I think I'm finally starting to "get it,"

I was wondering if you fine people could help check my understanding on some concepts, and help to solidify them.

Peercoin is designed to be the savings account of cryptos.

Proof of work will eventually be phased out entirely, in time (how much time?) and the network will use pretty much only the resources consumed by the computers minting proof of stake. Making it more environmentally friendly.

The fixed transaction fee functions to incentivise people to save peercoin long term and minimize transactions, and disincentivise them from using it as a currency.

Annual inflation from proof of stake functions to offset the transaction fee after having saved the coin for at least a year. So people will eventually want to at least get their year out of their coin to cover the transaction fee.

When transactions happen, those fees get destroyed, offsetting the coins created by proof of stake some, and helping to keep the number of ppcoin in existence lower.

Because of peercoin’s intentional design as a coin to save money with, if peercoin comes to serve its purpose on a widespread level, and crypto comes to be ubiquitous, then the fact that most of worlds wealth is being stored in savings accounts and bonds, means that peercoin’s target userbase’s funds represent the biggest chunk of the potential crypto market cap (those who want to gain safe interest on their savings, like a savings account or bond would in the old system).

So when people finally figure out what the different cryptos are used for, peercoin is going to get slammed with everybody’s long term savings. Also, the fact that people are incentivised to save for at least a year means that the supply of cryptos available will be much lower than similar markets for other coins, that don’t penalize people for transacting. This means that at some point in the future we’re going to see huge demand from people wanting to establish their stakes converge with limited supply in a market that encourages people to save their coin and gain interest. That sounds like a recipe for a sky-rocketing coin price to me.

Because peercoin is intended to be used this way, if it eventually grows to fill the niche carved out for it then it becomes the most lucrative potential investment in the crypto market today.

I see people using whatever currency ends up being popular for buying bread (sunny proposed primecoin for this, which supplements peercoin by using the PoW necessary for day to day transaction to also contribute to science by finding cunningham chains, but I wonder if an already established coin like litecoin might end up filling this role instead simply because it was the first to become established) to save up to buy some fraction of bitcoin. People would save up to buy bitcoin (or take loans from the new banks), and use those to buy, houses, cars, and other expensive goods and services that you wouldn’t need to pay for with Litecoin/Primecoin/Quark/whatever takes hold. One could then convert that btc to ppc if they wanted to save their wealth for a few years and gain interest.

I do have one question: For proof of stake minting, does that force you to not use a cold wallet, if you want to be able to claim your PoS mint? My understanding currently is that to be able to get PoS, and the compounding interesting that results from discovering blocks more often, I would have to fire up the client every few months and run a ./ppcoind walletpassphrase. Is that correct? I really need this part clarified.

Am I missing/misunderstanding anything? I think I’m almost more bullish on peercoin than I am bitcoin now…

See. this is exactly the thing I’ve been worried about… If people “get it” too soon. Peercoin’s value will skyrocket, and we don’t want that right now, well, at least I don’t. There is a time to be popular, and I don’t think we want to be too popular until 0.5 is out and the rest of our “presskit” is finished and ready.

I think we should keep the real meaning of Peercoin quiet in the interim.

dont worry. i have no life.

the masses are still a helluva long ways off from catching on to this one. they’re just now starting to accept bitcoin as legitimate… a little… not much…

Except not. The economic function of savings accounts is to allow that money to flow freely in the economy in the form of credit issued by the bank. If banks stopped lending money and raised all their fees, that would imitate Peercoin, except they don’t do that because they can make more money lending it out. In the long run there are much better investments to make with your money than just letting it sit and “appreciating” with inflation.

If you think the price of the coin is going to appreciate and you use that as a reason for putting your savings into Peercoin, that’s called speculation, and does not correspond to a fundamental economic reason for the value of the coin to rise. On the other hand, with lower transaction fees, Peercoin becomes a real currency that people aren’t scared of spending (and hence losing lots of value on), and then maybe people will want to put it into savings. Remember there’s already something good for savings that exists, it’s called a savings account at a bank.

Hmm… concavecircle, the few posts you’ve written as of this date, seem to be talking in support of banks and the current fiat financial system.

If you read between your lines of previous posts, it would be a good hypothesis that you work in the banking industry.

I’m not sure what you’re doing here, if you don’t believe in cryptocurrency of any sort. Are you simply trying to rally support for banks?

concavecircle, you’re one person I’m not going to go in circles discussing things with… You’ve obviously drawn your line in the sand already.

[quote=“concavecircle, post:4, topic:1173”]Except not. The economic function of savings accounts is to allow that money to flow freely in the economy in the form of credit issued by the bank. If banks stopped lending money and raised all their fees, that would imitate Peercoin, except they don’t do that because they can make more money lending it out. In the long run there are much better investments to make with your money than just letting it sit and “appreciating” with inflation.

If you think the price of the coin is going to appreciate and you use that as a reason for putting your savings into Peercoin, that’s called speculation, and does not correspond to a fundamental economic reason for the value of the coin to rise. On the other hand, with lower transaction fees, Peercoin becomes a real currency that people aren’t scared of spending (and hence losing lots of value on), and then maybe people will want to put it into savings. Remember there’s already something good for savings that exists, it’s called a savings account at a bank.[/quote]

concave, a savings account in a bank can be taken away from me at the whim of some guy with money. I don’t trust that.

I was thinking about a world where crypto has become as ubiquitous as fiat (if it’s going to). In that world, all crypto has a much higher market cap, and because rich people cant afford to pump and dump anymore, there is much more price stability.

In that potential future, 1% a year is a decent return on your investment (since crypto would largely be maxed out already, and nobody will trust the legacy system anymore)

[quote=“WishIStartedSooner, post:6, topic:1173”][…]
In that potential future, 1% a year is a decent return on your investment (since crypto would largely be maxed out already, and nobody will trust the legacy system anymore)[/quote]

It might, effectively, be even more than roughly 1% per year, once there’s an equilibrium between created (PoS, PoW) and destroyed (transaction fee) Peercoins.
If you don’t transfer money, but take part in the PoS process, you not only gain ~1% reward per year by staked Peercoins. Your share of the total amount of available Peercoins gets increased!

This depends on the percentage of Peercoins destroyed by transactions.

An equilibrium means that both the created and destroyed Peercoins are at a rate of roughly 1% of the Peercoin supply.

Say 1% of all the issued coins get destroyed per year by transaction fees and you own x% of all Peercoins. If you don’t transfer Peercoins you keep your amount of Peercoins stable, but they will be ~1.01*x% of all Peercoins after 1 year (precisely 1/0.99=100/99 x%). If you take part in the PoS process, your reward per year in that scenario is closer to 2% than to 1%

Warning: confusing (but hopefully correct) calculation incoming!
I don’t know when and at what number of issued Peercoins there will be a kind of equilibrium. I bet it will take some more time to establish that…
To get a feeling for the creation of Peercoins, I tried to create a thumb rule for the (current!) ratio between PoS and PoW rewards and an estimation for the created Peercoins in the last 2016 blocks.
I’ve taken a look at the last 2016 blocks (just to be close to a time frame of 2 weeks). I limited that to the last 2016 because the difficulty has been more or less stable in that time (between ~25 mio. and ~29 mio.).
In total 301 PoW blocks have been amongst those 2016 blocks. So we have a ratio of 0.149 for PoW/PoS or roughly 1 in seven blocks is a PoW block.
The PoW reward should have been (by average) close to 139 PPC per PoW block (forgive me my lazyness, but I don’t want to calculate the exact values and I doubt it makes much of a difference)[sup]1[/sup].

This equals a total reward for those PoW blocks of 41872 PPC.

Current money supply of PPC is 20924107. Given a 1% per year PoS reward rate this could make roughly 7472 PPC by PoS minting (which is much harder to calculate, because you need to know the amount of Peercoins that is used for the PoS process, etc… 20924107*0.01/28=7472; 0.01 because of the 1% POS reward per year and 28 because it is 28 times 2 weeks per year).

So the last 2016 have created ~49344 PPC or ~24 PPC per block (in average).
To have an equilibrium there would have been the need for 2400 transactions (average) per block. We had a bit more than 7 transactions per block (average: 7.04). That destroyed ~140 PPC. You can safely ignore that compared to the 49000 PPC created.
Looks like we have some way to go, before there is an equilibrium and you have an effective increase of more than 1% per year by PoS minting and destroying transaction fees :wink:
Current growth rate of Peercoin supply (once again derived from the last 2016 blocks) is roughly 6.6% (28*49344/20924107=0.066).

But one day I assume this thought plays some role…

[sup]1[/sup] ok, I did calculate it as I had to crunch some other numbers: the average PoW reward for the 2016 blocks (from 84046 to 86061) was 139.11 PPC

[quote=“masterOfDisaster, post:7, topic:1173”][quote=“WishIStartedSooner, post:6, topic:1173”][…]
In that potential future, 1% a year is a decent return on your investment (since crypto would largely be maxed out already, and nobody will trust the legacy system anymore)[/quote]

It might, effectively, be even more than roughly 1% per year, once there’s an equilibrium between created (PoS, PoW) and destroyed (transaction fee) Peercoins.
If you don’t transfer money, but take part in the PoS process, you not only gain ~1% reward per year by staked Peercoins. Your share of the total amount of available Peercoins gets increased!

This depends on the percentage of Peercoins destroyed by transactions.

An equilibrium means that both the created and destroyed Peercoins are at a rate of roughly 1% of the Peercoin supply.

Say 1% of all the issued coins get destroyed per year by transaction fees and you own x% of all Peercoins. If you don’t transfer Peercoins you keep your amount of Peercoins stable, but they will be ~1.01*x% of all Peercoins after 1 year (precisely 1/0.99=100/99 x%). If you take part in the PoS process, your reward per year in that scenario is closer to 2% than to 1%

Warning: confusing (but hopefully correct) calculation incoming!
I don’t know when and at what number of issued Peercoins there will be a kind of equilibrium. I bet it will take some more time to establish that…
To get a feeling for the creation of Peercoins, I tried to create a thumb rule for the (current!) ratio between PoS and PoW rewards and an estimation for the created Peercoins in the last 2016 blocks.
I’ve taken a look at the last 2016 blocks (just to be close to a time frame of 2 weeks). I limited that to the last 2016 because the difficulty has been more or less stable in that time (between ~25 mio. and ~29 mio.).
In total 301 PoW blocks have been amongst those 2016 blocks. So we have a ratio of 0.149 for PoW/PoS or roughly 1 in seven blocks is a PoW block.
The PoW reward should have been (by average) close to 139 PPC per PoW block (forgive me my lazyness, but I don’t want to calculate the exact values and I doubt it makes much of a difference)[sup]1[/sup].

This equals a total reward for those PoW blocks of 41872 PPC.

Current money supply of PPC is 20924107. Given a 1% per year PoS reward rate this could make roughly 7472 PPC by PoS minting (which is much harder to calculate, because you need to know the amount of Peercoins that is used for the PoS process, etc… 20924107*0.01/28=7472; 0.01 because of the 1% POS reward per year and 28 because it is 28 times 2 weeks per year).

So the last 2016 have created ~49344 PPC or ~24 PPC per block (in average).
To have an equilibrium there would have been the need for 2400 transactions (average) per block. We had a bit more than 7 transactions per block (average: 7.04). That destroyed ~140 PPC. You can safely ignore that compared to the 49000 PPC created.
Looks like we have some way to go, before there is an equilibrium and you have an effective increase of more than 1% per year by PoS minting and destroying transaction fees :wink:
Current growth rate of Peercoin supply (once again derived from the last 2016 blocks) is roughly 6.6% (28*49344/20924107=0.066).

But one day I assume this thought plays some role…

[sup]1[/sup] ok, I did calculate it as I had to crunch some other numbers: the average PoW reward for the 2016 blocks (from 84046 to 86061) was 139.11 PPC[/quote]

Thank you for clarifying that! I’ll have to read over it a few times but I think I get what you’re saying. The equilibrium you speak of would limit the production of new coins to near zero (after PoW is gone), right?

But you’re saying that that equilibrium is pretty far off, and that because of that, less coins will be destroyed that PoS, mints, while peercoin continues to grow. And that because of that inflation your PoS reward will be a little more inflated than it would be if created when ppc has reached maturity. And also that technically, since your interest would compound, you’d actually get about 2% a year from equilibrium PoS mining (or not account for inflation) Am I grasping this correctly?

I’m kinda rushing to get around for work right now, I will give this post a deeper thinking a little later tonight.

Thank you for your input.

The (supply!) equilibrium I mentioned is:
the total amount of created Peercoins (by PoW and PoS rewards) equals the total amount of Peercoins destroyed by transaction fees.
There are other equilibriums you can think of, e.g. when PoS minting gives your Peercoins a growth rate that is equal to the growth rate of total supply. Let’s call it growth equilibrium! I’ll get back to that later :wink:

[quote=“WishIStartedSooner, post:8, topic:1173”]But you’re saying that that equilibrium is pretty far off, and that because of that, less coins will be destroyed that PoS, mints, while peercoin continues to grow. And that because of that inflation your PoS reward will be a little more inflated than it would be if created when ppc has reached maturity. And also that technically, since your interest would compound, you’d actually get about 2% a year from equilibrium PoS mining (or not account for inflation) Am I grasping this correctly?
[…][/quote]

If you read it as “pretty far off”, I need to clarify that. What I meant was more like: we don’t have equilibrium yet - but maybe soon enough!
:slight_smile:
At Bitcoin network you have an average transaction number of 326.784
This is the current value from http://blockexplorer.com/q/avgtxnumber, although I don’t know the number of blocks that have been taken for this average value. It is likely to be the overall average.

The Bitcoin blocks 275250 to 275269[sup]1[/sup] had an average transaction number of 411.9 per block (varying from 26 to 1217) and a block size average of 203 kB (varying from 9.16 kB to 537.6 kB). Unluckily I don’t know what part of the block is caused by transactions and what part is independent from transactions. But I think most of the block’s size is originated by transactions as transactions are the main data in the block.
Ignoring the fixed value the average size per transaction was 0.55 kB (varying from 0.35 to 1.15).

As Peercoins PoW is mainly derived from Bitcoin, I assume that transactions cause similar sizes.

If Peercoin had an average transaction number of > 400 per block, > 4 PPC per block would be destroyed with current transaction fees (assuming that you pay 0.01 PPC for each started 1 kB chunk would cause even higher fees, because you had to pay 0.02 PPC once the transaction size did exceed 1 kB or 0.03 PPC for > 2 kB; 4 PPC is the absulote minimum in that scenario!).

That is not yet close to the 24 PPC that are issued at average (estimate for the blocks from 84046 to 86061 and referring to my last post).
But: the Peercoin PoW reward decreases not as a function of block height (like with Bitcoin: reduced by half each 210,000 blocks), but as a function of difficulty: 9999/diff^1/4.
In other words: the PoW rewards is halved if the difficulty is 16-folded.

If you compare the Peercoin hash rate with the Bitcoin hash rate, you find that the

[ul][li]Peercoin hash rate is close to 50 TH/s at the moment (2013-12-15): http://bitinfocharts.com/comparison/hashrate-ppc.html and the[/li]

[li]Bitcoin hash rate is 8.89 PH/s = 8,890 TH/s: http://bitinfocharts.com/comparison/hashrate-btc.html
[/li][/ul]

If all Bitcoin miners were turned to Peercoin that would 177-fold the hash rate and hence the difficulty.
That would decrase the PoW reward from current 136 PPC to approximately 37 PPC per block (9999/(29,000,000177)^1/4).
And that would have changed my previous calculation to 301
37 PPC = 11,137 PPC for the PoW rewards.
Together with the 7472 PPC for PoS rewards it would have been atotal reward of 18,609 PPC for those 2016 blocks or 9.23 PPC at average per block.
As you see that would be close to the 4 PPC destroyed per block if you calculate with the current Bitcoin hash rate and transaction rate. And that is still the beginning… :wink:
At that rate the Peercoin network would issue only a plus of roughly 300,000 PPC per year (52,560 blocks/year * 5.23 PPC/block = 274,888 PPC/year).

At that rate you wouldn’t have your relative share of Peercoins increased by PoS minting, but you already had 1% growth in your wallet in relation to 1.4% growth in total supply (274,888/2,092,4107 = 0.013 = 1.3%)

So we might be closer to that growth equilibrium than you might have thought in first place!

What makes a precise calculation difficult is the connection between PoS and PoW difficulty.
But take it as a rough estimate.

To be clear: I don’t expect all Bitcoin miners to turn to Peercoin instantly.
But I expect Peercoin to be joined by former Bitcoin miners once they realize that they earn more by mining Peercoins.
And as there are several dozen PH/s of SHA-256 announced for 2014, I guess at least some TH/s will join Peercoin :wink:
I know that parts of the calculations are based on assumptions and roundings. But I hope that it’s overall not too far off.

[sup]1[/sup] “latest blocks” from http://blockexplorer.com/; at the time of the report with the given blocks

Number	Hash		Time		Transactions	Total BTC	Size (kB)	Size (kB) per Transaction	
275250	ab45030e33... 	16.12.13 16:15	646		10372.84258734 	248.58		0.38	
275251	27fe590ab9... 	16.12.13 16:14	69		3742.72923366 	32.74		0.47	
275252	702703f84a... 	16.12.13 16:35	915		23250.26345043 	349.07		0.38	
275253	219c7a9ebd... 	16.12.13 16:46	807		14036.33331529 	460.74		0.57	
275254	1340ff27fb... 	16.12.13 16:45	26		4738.04919292 	9.16		0.35	
275255	26b63bc67d... 	16.12.13 16:45	124		33451.57989148 	142.34		1.15	
275256	2ed368b4fe... 	16.12.13 16:48	88		3585.27992157 	32.58		0.37	
275257	27ff4e717f... 	16.12.13 16:59	629		17663.27666783 	248.95		0.4	
275258	13ff472035... 	16.12.13 17:08	534		8230.30869885 	301.95		0.57	
275259	439b1b4994... 	16.12.13 17:29	705		17975.91414859 	249.06		0.35	
275260	3c9b4d3b65... 	16.12.13 17:30	400		6156.46082265 	219.13		0.55	
275261	149b185414... 	16.12.13 17:34	387		9580.73113721 	190.53		0.49	
275262	2d3a5dd479... 	16.12.13 17:41	406		11174.44324506 	205.29		0.51	
275263	24d09ff423... 	16.12.13 17:41	226		54525.04687244 	149.1		0.66	
275264	3f261b59ee... 	16.12.13 18:00	1217		28141.11787659 	537.63		0.44	
275265	466b5faf1b... 	16.12.13 18:05	374		7901.06915157 	248.82		0.67	
275266	32f7f9424a... 	16.12.13 18:08	281		172483.55204016 149.11		0.53	
275267	147eaf0279... 	16.12.13 18:11	136		7675.40951744 	66.27		0.49	
275268	194c19f6ff... 	16.12.13 18:11	138		3563.83842094 	72.16		0.52	
275269	3121f40586... 	16.12.13 18:13	130		45789.47699972 	149.19		1.15	
							
								average	203,12		
								min	9,16		
								max	537,63		
							
											0,55	average
											0,35	min
											1,15	max

I don’t think compound interest plays a very big role.
Note that you don’t get 1% interest per PoS mint. Instead you get 1% per year that you had the coins. For example, if you had your coins for 2 years before you finally minted a PoS block, your PoS reward would be 2% of those coins. Likewise if you had them for only 6 months, you would get only 0.5%.

If you look at the effective annual interest rate, taking compound interest into account, you can see that there is not much difference between a yearly interest payment of 1% versus a once-every-10-years payment of 10%. (I made a very nice plot but the forum does not want to show it.)
Of course if you mint only once in 10 years, you can not touch your coins for all that time or you will lose your unpaid interest up to that point.

At current difficulty, if you have 1000 PPC at 90 days age, you need to run your miner for (6.6 * 2^32 / 90 / 1000 / 3600 / 24) = 3.6 days straight to mint a block.

Note that a PoS block can only draw interest for coins that are held on the same address. If you hold your coins on multiple addresses, the effective time between interest payments will be longer.

[quote=“ppcman, post:5, topic:1173”]Hmm… concavecircle, the few posts you’ve written as of this date, seem to be talking in support of banks and the current fiat financial system.

If you read between your lines of previous posts, it would be a good hypothesis that you work in the banking industry.

I’m not sure what you’re doing here, if you don’t believe in cryptocurrency of any sort. Are you simply trying to rally support for banks?

concavecircle, you’re one person I’m not going to go in circles discussing things with… You’ve obviously drawn your line in the sand already.[/quote]

Saying the system works well is different from saying it is perfect. Sure in theory the bank can try to screw you over and potentially bribe regulators to let themselves get away with it, but you don’t see billionaires hoarding their money.

The reason you need something that is very similar to US dollars is because it mostly works well. Banking is profitable because it provides value. Why is this so hard to see? If you distrust the bank so much, have you withdrawn all your cash yet?

The reason I signed up on this board is because I think there is value to having decentralized currency, and I think it can really take off. However it is very troubling that people like you decide to ignore basic economics, and I think that’s the biggest danger to the movement.

[quote=“singlethread, post:10, topic:1173”][…]
For example, if you had your coins for 2 years before you finally minted a PoS block, your PoS reward would be 2% of those coins.
[…]
At current difficulty, if you have 1000 PPC at 90 days age, you need to run your miner for (6.6 * 2^32 / 90 / 1000 / 3600 / 24) = 3.6 days straight to mint a block.[/quote]

I thought the coin-age would be capped at 90 days (although I couldn’t find that in the source code due to lacking programming skils…)?
Is there a difference between the age that is accounted for having success in PoS minting and the reward that is calculated for that success?

Do you know about a relation between the PoS difficulty and the PoW difficulty?
It would be nice to have a connection between those difficulties, because otherwise it will be hard to phase out PoW…

[quote=“masterOfDisaster, post:12, topic:1173”]I thought the coin-age would be capped at 90 days (although I couldn’t find that in the source code due to lacking programming skils…)?
Is there a difference between the age that is accounted for having success in PoS minting and the reward that is calculated for that success?[/quote]

Yes, there are two kinds of coin age.

  • One is the coin age that determines when you are eligible to mine a PoS block. This is (coin value) * (days since last tx, capped at 90 days, minus 30 days).
    (code slightly simplified, see kernel.cpp)
    [tt]STAKE_MAX_AGE = 60 * 60 * 24 * 90;
    nStakeMinAge = 60 * 60 * 24 * 30;
    int64 nTimeWeight = min(nTimeTx - txPrev.nTime, STAKE_MAX_AGE) - nStakeMinAge;
    CBigNum bnCoinDayWeight = CBigNum(nValueIn) * nTimeWeight / COIN / (24 * 60 * 60);[/tt]

  • The other kind is the coin age that determines your PoS minting reward. This is simply 0.01 * (coin value) * (time since last tx) / year.
    (code simplified, see main.cpp)
    [tt]nCoinAge = SUM( nValueIn * (nTime - txPrev.nTime) ) / COIN / (24 * 60 * 60);
    int64 nSubsidy = nCoinAge * 33 / ( 365 * 33 + 8 ) * CENT;[/tt]

Do you know about a relation between the PoS difficulty and the PoW difficulty? It would be nice to have a connection between those difficulties, because otherwise it will be hard to phase out PoW...
PoS difficulty is managed to keep the average time between PoS blocks at 10 minutes. I don't precisely understand PoW difficulty. It looks like the PoW block interval is kept between 10 and 120 minutes based on seemingly arbitrary rules. See also here http://www.peercointalk.org/index.php?topic=504.0

PoW is not in the process of being phased out. The ratio PoS:PoW blocks will remain between 1 and 12. As the PoW hash rate goes further up, up, up, the reward per PoW block will gradually decrease. This should result in an equilibrium at some point.

[quote=“singlethread, post:13, topic:1173”][…]
PoW is not in the process of being phased out. The ratio PoS:PoW blocks will remain between 1 and 12. As the PoW hash rate goes further up, up, up, the reward per PoW block will gradually decrease. This should result in an equilibrium at some point.[/quote]

Thank you for your explanations, especially for the linked thread.
Now it appears even more profitable to continually take part in the PoS minting process.
In my misunderstanding the reward would also continue based on the age since last tx minus 30 days.
So it is good to have a PoS miner continuously running to get interest and compound interest!

I know that the PoW is not yet planned to be phased out.
It was more like my vision of Peercoins future.
I’m quite interested in the economical and technical aspects of Peercoin and try to understand it better and maybe improve it if I can.
And that is why the thought “at some point of time phasing out PoW should be considered” crossed my mind.
With PoW it is only relatively energy efficient compared to PoW only concepts!
…without PoW Peercoin can to be really energy efficient.

Referring to this post:

[quote=“singlethread, post:5, topic:361”][…]
The block reward (or amount) depends on difficulty (number of coins = 10000 / difficulty[sup]1/4[/sup]). The PoW block spacing (frequency) bounces around between 10 minutes and 120 minutes depending on the recent block spacing of PoW and PoS combined. The question is, why?[/quote]

Increasing the limits of PoW block spacing could do the trick and be the start of phasing out PoW.
Once again: this is only an idea for future and might better be discussed in a separate thread!
Do you think it might be a good idea to do that? I mean, it is very early to discuss these things now, but just like the fixed transaction fee discussion I appreciate leading these kinds of discussions rather early than late.

I think phasing out the PoW should be on Peercoins agenda!
By rule of thumb Peercoin is (with PoW hash rate at the same level of a PoW only concept) much more energy efficient and needs with a PoW block spacing of 120 minutes (the current maximum) only 1/12 of the energy that a PoW concept needs (assumption: the same type of mining devices) to secure the blockchain. This is only a rule of thumb, but I think it is clear that even “energy efficient” Peercoin has the ability to largely waste energy! With a Peercoin PoW hash rate as high as Bitcoin’s current hash rate, the PoW reward would still be close to 40 PPC per PoW block. Even maxed out to 120 minutes spacing, this could be enough incentive to operate PoW mining devices.
Peercoin’s energy efficiency could be even more impressive than that!
Peercoin could need close to 0 energy with PoS only or PoW block spacing of up to [please put a reasonably high number here] minutes.

For reference: I have Peercoin running on a RaspberryPi causing 20% CPU load - and that RaPi is needing roughly 3 Watts (without load 2.5 Watts). So I take part in the PoS process with an extra of 0.5 Watts.
Wouldn’t it be cute to phase out PoW considering the low amount of CPU power is needed for PoS? This could run well on a mobile phone (although you had to reload it more often; or you could schedule that to happen over night while it is loading anyway).

I believe the primary function of PoW blocks is to distribute the initial coins. This process is not finished, and I think it needs to run its course. The peercoin economy, PPC price, people’s willingness to trade PPC etc. is partly based on the “promise” that coin creation through PoW will gradually decline over many years. If you accelerate the decline of PoW coin creation, you break that promise. I don’t have the expertise to predict how that would influence the economy. If people start to see PPC as an early-adopter-only coin, it might be the end of the PPC economy.

I suspect that the distribution of PPC among people is very skewed, i.e. a small group of people holding most of the coins. Perhaps even more so than in bitcoin. I’m planning to take a better look at it soon (if anybody here has information on this subject, please share). Without continued coin creation via PoW, a skewed coin distribution will be more problematic.

By rule of thumb Peercoin is (with PoW hash rate at the same level of a PoW only concept) much more energy efficient and needs with a PoW block spacing of 120 minutes (the current maximum) only 1/12 of the energy that a PoW concept needs (assumption: the same type of mining devices) to secure the blockchain.
I don't see how you derive 1/12 of the energy. Assuming hash rate is at the same level, energy is also at the same level right? For a quantative comparison of efficiency, you need a precise mathematical definition of what you mean by "efficiency".

A PoS-only system is an attractive idea. The unbounded waste of energy is one of bitcoin’s biggest problems in my opinion. But distributing the coins is going to be a problem with PoS-only. Also, I have seen a convincing argument against the security of a PoS-only system (https://bitcointalk.org/index.php?topic=101191.0). I would love to see a discussion between experts to get to the bottom of such issues. Unfortunately many discussions end in a flamewar before the experts even arrive at the scene.

I’d love to see a discussion between experts - on an appropriate level! - as I believe this is how things evolve into something better.
Unfortunately I’m no expert, but I have this strange idea that I can think constructively…

[…]
The peercoin economy, PPC price, people’s willingness to trade PPC etc. is partly based on the “promise” that coin creation through PoW will gradually decline over many years.
[…]
Without continued coin creation via PoW, a skewed coin distribution will be more problematic.[/quote]

Agreed. And as I see, we agree that the promise is a gradual decline of coins produced by PoW :slight_smile:
I only doubt that the currently integrated mechanism of reducing the PoW reward as a function of a rising hash rate is sufficient to really call Peercoin energy efficient. It is more energy efficient than “PoW only” coins but it could be more energy efficient with even less PoW blocks (or less energy consumed for creating those blocks). The current minimum for PoW blocks seems to aim at 1/12 of totally created blocks (desired maximum block spacing of 120 minutes for PoW compared to 10 minutes average block spacing at Peercoin).
Finally I got confused by that “1/12”:

[quote=“singlethread, post:15, topic:1173”][…]
I don’t see how you derive 1/12 of the energy. Assuming hash rate is at the same level, energy is also at the same level right?
For a quantative comparison of efficiency, you need a precise mathematical definition of what you mean by “efficiency”.[/quote]

You are absolutely right; 1/12 is nonsense. The energy would be at the same level. And Peercoin would in that case consume as much energy as the coin that it gets compared with.
For sure you need a definition to measure efficiency. You could measure the consumed energy per transaction, per secured value, etc.

But no matter how you try to calculate the efficency: it will look worse with huge amounts of energy consumed by PoW that it’d look like with much less energy consumed by PoW…
The thing is: as long as there is PoW and the reward is calculated as a function of hash rate, it will not stop. Right now it is needed for coin distribution. But it will never really stop, if the parameters stay the same. Once miners drop off, the hash rate goes down and the reward increases, attracting new/old miners.
Maybe PoW is needed all the time. My call would then be: decrease the reward at some point of time in the future even further to lower the incentive for PoW mining - although that would (from my understanding) require a hard fork. It looks like countermeasures to high energy consumption for Peercoin’s PoW are not yet necessary, but I think they might become one day.
A rising Peercoin price incentivizes miners even if the PoW rewards drop by increased hashing power…
…that’s not the way to energy efficiency!

I agree that “PoS only” sounds attractively.
I tried to figure out what Gavin meant. I’ve come to the conclusion that the attack vector described by him is valid. But it largely depends on the implementation of Peercoin’s PoS whether Peercoin is vulnerable to that.

Just like Sunny wrote in reply to Gavin’s post:

[quote=“Sunny King from bitcointalk.org”]https://bitcointalk.org/index.php?topic=101191.0.msg1106145#msg1106145 date=1345179268
There are different ways of designing proof-of-stake. Some of the designs do not require collecting large number of signatures. Our design will be made public by the coming Sunday so in due time we welcome the crypto-currency/Bitcoin community to examine our design.[/quote]

Does Peercoin’s design require collecting large numbers of signatures for PoS blocks?
As far as I understand it, this is no requirement.
But even if it is no requirement - can it be done that way? Can you perform a DoS on Peercoin’s PoS process by inserting large numbers of signatures that need to be verified?

I followed the two links at the end of that thread. The one I find especially interesting is the following one, because it deals with tx fees and two attack vectors amongst mitigation for those (my question would be: does this apply to Peercoin?):

[quote=“cunicula at bitcointalk.org”]https://bitcointalk.org/index.php?topic=99735.msg1112992#msg1112992
As I understand it, you are not distributing txn fees to proof-of-stake ‘miners’. Instead, you are destroying txn fees. Is that right?

I am concerned that proof-of-stake miners may fail to include txns in the blockchain, since inclusion does not benefit them.

Also, as I understand it, you can contribute stake without necessarily submitting significant work to accompany it. There are two issues with this:

  1. It make double-spend attacks easier because they no longer have meaningful hardware and electricity requirements.
  2. Stake-owners might create alternate histories. i.e. Say I utilize aged coins at block t to mine a block. At block t-1, my aged coins still exist and can be used to mine another block. If I have nasty inclinations, I could utilize my aged coins multiple times and create several different branches at block t. Subsequent miners would not be able to easily distinguish which one of these branches is the “correct” fork and thus add to them all.

If you require significant work to accompany stake (e.g. by making the proof-of-work difficulty target a decreasing function of the aged coin stake accompanying the work), then you could avoid problem 2 entirely. I suspect that you could also substantially alleviate problem 1 as well. I believe that incorporating a significant proof-of-work submission would substantially increase the number of aged coins you need to successfully carry out a double spend (fixing the probability of success and the number of blocks you are trying to roll back).

I hope that you will look for ways to address double-spends without relying on the stop-gap measure of checkpoints. Checkpointing is quite unpopular. Incorporating a larger proof-of-work component and requiring people to wait longer to have confidence in the irreversibility of high-value sends might be a better solution.

Anyways, delightful to see a beta and I hope people will play around with attacking it.[/quote]

[quote=“masterOfDisaster, post:16, topic:1173”]But no matter how you try to calculate the efficency: it will look worse with huge amounts of energy consumed by PoW that it’d look like with much less energy consumed by PoW…
The thing is: as long as there is PoW and the reward is calculated as a function of hash rate, it will not stop. Right now it is needed for coin distribution. But it will never really stop, if the parameters stay the same. Once miners drop off, the hash rate goes down and the reward increases, attracting new/old miners.
Maybe PoW is needed all the time. My call would then be: decrease the reward at some point of time in the future even further to lower the incentive for PoW mining - although that would (from my understanding) require a hard fork. It looks like countermeasures to high energy consumption for Peercoin’s PoW are not yet necessary, but I think they might become one day.
A rising Peercoin price incentivizes miners even if the PoW rewards drop by increased hashing power…
…that’s not the way to energy efficiency![/quote]
Actually, I have been playing with some models of Peercoin money supply and it seems to me that the relative importance of the PoW will be getting smaller and smaller over time, no hard fork is needed:

[ul][li]If PoW produces many coins, it triggers inflation that increases the proportion of PoS/PoW over time. (PoS minting generates always ~1% of the money supply, PoW generates constant at given hash rate. Increasing the hash-rate only decreases the total supply from PoW.)[/li]
[li]Moore’s law and ASIC-like hardware upgrades will increase hash-rate per watt. This will increase the difficulty and thus reduce the total amount of new coins from the PoW mining. This will further decrease incentive to mine and it will keep the mining on leash. Both increase of hash/watt rate by technological progress and decrease of PoW rate will increase the energy efficiency.[/li][/ul]

In almost all my models, PoW money supply rate will drop ~2x in ~5 years and ~ 5x in ~20 years. (After some additional checking, I will probably publish my models here. They have, of course, many assuptions that are not necessarily valid.)

It is clear that with permanent PoW, PPC is by far not as energy efficient as some pure PoS coins. But it seems to me that PoW is vital for the currency in any point - it provides possibility for other parties to enter the market and prevent the project to become completely controlled by the early adopters. I think the reason why Bitcoin is prone to collapse is not that it is terribly energy inefficient, but because it is deflatory and all costs of the PoW will have to be paid from the transaction fees. The same costs in PPC will be covered by the additional PoW inflation (as are in Bitcoin now), which is healthy for any currency. (And moreover, this will decrease over years, although in quite long time.) The more I think about it, the more I like the way how PoW is implemented in Peercoin. It is very nicely self-stabilizing.

I really like the savings account analogy. In fact I was playing with some language today and wrote, ‘While most cryptocurrencies, such as Bitcoin, are competing to be used for everyday transactions, Peercoin designers had the bigger picture in mind. In a future where Bitcoin is used much like your debit or credit card, Peercoin aims to serve as the high interest savings account of the cryptography ecosystem.’