volume is discouraged in favor of serving as backbone currencies.
On the other hand there is no promise that minimum transaction fee wouldn’t be adjusted. If processing capacity of personal computers continues to advance at the current pace, both max block size and minimum transaction fee could very well be adjusted at some point. However I do take a very cautious approach to adjusting transaction fees, as opposed to bitcoin devs. The impact to the fitness of the currency as a backbone currency is of great concerns to me.[/i][/quote]
While it’d be a dream for current peercoin holders to have PPC become a kind of super valuable backbone currency, I don’t think that will just happen on its own. I’m not sure there’s even a need for a “backbone” cryptocurrency, one cryptocurrency that takes advantage of off-chain transactions could do just fine. Rather, I think peercoin’s value will derive from it providing a better decentralized blockchain, one that provides a similar level of security, robustness, and convenience as other blockchains but at a lower cost to its users. This is theoretically possible since POS requires far fewer resources than POW. If the cost of making peercoin transactions is artificially high due to a static network transaction fee, why would people use peercoin at all?
I respect Sunny and appreciate his work but PPC is bigger than just him now and I wish he would listen to the community more. He’s getting warmer in his last paragraph, personal computers are constantly advancing and can handle larger transaction loads over time. The transaction fee WILL have to be adjusted if PPC has any future, in my opinion. The solution I’d like to see is a change that is dynamic and addresses future potential of technology and peeroin growth, rather than an arbitrary/ad-hoc method of changing the transaction fee manually from time to time.