Peercoin as backend currency for peer side-chains (well, pillow version)

General
1

This is how I think of Peercoin as a backbone currency for its side-chains. It’s a very simple thing.

Framing
I think I’ve might something to contribute here, so let me digress for a moment so I can better frame my proposition in a context in which its value can be readily understood.

Sunny King’s suggestion to think of Peercoin as a backbone crypto currency, have caught my imagination. I think its a powerful concept, because it puts the the ecosystem, i.e. the context, in focus. Instead of extending Peercoin with additional features, Peercoin could be thought of as the core technology of a much larger body. Under such circumstances the value of a peercoin would be derived not only from Peercoin itself, but also from the rest of the ecosystem.

While its a grand vision, what does it really mean practically speaking? My personal take on it is this. There are at least four different ways that Peercoin could function as a backbone currency. These are:

[center]External[/center]

[ul][li]as reserve money (collateral in financial contracts etc)
[/li]
[li]ubiquitous transaction layer (bridge between other systems)[/li][/ul]

[center]Somwhere in between[/center]

[ul][li]DAC’s (NuBits is a great example offering a synthetic link between Peercoin and NuBits using a very elegant solution). [/li][/ul]

[center]Internal[/center]

[ul][li]Peercoin side-chains extending new capabilities, offering new features, within the context of Peercoin as a DAC. I.e. without putting any load (or compete) with the Peercoin network, the Proof-of-Stake could be used in new blockchains, which offers features and provides services that there is a demand for.
[/li][/ul]

Now let’s elaborate on the last one here, the one I labeled as Internal…

Peercoin as backbone currency for side-chains
I envision that there could be a type of Peercoin side-chain that offer features that Peercoin itself don’t. The core principles for these side-chains, would be that they offer a service or a product which has value. The price of tokens used in these side-chains would reflect this value. It could be low latency clearing (fast transaction time), zero-knowledge proof anonymous transactions and another example would be distributed DNS (think namecoin).

Why would I want to buy a token (coin) in a distributed DNS network? Because then I can make changes in the DNS database! It could be argued that the cheaper the price of making a change in the database, the less cost of using it for its users and the cheaper the better (as long as the blockchain is not being bloated). The side-chain is deriving its value not the from the price of its tokens, but from the service it is offering

A key notion here is that people would buy these kinds of tokens, not for the price they are traded for, but because they need it to use the network. In a sense, the “store of value” aspect of these tokens would be of less interest and they wouldn’t really be money. Not more, then the tokens you buy to be able to use the washing machine when doing the laundry or the tokens you need to buy, in order to drive the car over the bridge.

Think tokens, not money. Why am I stressing this? If the store of value aspect of the token is of less importance, it opens up a new interesting possibility.

The mechanics
Imagine for a second that these tokens in the side-chain can NOT be used for minting. Instead the side-chain would be fully secured by nodes in the Peercoin network that choose to do so, and then use their Proof-of-Stake stake in securing the side-chain. In return for doing so, they would receive freshly minted tokens in the side-chain. The supply of tokens in the side-chain would increase every time this happens. To counterbalance this inflationary effect, transacting with tokens in the side-chain has a cost tied to it, a fee, where the fee gets destroyed thus defalting the existing supply.

Should someone want to attack it, they would have to compete/collaborate with other nodes in the Peercoin network. No miners/minters existing only on the side-chain would have to fear an attack, because there are no such entities.

Should people holding side-chains tokens fear an attack by the Peercoin nodes? That would make as little sense as the Peercoin nodes attacking the Peercoin network. Since the side-chain is one hundred percent dependent on nodes in the Peercoin network, the Peercoin network will never have to fear competition from the side-chain. Since there is no competition from it, there should be no point in attacking it. On the contrary, the side-chain is a valuable resource which the Peercoin nodes are getting paid to secure. So, why stop making money?

Summary
What I’m suggesting is straightforward: separate blockchains (the side-chain, the Peercoin network), side-chain token supply deflation by a fee, blockchain secured by stakes in the Peercoin network and they are paid reward for doing it.

Participating in side-chains is on a voluntary basis. There is no need to change the existing Peercoin protocol or source code at all. There would not even be any extra data stored in the Peercoin network.

I imagine that this simple mechanism could be used to create all sorts of side-chains offering all sorts of features, extending the Peercoin technology layer with new features. The feature set in total could be extended infinitely. Peercoin would become a real backbone crypto currency.

An interesting consequence
Since Peercoin nodes are rewarded for minting on the Peercoin network, the tokens on the side-chain can be very cheap. It’s not impossible to think, that the tokens could be so cheap that they would undercut other coin based blockchains doing a similar thing, but using more resources intense solutions. The tokens doesn’t really have to have a value, for people to want to buy them, because it is the feature they are after, not the coins themselves. Actually the cheaper they get, the more people would want to use them (in side-chains where the store of value is of more importance, the minters have to make sure they don’t inflate the supply to much or else people will not want to “buy their product” any longer).

One way to get tokens almost for free, would be to buy peercoins and use them to mint. As an added bonus that would make both Peercoin more secure and it would make the side-chain more secure. The more side-chains, the more demand for peercoins.

Disclaimer
This is totally my own thoughts and reflections. I’ve not heard anyone else say these things and these thoughts are only imaginations of my own (most likely heavily influenced by reading what other people have written) and doesn’t reflect the Peercoin communities definition of what Peercoin side-chains are or should be. Basically its all in my own head and if you didn’t skip reading the text above, now also in yours. Sorry for that.

2

[quote=“pillow, post:1, topic:3166”]The mechanics
Imagine for a second that these tokens in the side-chain can NOT be used for minting. Instead the side-chain would be fully secured by nodes in the Peercoin network that choose to do so, and then use their Proof-of-Stake stake in securing the side-chain. In return for doing so, they would receive freshly minted tokens in the side-chain. The supply of tokens in the side-chain would increase every time this happens. To counterbalance this inflationary effect, transacting with tokens in the side-chain has a cost tied to it, a fee, where the fee gets destroyed thus defalting the existing supply.[/quote]

3

On that note… if the tokes vs peercoins ratio would fall below 1, it means that side-chain token was worth more then a peercoin. It’s not unlikely that one would sell the side-chain token for peercoins, because then they would be able to mint with the peercoins and receive both peercoins and side-chain tokens. I think this means that the value of peercoins would always be kind of higher then the value of the tokens.

If the token provides the means for using sought after features, then money would as a side effect flow into peercoins, pushing up the value of peercoins, further establishing it as a backbone currency. Also, the more peercoins are worth, the more will be at stake when staking, which adds to the security of the chain.

4

I should also add that I don’t know how to realize this :-P. I can think of ways of doing it that secures the chain slower then Peercoin, but not faster.

A naive solution could perhaps be by piggybacking solely (i.e. not using the side-chain tokens at all for minting and not changing the Peercoin protocol at all) on Peercoin as it is today, writing the top side-chain block hash to the coinbase or something like that. But confirmations would come in slowly, since we don’t know if and when someone will do it.

Maybe its even to good to be true… :). Back to the drawing board. Well this is more meant to be some kind of inspirational ideas then a specification :slight_smile:

5

Thanks pillow, you have summed up the goals this community aspires to for quite some time.
I really love how you used word “tokens” instead of “money” as it reflects the nature of single Peercoin unit more closely.

To achieve this goals we need to work harder on infrastructure projects, technology is how you achieve this goals and ideas.
Projects like ppcd, Peerunity, Peerbox will create platform on which we can build the future.
So once again, I stress the need for developers and more technical people on board. People who will share our enthusiasm with this technology and contribute their “know-how” to achieve this.

Thanks for inspiring post.

6

Pillow, does Sunny know about your post here?

We seem to always need developers, but ask inside our existing community. ppcd needs more development help right now. Maybe that help doesn’t exist here right now and we need to go outside of our own community to find interested people. I’m tired of everyone flocking to NXT over us when we have such ambitious plans and a good coin design. It doesn’t make sense to me. Ideas?

7

May be the coin is lacking some real governance making it look a little “amateurish”.

Just my 2 cents.

8

[quote=“mably, post:7, topic:3166”]May be the coin is lacking some real governance making it look a little “amateurish”.

Just my 2 cents.[/quote]

I’ve been thinking this as well. Jordan Lee and his NuBits team are like a well oiled machine. Jordan is always moving forward and directing his team to get things done to fulfill his vision of the Nu network.

Sunny on the other hand is absent most of the time and he doesn’t seem to have any interest in steering our efforts in a certain direction. Instead, he seems to leave everything up to us to decide. I wish he would take on a more direct leadership role like Jordan has with NuBits. Does anyone else feel this way?

9

In one aspect I disagree and I think its worth pointing out.

While I fully agree with that Sunny King is leaving it up to the community to decide what to do with Peercoin, I feel like he is almost doing the opposite when it comes to the Peercoin.

I’ve had some email conversations with him and he is always encouraging and constructive. He responds quickly but I also get the feeling he is allocating his time in a sensible manner, extending effort where its worthwhile. I very much suspect that his silence on the forum, is a thought out strategy.

My personal belief is that Sunny King understands that what will make or break Peercoin as a currency, is whether is will function as a store of value or not. If the chain fork, if there is any other breach in the security of the coin, that would be devastating. Very few coins have survived such an event. Ensuring that the coin function is a store of value is key. Since Bitcoin has PoW, there is an inherent risk of centralization etc. If Bitcoin fails, all other PoW will fail, Peercoin will be the only (first PoS coin) still standing. That is the thing. Peercoin, as a functioning coin that doesn’t break, has to survive and outlive Bitcoin. It’s the thing that matters the most in my opinion.

Why am I so sure of this? It took several months before a new coder, sigmike, was endorsed by Sunny. If you study the comments he have made about NuBits for example, he writes it in such a way that he or Peercoin can not be blamed if it doesn’t work, but if it works then he praises its contribution. Its very sensible and constructive. Peercoin is also not using the very latest Bitcoin versions, so as to ensure that it is always using code that has stood the test of field test time.

Sure, I would love to have him cranking out new stuff all of the time, but I’m a software engineer myself and can only imagine how much work it done, only verifying code re-basing and what not. I’m not sure there is too much time over. Maybe he has a family and daytime job too? I know I do and I don’t even have time to do any Peercoin coding at all… I mean, putting leadership on top of that and doing a good job doing it, man that’s almost to much to ask of a man or a woman.

For better or for worse, I think he is spending his resources and allocating his time in a very well balanced manner. Its up to the community to push on the rest I think. Oh, and also dividing and separating some of the “power” might also be a very smart thing. Things like peer4commit and all the things everyone else does (I’m doing nothing, only always talking a lot :-P), I’m not sure those would have happened if Sunny King was controlling it all. Maybe there is a point to him, not taking on this burden.

Just my few satoshis.

10

[quote=“pillow, post:9, topic:3166”]While I fully agree with that Sunny King is leaving it up to the community to decide what to do with Peercoin, I feel like he is almost doing the opposite when it comes to the Peercoin.
[…]
My personal belief is that Sunny King understands that what will make or break Peercoin as a currency, is whether is will function as a store of value or not.[…]Peercoin, as a functioning coin that doesn’t break, has to survive and outlive Bitcoin. It’s the thing that matters the most in my opinion. […]
Peercoin is also not using the very latest Bitcoin versions, so as to ensure that it is always using code that has stood the test of field test time.
[…][/quote]

I can wholeheartedly agree with this assessment - at least I have the same impression. Thank you for writing it down!
Just like I wrote in another topic:

[quote=“masterOfDisaster, post:22, topic:3134”]Consensus for phasing out PoW could easily be tested by releasing a Peercoin version with a PoW coinbase reward of 0 PPC.
But I doubt that it’s the right time to do that now and I hope the majority would choose continuing PoW.
And I find it dangerous risking a fork!
I prefer to let protocol changes be done by the Peercoin core development team (Sunny King, sigmike) for some more time.
[…]
We still need PoW for coin distribution (although the distribution is already suffering from the low block reward)!
The influence to the PPC price by miners can’t be that big; per day only roughly 1000 PPC are mined.
The big dumps are rather from people who mined or bought them some time ago.
…and that is also good for distribution.
Don’t get frustrated by low prices.
Peercoin doesn’t need high prices to be sustainable.
If you consider the price low: buy![/quote]

This quote is referring to an area where I fully believe in the core development.
But what can be done with that safe & sound, secure & sustainable crypto coin is up to the community (that by and large agrees to the protocol development by the core development team).

We are given an instrument. Now we need to make use of it!
We need side chains and other things that bring value, that help, that advance the crypto coin world, that make the world a better place!

11

[quote=“pillow, post:9, topic:3166”]In one aspect I disagree and I think its worth pointing out.

While I fully agree with that Sunny King is leaving it up to the community to decide what to do with Peercoin, I feel like he is almost doing the opposite when it comes to the Peercoin.

I’ve had some email conversations with him and he is always encouraging and constructive. He responds quickly but I also get the feeling he is allocating his time in a sensible manner, extending effort where its worthwhile. I very much suspect that his silence on the forum, is a thought out strategy.

My personal belief is that Sunny King understands that what will make or break Peercoin as a currency, is whether is will function as a store of value or not. If the chain fork, if there is any other breach in the security of the coin, that would be devastating. Very few coins have survived such an event. Ensuring that the coin function is a store of value is key. Since Bitcoin has PoW, there is an inherent risk of centralization etc. If Bitcoin fails, all other PoW will fail, Peercoin will be the only (first PoS coin) still standing. That is the thing. Peercoin, as a functioning coin that doesn’t break, has to survive and outlive Bitcoin. It’s the thing that matters the most in my opinion.

Why am I so sure of this? It took several months before a new coder, sigmike, was endorsed by Sunny. If you study the comments he have made about NuBits for example, he writes it in such a way that he or Peercoin can not be blamed if it doesn’t work, but if it works then he praises its contribution. Its very sensible and constructive. Peercoin is also not using the very latest Bitcoin versions, so as to ensure that it is always using code that has stood the test of field test time.

Sure, I would love to have him cranking out new stuff all of the time, but I’m a software engineer myself and can only imagine how much work it done, only verifying code re-basing and what not. I’m not sure there is too much time over. Maybe he has a family and daytime job too? I know I do and I don’t even have time to do any Peercoin coding at all… I mean, putting leadership on top of that and doing a good job doing it, man that’s almost to much to ask of a man or a woman.

For better or for worse, I think he is spending his resources and allocating his time in a very well balanced manner. Its up to the community to push on the rest I think. Oh, and also dividing and separating some of the “power” might also be a very smart thing. Things like peer4commit and all the things everyone else does (I’m doing nothing, only always talking a lot :-P), I’m not sure those would have happened if Sunny King was controlling it all. Maybe there is a point to him, not taking on this burden.

Just my few satoshis.[/quote]

Pillow, you bring up some very valid points that I agree with. The most important thing Sunny can do is to continue to develop Peercoin itself and to ensure it has a solid design that can stand the test of time. That is where his valuable time is best spent. Also, being unavailable most of the time has forced many people to take the initiative themselves to create projects for Peercoin. Peerchemist has created Peerbox, Mably is working on ppcd, kac- is working on pooled minting, sigmike is working on cold-locked minting, etc…

I agree with these things, however I don’t think that anyone is asking Sunny to be in control of all Peercoin related development. The people mentioned above need to be free to work on their own projects without needing to answer to or take directions or orders from someone who has complete authority over development. That would discourage people more than anything and stress out Sunny and take away much of his valuable time.

Rather, what I’m asking for is that Sunny at least take on an advisory role in the community. He should spend most of his time working on Peercoin itself, but he should also spend some of his time providing guidance to the community and to the various projects that are in development. I’m sure we’d all love to hear his opinions or ideas about different things. We’d also love to hear what he believes are the most important things that need to be worked on. This would help provide direction to the community and we can self organize to achieve these goals.

This wouldn’t require Sunny to be completely involved in micromanaging everything that is going on in Peercoin development. The majority of the workload would be carried out by us. The important thing is that from time to time he passes on his thoughts to us about the work that is currently being done and his thoughts about what should be done in the future. This would provide the community with some feedback, guidance, a direction to move in and goals to work toward. Do you think this is a reasonable thing to ask of him?

12

This would be very much appreciated, because I think the community understands that Sunny was very far-sighted when he created Peercoin with the specific mechanics.
And as much as I value what Sunny has created by making Peercoin and as much as I value his advice, I think that we are already that far in the development where the community has taken over the role to build things on Peercoin.
And I think it is better this way, because Peercoin is driven by consensus: the community needs to agree where to go. It’s the users of Peercoin that make Peercoin what it is and not the creator. The Peercoin protocol is an instrument. We need to use it.
I hope that doesn’t sound disrespectful. It is not intended to do so, but I needed to make that point clear.
We very much need a reliable Peercoin (thank you Sunny and sigmike for doing all you can to ensure that!).
But we don’t need anyone to tell us what to do with it!

We have learned that Peercoin works well.
We have understood that Peercoin has attributes that may qualify as a backbone currency.
And we see that Peercoin might very well be a background currency as well.

Peercoin might once for crypto coins be what TCP/IP is for the internet: a technology so much is based on, but that gets rarely even recognized.

If this metaphor is close to what will be, we need value that is built on Peercoin, because Peercoin alone (not being used for anything) is close to useless - just like the existence of TCP/IP is, if you don’t use it to send packets anywhere.
We need to find ways to utilize Peercoin’s strength in being secure and sustainable.
We need to transfer value using Peercoin (send TCP/IP packets).
We need to find or develop businesses, services that have the need to transfer value (create those TCP/IP packets).
This is a way to undermine the power that banks and governments have, to make the people a bit more free than they are now.

13

[quote=“masterOfDisaster, post:12, topic:3166”]Peercoin might once for crypto coins be what TCP/IP is for the internet: a technology so much is based on, but that gets rarely even recognized.

If this metaphor is close to what will be, we need value that is built on Peercoin, because Peercoin alone (not being used for anything) is close to useless - just like the existence of TCP/IP is, if you don’t use it to send packets anywhere.
We need to find ways to utilize Peercoin’s strength in being secure and sustainable.[/quote]

That’s one of the brightest analogies I’ve read on this forum!!

14

Even after reading all these optimistic posts about Peercoin moving along all by itself, I still think that any crypto coin will need strong leadership and governance to keep users/merchants confidence in its capacity to evolve and adapt in a permanently changing crypto world. Time will tell.

EDIT:

Is it a coincidence? http://www.peercointalk.org/index.php?topic=3702.msg35735

15

just coinsidence >:D
we are off topic, sorry Pillow.
i think ppc needs a more organized community with specific roles, more organized, voting community mechanisms
and more importantly funds. once again i will refer to STORJ which have an excellent team, a slack community with active members discussing new ideas, problems, etc
i find the proposal of ppcman in the right direction.
i believe Sunny doesn’t want to connect his name to ppc but this is unavoidable. if sunny decides to quit from ppc,
the coin will tank!
this will not happen only if a well organized community exists

16

[quote=“seki, post:15, topic:3166”]we are off topic, sorry Pillow.
i think ppc needs… more importantly funds.[/quote]

I’ve suggested earlier that we create a Peercoin Fund that we money manage and try to increase the value of. I’m not licensed to do such a thing, but I’m think I dare to say that I have the skills to do it.

17

I’ve been trying to catch up on the side-chain discussion from a peercoin perspective.

Bitcoin seems focused around an idea of a side-chain that allows coins to flow into and out of the chain. In this way, the primary purpose of side-chains is indeed currency-focused, though you could (of course) build data apps on top of those currency sidechains.

For consensus, Bitcoin’s merged-mining proposal is silly, killing the potential for experimentation for all but the 2-3 most popular sidechains that the bigger pools decide to merge-mine. Sidechains that are data-heavy apps will provide significant storage costs to miners for no significant gain, reducing their incentive.

From little tid-bits I’ve seen here and there from Sunny, it seems the primary purpose he’s pursuing for side-chains is data-focused. I recall reading somewhere he wasn’t concerned about transferring coins into and out of the sidechain. I see in my mind this idea of Sunny’s side-chains being a sort of opt-in database extension to peercoin (e.g. if you want the peercoin bitmessage equivalent, you have the peercoin blockchain and the peercoin bitmessage sidechain, meaning only those using peercoin bitmessage have to store the extra data associated with that sidechain, as opposed to polluting the mainchain and requiring everyone to store that data).

I’m curious on how Sunny’s intending on doing it.

Perhaps he’ll do a sort of one-way peg, allow coins to flow into the sidechain but not out. In this way, I can add 5 ppc to the peercoin bitmessage sidechain, which allows me to send 500 messages (0.01 peercoin transaction fee). These 5 ppc can never be sent back to the main sidechain.

Or perhaps the sidechain will only be focused around data, and not even have the concept of coins. He could use op_return to store a key on the main chain, then point that key to a value on the sidechain. In this way, we would get a distributed hash table.

I wonder how consensus would be handled on the Peercoin sidechain. For peercoin, if it’s a 1-way peg sidechain I wonder if PoS would be sufficient. If it’s a distributed hash-table, I wonder if consensus is needed at all.

Can anyone link me to spots Sunny has talked in more detail about the direction of his sidechain research?

18

Emeth, Sunny shared this with me 4 months ago and it’s pretty much all we know about his work on sidechains…

http://www.reddit.com/r/peercoin/comments/2euklo/sunny_shared_some_information_about_sidechain/

Sentinelrv: Hey Sunny, from what I understand you seem to be either developing or researching sidechains for Peercoin and Primecoin. I’m not sure how informed you are of the developments others are making in this area. I’m not informed myself, but this was posted on our subreddit…

http://www.reddit.com/r/peercoin/comments/2ehl36/sidechains_implementation_is_a_race_between/

Bitcoin’s core developer Jeff Garzik seems to be working on sidechains as well. Maybe there is some valuable info on his Twitter account? It seems like it might be a race between you two.:stuck_out_tongue:

Anyway, just passing along the info in case you didn’t already know.

Sunny King: Thanks for the pointer. My focus is probably somewhat different from theirs, as I am more focused on providing data services on sidechains, but bitcoin devs are more into passing bitcoins between the chains. From the sound of it Jeff is probably considering supporting high volume micropayments on the sidechains.

Sentinelrv: Would you be able to give me an example of what you mean by data applications? I’m just trying to get an idea of what would be possible.

Sunny King: Basically everything you see outside currency transactions (namecoin, ripple, bitshare, peershare etc) and a lot more. My main goal is to provide a common infrastructure to make it easier for developers to create such services.

Sentinelrv: That sounds great! I imagine that would draw a lot more developers to Peercoin, which is something we really need right now. You’d basically be creating a playground for them to try out anything they want.

Is this something I can share with the community, or would you rather wait until you have something to show to talk about it? The reason I ask is because many people at least on our subreddit don’t seem to understand what sidechains are. The question about what they are comes up all the time.

Sunny King: Sure I don’t mind you talk about this topic, I think I have already implied it in my earlier interviews. But just note it’s still in research/experiment stage so I cannot yet make a schedule or promise of any kind. I think my focus is somewhat different from bitcoin’s side, I am not really putting any effort into cross-chain coin transfer. Rather I see the sidechain platform as a decentralized database solution with some link to a common base currency.

Best Regards!

19

Very interesting, emeth.

20

Excellent! I am so looking forward to this, seems more like the key/value distributed hash table kind of approach.

For the project I’m working on for peercoin, I have a sort of parasitic cloud storage (tinydisk-like) setup as a fallback, and was digging into ways to setup a DHT as the main db. In light of the above, I’ll settle for the cloud storage datastore for now and work on fleshing out the features, and will plug in Sunny’s sidechain implementation for the main datastore when ready.

Thanks Sentinelrv. And an encouragement to all of you - Peercoin’s success is NOT dependent on its price. It’s dependent on the community. Just from what I’ve seen so far, you guys have some giants among you. Peercoin IS pushing boundaries forward in cryptocurrency, and all signs point to it continuing to do so.

Onwards and upwards.