Estimates of Peercoins long term inflation rate


#1

Could use some help trying to work out an estimate of Peercoins long term inflation rate from POS. Assuming long term all minting is from POS, I’d guess about 80% of Peercoins will be used for minting. So 0.8% - % destroyed in transactions. Any thoughts on final figure?


#2

www.peerchain.net is a good resource to use.

To start the conversation, where are you getting the “80%” number from?


#3

I assume 25-30 percent is used for minting, based on my personal blockrate in relation to my share of all peercoins

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#4

I can confirm this.

You can do the calculation yourself:
Every day, ~2110^6 coindays will be created and ~150 PoS-Block will be found. If all coins would be used to mint, the total consumed coindays per block would be ~2110^6/150=~140,000. But if you are looking into the ledger, you find that PoS blocks are found with 6000- 60,000 coindays. So there are maybe only 20% of the total coin-supply is on stake.

Maybe the percentage gets bigger if we enable minting while cold storage.


#5

I can confirm this.

You can do the calculation yourself:
Every day, ~2110^6 coindays will be created and ~150 PoS-Block will be found. If all coins would be used to mint, the total consumed coindays per block would be ~2110^6/150=~140,000. But if you are looking into the ledger, you find that PoS blocks are found with 6000- 60,000 coindays. So there are maybe only 20% of the total coin-supply is on stake.

Maybe the percentage gets bigger if we enable minting while cold storage.[/quote]

If there is not enough participation in minting only solution would be to raise interest rate to more then 1% or to have some floating (smart) interest rate.

Minting with cold storage would lead to centralization and would kill peercoin security, that’s probably why Sunny King didn’t implement it.


#6

Yes I think the minting participation is really big problem. I have a relatively small ammount of Peercoins minting 24/7, but found two blocks in a row two times (one time even within 2 minutes).

Please explain that, I don´t see why minting without unlocking the wallet should lead to centralization. In my opinion minting should be always enabled as soon as you start you wallet.


#7

[quote=“MUTO, post:6, topic:2042”]Yes I think the minting participation is really big problem. I have a relatively small ammount of Peercoins minting 24/7, but found two blocks in a row two times (one time even within 2 minutes).

Please explain that, I don´t see why minting without unlocking the wallet should lead to centralization. In my opinion minting should be always enabled as soon as you start you wallet.[/quote]

I’ll try to explain it short and clear.

  1. Minting with cold storage would mean that you are able to mint a block without using your private key in that process.
  2. If that is possible then people would let third parties to mint blocks instead of them just because of convenience.
  3. Those third parties would mint for a lot of holders and they would be centralized points able to create long secret chains and double-spend frequently.

#8

Weil, that is true if it is really possible with out the (encrypted) privatkey. But I See that as speculations as long as it is not implemented and for sure there is a solution for this. But you may be right, that this is the problem because of that sunny didn’t enable it so far

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#9

Can I re-emphasize ‘long term’. Lets say 15 years time. I’m assuming if Peercoin succeeds it will be worth a lot more by then, so incentive to mint will be higher. 80% was my guess. Really meaning ‘most’, as obv some wont be due to laziness, spending, transferring etc.

Any guesses as to what the average inflation will be in 15 years time?


#10

Only Proof-of-Work Mining causes real Inflation in Peercoin, minting doesn’t, as long as you participate in minting.

Minting ROI is 1% for all holders, so the new coins get distributed proportionally.
Imagine the United Kingdom would join the Eurozone. 1 British Pound is worth a little bit more than 1 Euro.
So every holder of British Pounds would have a little “more” money once they have Euros instead of British Pounds.
Would that be inflation?

In Peercoin, you only suffer inflation from minting if you do not participate.

So the whole calculation that you want to do is pointless I would say.
The interesting part of your question is how many % of peercoin-holders are minting, because that is important for the network stability. And that has already been answered.


#11

[quote=“petar87, post:7, topic:2042”]1. Minting with cold storage would mean that you are able to mint a block without using your private key in that process.
2. If that is possible then people would let third parties to mint blocks instead of them just because of convenience.
3. Those third parties would mint for a lot of holders and they would be centralized points able to create long secret chains and double-spend frequently.[/quote]

People will put their money in banks, instead of under the mattress, as long as banks promise to safe guard the money, because putting money under the mattress is not safe. So minting without the private keys could result in less PPCs in the bank.


#12

Can I re-emphasize ‘long term’. Lets say 15 years time. I’m assuming if Peercoin succeeds it will be worth a lot more by then, so incentive to mint will be higher. 80% was my guess. Really meaning ‘most’, as obv some wont be due to laziness, spending, transferring etc.

Any guesses as to what the average inflation will be in 15 years time?[/quote]if we assume no inflation from the PoS minting, than only the PoW mining counts. So to answer the inflation question we would only need the current PoW data and a prediction of the mining in the next 15 years. I guess we need to work with a few assumptions for the prediction as there are at least two dependencies, the value of PPC and the mining capacity which influence the difficulty and with that determine how many coins will be mined in a given period. Anyone for an educated guess based on the actual data (see link below).

Just found this post from Kactech: https://www.peercointalk.org/index.php?topic=1984
So it was about 7.5% mid January this year and decreasing.


#13

[quote=“Ötzi, post:10, topic:2042”]Only Proof-of-Work Mining causes real Inflation in Peercoin, minting doesn’t, as long as you participate in minting.

Minting ROI is 1% for all holders, so the new coins get distributed proportionally.
Imagine the United Kingdom would join the Eurozone. 1 British Pound is worth a little bit more than 1 Euro.
So every holder of British Pounds would have a little “more” money once they have Euros instead of British Pounds.
Would that be inflation?

In Peercoin, you only suffer inflation from minting if you do not participate.

So the whole calculation that you want to do is pointless I would say.
The interesting part of your question is how many % of peercoin-holders are minting, because that is important for the network stability. And that has already been answered.[/quote]

I think it’s an important question. Coins are being destroyed in transactions. Consider an equilibrium where all bitcoins have been mined and Peercoin is 100% PoS. If you participate in minting, the inflation cancels out and your holdings gain value from the deflation of coins being destroyed. This is a selling point. If Peercoin and Bitcoin held value equally, a Peercoin minter would do better in the long run.


#14

Can I re-emphasize ‘long term’. Lets say 15 years time. I’m assuming if Peercoin succeeds it will be worth a lot more by then, so incentive to mint will be higher. 80% was my guess. Really meaning ‘most’, as obv some wont be due to laziness, spending, transferring etc.

Any guesses as to what the average inflation will be in 15 years time?[/quote]if we assume no inflation from the PoS minting, than only the PoW mining counts. So to answer the inflation question we would only need the current PoW data and a prediction of the mining in the next 15 years. I guess we need to work with a few assumptions for the prediction as there are at least two dependencies, the value of PPC and the mining capacity which influence the difficulty and with that determine how many coins will be mined in a given period. Anyone for an educated guess based on the actual data (see link below).

Just found this post from Kactech: https://www.peercointalk.org/index.php?topic=1984
So it was about 7.5% mid January this year and decreasing.[/quote]

Interesting. I was assuming PoW would be gone in 15 years. I think saying [PoS minting ~= Transaction destruction] seems to be a good enough estimate. It’s a bit quick and dirty, but makes explaining things easier and it seems reasonable.


#15

PoW will never* be removed from Peercoin; it may reach an equilibrium where the reward is slightly above the cost of a transaction, but it’s an integral part of the protocol.

  • “Never” in this case means it is not currently designed into the protocol to be automatically phased out. I cannot anticipate if there will be hard-forks in the future due to code changes, but I find it unlikely as PoW mining makes up a portion of the network’s stability and security, just like PoS minting does.

#16

[quote=“Ben, post:15, topic:2042”]PoW will never* be removed from Peercoin; it may reach an equilibrium where the reward is slightly above the cost of a transaction, but it’s an integral part of the protocol.

  • “Never” in this case means it is not currently designed into the protocol to be automatically phased out. I cannot anticipate if there will be hard-forks in the future due to code changes, but I find it unlikely as PoW mining makes up a portion of the network’s stability and security, just like PoS minting does.[/quote]

Thanks for the info.
So we have Long term Peercoin inflation = PoS Inflation (max 1%, likely?) +PoW Inflation (likely <1%?) + Transaction Inflation (likely ~ -0.5%?)

I’d guess this puts the actual inflation ~1%. If so, with minting you’d expect your holdings to hold value. It’s a shame as if we could say definitively that Peercoin will inflate at <1%, then with minting you’d expect your holdings to gain value. Which would be a nice selling point.


#17

Few weeks ago, I played a lot with various models of PPC inflation. They took into account many things, but at the end, all estimates of hashing power and transaction number are very unreliable. For this reason, I will not publish them and offer only a very simple model. On following picture, you see two curves. The blue one is PPC inflation if the hashing power keeps the same as is today. The wine-red curve is PPC inflation provided the hashing rate only increases according to Moore’s law. (Double every 18 months.)

  • Deflation by transaction fees is not included, currently it is negligible, but could be higher.
  • If price goes up, hashing rate will probably increase much more than in my model. In that case, the inflation will approach to 1% even quicker.

Unless PPC gets abandoned, the infation should definitely not be higher than the curves plotted. It could be, however, smaller.

For more technical readers: The curves are solutions of differential equations

y’[t] == k + y[t]/100
y’[t] == k (2^(-2 t/3))^(1/4) + y[t]/100

and y’[t]/y[t] is plotted. y[0] = 21 276 534, k = 817 019.