Thanks for sharing that.
Admittedly, I wasn’t able to completely understand the article, but it didn’t seem to make any useful conclusions. Technical justifications aside, the fact remains that if Peercoin was valued at current Bitcoin prices (something I think we’d all like to see) then every transaction on the Peercoin network would cost the equivalent of $600 USD. There’s no business or individual that would pay that. Therefore, it will be technically impossible for Peercoin to ever get bid up to that level.
Bitcoin has risen to this level (and it will probably go higher) because those that are attempting to value Bitcoin are viewing it as a “digital gold” and, therefore, a safe haven for fiat currency inflation. The rationale in many circles seems to be that with roughly 2.1 trillion US dollars in circulation and a max Bitcoin supply of 21 million BTC, the natural value of 1 Bitcoin being used as an inflation hedge is $100,000 USD. This, and this alone, is what is driving the current mainstream demand for it.
Peercoin, on the other hand, will have it’s valuation hamstrung by the fixed transaction fee forever. It seems to me that the valuation of Peercoin will never rise above what the consensus becomes for an acceptable transaction fee. So if that number is $1 USD equivalent, then 1 PPC will never be worth more than $100 USD, or will always naturally revert to that level.
The extra effect is that Peercoin, in this current design, could never be used as an inflation hedge. So it seems to me that for any technical argument that can be made for the current 0.01PPC fixed transaction fee, a better economics argument could be made against it.
I think a better solution would be to start with an estimate of an “acceptable” transaction fee. We should start with our estimate in USD. Let’s suggest that for a backbone asset that will be minimally traded, we’re willing to accept a transaction fee of $1 USD and use that as our baseline for determining a relative transaction fee for Peercoin.
We can then determine the total number of transaction fees in circulation to get an acceptable ratio. In the case of USD, the math is easy: 2.1 trillion supply / 1 USD acceptable fee = 2.1 trillion. Using 2.1T as our acceptable ratio, we can then divide the current supply of PPC, which is roughly 27 million, by 2.1T to get a similarly acceptable transaction fee of 0.0000129PPC. This is a formula that could be set programmatically into the protocol such that the transaction fee would automatically increase relative to the total supply of Peercoin increasing. So in effect, the transaction fee becomes the formula of total supply divided by the static constant of 2.1 trillion.
I would also propose that transaction fees be awarded to minters (a 1-3% general supply inflation is economically ideal) but that’s a different discussion.