Just wanted to share an email I just sent to Dooglus over at Just-Dice to educate him more about Peercoin and try and get him to create a Peercoin Dice site. I know there are mixed feelings about gambling but my intentions are noble. I’ve used his site as an “investment” for BTC and would love to see more “investment” opportunities for Peercoiners. I think any large exposure we can get would help our cause. Here’s the email.
Without going into too much of a sales pitch I’ll tell you a bit about Peercoin.
Peercoin is currently #3 in mineable currencies behind Litecoin. Unlike most other currencies, Peercoin uses the proof of work/proof of stake hybrid model allowing for a more secure and less energy intensive coin. Instead of only relying on proof of work to confirm transactions, proof of stake enables a persons coins to generate new blocks by consuming the length of time you have held them in your wallet. Meaning that if I had 100 coins in my wallet for 30 days they would allow me to start confirming transactions and finding blocks without the needed difficulty that comes with proof of work. So if you have a difficulty in proof of work of say 1 million, the difficulty to generate a block in proof of stake would be say 7 (single digit). This is possible due to the prerequisite of having coins in your wallet and then destroying their coin age. This feature allows for much less energy intensive processes to run the network while creating a 1% inflation rate, forever. This does mean there is no “hard limit” but as of right now the inflation rate of Peercoin is actually lower than Bitcoin and Litecoin because block halving is based on difficulty change (every 16x) not # of blocks created. One other benefit to this design is that instead of needing 51% of the total hashing power to pull off an attack, you would need 51% of all coins in existance. This is because proof of work blocks and proof of stake blocks are being created in tangent to each other on the blockchain. As the difficulty gets higher, more and more coins are being “minted” exclusively through proof of stake instead of proof of work, meaning that eventually mining through proof of work will become less of an incentive than to just hold the coins and make 1% annually from the interest.
Hypothetically, from a business stand point, say I had 4000 coins invested in your dice site. If you had those coins for 30 days (minimum prerequisite for proof of stake to kick in) you would begin the proof of stake process and start generating blocks just by holding my coins. As of right now you would need to bring your wallet online in order to communicate with the network to mint them, but you could do this every couple months, mint the coins and then put them back into cold storage (offline) for safe keeping. Note that moving coins from one address to another destroys the coin age of the coins you move. This encourages saving, making Peercoin the “back-bone” savings account currency of the crypto world. So therefore, by holding my coins for 1 year (if I kept them there for that long) you would make 40 new coins! Of course if you had a ton of people moving coins in and out of the site, you could store the majority in a secure place (like you do) and never move them so they don’t destroy their coin age and you could make compound interest.
One minor flaw to making Peercoin a transactional currency is the designed high transaction fee. Whereas Bitcoin has a suggested transaction fee of around .0001 BTC, Peercoin has a required transaction fee of .01 PPC which is actually destroyed in the process instead of going to miners. This was put in place to discourage blockchain bloat while keeping the value stable. Making sending money more expensive, it is designed (in all of its aspects) for people to save it. This may sound like a bad idea to use for gambling, but as of right now, the transactional cost of Peercoin is actually cheaper than Bitcoin. $800 x .0001 = .08 vs $6 x .01 = .06. Of course the bitcoin fee structure is a little less rigid than that, but my point is that the current Peercoin fee structure is not at a discouraging point yet.
That was a lot longer than I though it would be. Sorry for the spam, I’m just very passionate about the implications of these features. I believe that proof of stake is an amazing innovative feature that if added to Bitcoin would leave it unstoppable (for the forseeable future). That being said, in the mean time, I plan to hedge my bets with other coins that solve real problems in innovative ways. The network effect is key (just look at Dogecoin) and I would love to see the network grow. That’s my spiel. I hope you look into this more in the future.