Peercoin, 'Store of Value', and the newbie's perspective

One of the first questions a newbie asks about Peercoin is the transaction fee and how this will play out in the future.

This person brings up a good point. We need to alter the language we use when we explain the fee. Peercoin is not only a store of value. Saying it is further complicates an already complex cryptocurrency.

Plus there was this whole thing too.

Since I have been quite active on reddit. Would any of you have a certain way we should describe Peercoin. I have always said it has been focused on the store of value aspect of cryptocurrencies. I do not think of myself as an expert on Peercoin so if anyone would have a better way to explain Peercoin, I would be appreciative.

EDIT: The only reason I emphasize the Store of Value is because it is one of the things that makes Peercoin so unique compared to other coins. I am not saying you can’t use Peercoin as a currency, it just seems better to use other coins and I feel that newbies find Peercoin as a poor contender as a currency due to its high fee.

The newbies are getting more educated about cryptos, I guess that is a good thing.

Peercoin is really about economics. The reason why most of us are in Peercoin is because the economics appear to make the most sense. A few reasons why I bought into Peercoins:

Peercoin is lean:

  • Fixed fee is to reduce spam transactions, therefore blockchain is small (bitcoin’s would take you a while to download).

Peercoin is profitable

  • Earn 1% interest on your balance. The interest is to make sure wallets are put online from time to time to secure the network and obtain the earned interest. It is a nice bonus.

Peercoin is secure

  • Combination of PoS and PoW reduces the chance of 51% attack. High security of network
  • The network is still secured with checkpoints, so even in case of an already unlikely 51% attack, the network can safely continue. In the future only clients can enforce this.
  • Peercoin has an active quality lead developer

Peercoin is energy efficient

  • PoW blocks have lower priority than PoS blocks. Therefore only about 1 in 6 block is a PoW block. This reduces the energy required to keep the network running.
  • The real cost of mining will become apparent soon when mining giants start to charge for creating blocks (guess Bitcoin will be the first). Peercoin’s 0.01 will then look cheap.

Peercoin has low inflation

  • The number of coins created by PoW blocks reduces fast. Therefore the inflation is quite low. Peercoin becomes more scarce, and would be more likely to hold its value or increase

Peercoin is community work

  • No central organisation or foundation. Still very interesting developments going on, mostly driven by community.
  • Very kind community who are very helpful with any issues or problems you might have.

Hope that helps, for the Reddit discussion you guys have. When I see the above list I really don’t understand why everyone is not buying Peercoins :wink:

And from the above you can see why marketing as a backbone crypto or store of value makes sense. It is also likely to be more sustainable due to the fees and the low cost PoS blocks in the long term.

Pick what you think is appropiate for newbies, but I think it is the package as a whole.
Or add/delete what you think won’t work.

Comments are welcome

1 Like

If you do not mind I will act like some of the newbies I have encountered.

“1% inflation? Why would I ever invest a coin that would give me such low returns.”
“The fee is ridiculous. Why would I ever use Peercoin to buy things? It is useless. Bitcoin and Dogecoin have a lot more uses than Peercoin. Damn… You guys are a shitty 3rd currency.”

Not saying some of these are hard to argue with with. It is just that I feel the same with the high fee and it is hard to simplify Peercoin’s usage to newbies.

P.S. I am by no means a whale… I am (by far) probably one of the poorest Peercoin members here. I just want to try to bring a stronger community to Peercoin itself. I believe Peercoin is one of the strongest cryptocurrencies out there and I believe it be evident in a few years.

The problem is that we are often starting in the totally wrong position - e.g. by drawing attention to the 1% as interest or (even worse) emphasizing it as a reward. For those that want rewards, it is a very poor rate of return when compared to conventional savings and investments. The correct starting point is to explain why there is a 1% interest (and 0.01 fees) in the first place - which is to secure the network, etc. Or, more precisely, to start with the notion that Peercoin’s security is its strength, and work backwards to the interest and fee

One of the best descriptions I have read of Peercoin logic is in the link provided by Sentinal above; here is the text (by JonnyLatte):

"1% goes to the holders so even though they lose 1% due to inflation they get 1%. What that really means is that all the holders secure the network adding security based on how much they hold. That means in order to attack Peercoin an attacker would have to buy up the currency and hold it for 30 days while their stake matures and then attack with both more hashing power and a large percentage of the currency. Then they will be attacking something they have a stake in themselves. The point is increased security over the long run. I’d love it if someone tried that though. In order to get the stake needed to attack the coin they would have to push the price up pretty high. We would be pretty well compensated for the attack.

"The fixed fee is there to keep the blockchain from bloating up with dust. I agree it could be smaller but it is doing its job with Peercoin being in the top 5 currencies for an extended period of time without the blockchain size going over 300MB

“Peercoin is also very deflationary. The reward for mining drops off with increased difficulty and the abundance of ASICs as well as the popularity of Peercoin has resulted in Peercoins inflation rate to drop lower than that of litecoin and bitcoin. Eventually Bitcoin and even Doge will have lower inflation rates but Peercoin has that now so holders don’t have to worry so much about their holdings being watered down by all the new currency units being created on the other coins. I am currently mining Doge but I am selling them for BTC and PPC because of the high inflation and because a lot of doge holders are like you, they see the inflation as earnings and so as the inflation rate drops off and a new coin is launched with a correspondingly high inflation and low difficulty they will jump ship. With Peercoin you can jump ship and it wont lose its security. In the long run when the inflation rate of PoW coins approaches zero they will have a lot of trouble securing their networks where as with Peercoin I don’t have to worry about that”.

Im a “convert”. It took me well over several months to “get it”. The thing is, right now I think that BTC is a better currency to use because of the low fees, but I am really sceptical toward BTC working it all in the future, partly just because of the low fees. What I realized is that I think there is a pretty god chance that Bitcoin has an “economic bug” built into it and Peercoin dont. When the symptoms starts to show POS will be suggested as a fix and well… there we get Peercoin recognition.

What Im trying to say here is that I feel that I hold Peercoin and buy Peercoin now, because there might be trouble with Bitcoin in the future. Fees are at the heart of it.

Also I kind of like the ide of being able to replace a huge spexial purpose built POWW warehouse, personal, hardware R&D, etc, with one or two laptops. I think that kind of economic effeciency just have to have an impact as well. Afeterall we are talking about billions when Bitcoin POW scales up.

[quote=“Hibero, post:5, topic:1941”]If you do not mind I will act like some of the newbies I have encountered.

“1% inflation? Why would I ever invest a coin that would give me such low returns.”
“The fee is ridiculous. Why would I ever use Peercoin to buy things? It is useless. Bitcoin and Dogecoin have a lot more uses than Peercoin. Damn… You guys are a shitty 3rd currency.”

Not saying some of these are hard to argue with with. It is just that I feel the same with the high fee and it is hard to simplify Peercoin’s usage to newbies.

P.S. I am by no means a whale… I am (by far) probably one of the poorest Peercoin members here. I just want to try to bring a stronger community to Peercoin itself. I believe Peercoin is one of the strongest cryptocurrencies out there and I believe it be evident in a few years.[/quote]

Simplifying is always very difficult. Ten questions from uneducated people can keep one scientist busy for a long time.
It is a process of matching where people are at, what can they comprehend at one time and what they are after. It took you and me a long time before we started to grasp how this all works and we are still learning. So explaining someone else in a few minutes what it is all about and having them to understand all the complexities is not an easy feat.

I always start from trying to understand where the user is at, what are their interests, what is important for them. Let’s do a bit of profiling and story telling specific to this use case. The typical Doge user is new to crypto currencies, is likely to be young (under 35) and has been lured by Doge’s good marketing. They are after a bit of fun money which they can mine and spend easily on small items or tipping people. That requires easy mining, abundance of coins and no transaction fees, which Doge has.

But is it sustainable? Doges are highly inflationary (anyone has the actual numbers? appears to be 5%), so either you have to spend them relatively fast or buy fiat or other cryptos. So that leaves the people spending every coin as soon as they earn them, they are happy with Doge as it meets their needs. Also leave the people who are happy with making a quick buck mining Doges and then returning it to fiat in their bank account. They are happy with Doge today and they will jump on another coin when they are providing better profits. Also leave the people who just want to play a bit with cryptos, have a bit of fun and learn their way around the different new technologies before they seriously consider moving their fiat. Doge is excellent for that.

So that leaves the profile that actually made a good amount of Doges either by mining or earning them and is not keen on transferring that back into fiat. A consideration could be transaction costs or not that much trust in the local fiat coin (also likely to be highly inflationary). This person is more interested to find a store of value within the crypto world. Peercoin would end up high on the list of offering just that (see my previous post why) especially when you only compare to other cryptos in top 15. Sentinelrv recently posted some information on the value gains Peercoin had on Litecoin in the last 7 months. This is most likely to continue and is also valid for most other coins (we need some more numbers to back this up).

The factor which makes the waters muddy is that cryptos like Doge act more like an attractive commodity (like the latest toy) than a currency recently as many jump aboard due to the good marketing. Therefore it’s value appears to be high (and rising) and as long as their marketing works they might be able to increase the value of their coin for a while despite the inflationary pressure. Great for speculators. But this won’t last forever, we have seen this in the dotcom bubble in the last decenium before. At the end of the day the real underlying values and issues of Doge and others will become clear and the speculators jump on the next train leaving a few train wrecks.

So that is why Doge and most other cryptos are not a store of value and Peercoin has the most properties to just serve that purpose. However, this doesn’t stop it from being used for normal day-to-day spending as most people do with there current bank account. The Peercoin transaction fees are still lower than the total cost of most back accounts.

It’s only for micropayments, e.g. small tips (<US$1 equivalent) where you used to be using fiat coins as opposite to banknotes, Peercoin is not the best solution, but it will still work for the odd occasion.

Maybe someone can make an infographic ‘Peercoin versus your average crypto’ out of the information in this thread? Not comparing the technical stuff (like number of transactions and encryption protocols) but based on practical use cases.

Edit: And Pillow just provides us with another excellent example why people consider Peercoin as a store of value in the crypto world. Thanks for your timely post, Pillow.

I think that’s factually accurate, but primarily relevant in the macro-economic sense. People relate to micro-economic mechanics though, so for individuals who mint it is an increase of 1% of their holdings per year.

[quote=“Cybnate, post:4, topic:1941”]Peercoin is profitable

  • Earn 1% interest on your balance. The interest is to make sure wallets are put online from time to time to secure the network and obtain the earned interest. It is a nice bonus.[/quote]

Isn’t this wrong though? It’s my understanding that the 1% interest doesn’t actually give you more wealth than you already have. This would be true if the newly minted coins were only given to certain people and not others. What is supposed to happen though is that the newly created coins are supposed to be equally distributed to everyone on the network based on their current holdings. So some of my value is taken away when new coins are created, but then that same amount of value is given back to me in the form of the new coins.

In the end, nobody actually makes more money from this process. They simply get to maintain the value of the Peercoins they already own. If everyone else was minting except for me, then the value of my coins should slightly shrink, since I’m not getting any new coins to replace the value that was taken away from me due to the inflation. So the 1% interest doesn’t add wealth, it simply maintains your wealth. The reason you would mint then is so that you don’t lose value because of the inflation.

Maybe I’m mistaken in something. What do you think?

I screwed up my explanation, so I removed it and reposted it after I fixed it. It’s almost the same though.

Anyone know how many ppc is produced per day and when it will be reduced again and when pow will finish and only pos minting left?

[quote=“Sentinelrv”][quote=“Cybnate, post:4, topic:1941”]Peercoin is profitable

  • Earn 1% interest on your balance. The interest is to make sure wallets are put online from time to time to secure the network and obtain the earned interest. It is a nice bonus.[/quote]

Isn’t this wrong though? It’s my understanding that the 1% interest doesn’t actually give you more wealth than you already have. This would be true if other people’s Peercoins are being inflated (But not my own coins) and then I get some of that. What really happens though is that everyone’s Peercoins are inflated, but then the newly created coins are equally distributed to everyone based on their current holdings. So some of the value of my coins is taken away when new coins are created, but then that same amount of value is given back to me in the form of the new coins.

In the end, nobody actually makes more money from this process. They simply get to maintain the value of the Peercoins they already own. If everyone else was minting except for me, then the value of my coins should slightly shrink, since I’m not getting any coins to replace the value that was taken away from me due to the inflation. So the 1% interest doesn’t add wealth, it simply maintains your wealth. The reason you would mint then is so that you don’t lose value because of the inflation. Maybe I’m mistaken in something. What do you think?[/quote]
Yes, you are right, but if you can offset inflation you actually gain wealth comparing to others. You end up with more buying power (value) then someone who is unable to offset inflation. So if Peercoins inflation comes down to 1% and your earn 1% interest you basically offset inflation and gain value. Inflation really steals your wealth slowly but surely. Think about what you could buy with 100 dollars 20 years ago. Inflation works when you have many people (or governments) with debts, because you are actually decreasing the value of their debt taking it away from the lenders. Therefore lenders would ask interest which at least beats inflation to offset their wealth losses. We can spend a separate topic on this whether this is a good or bad for society as a whole. It is all about Economics at the end of the day.

BTW Try to beat inflation in fiat where average inflation is between 3 and 10% depending on your country. Try to offset that without taking a lot of risks investing money in e.g. shares. So all things equal Peercoin is a good store of value. In my opinion the risk is in the competitive edge of Peercoin. Others might do better over time. At the moment I have only seen promises (NXT, ethereum, eMunie, etc.) but not much threat, likely due to a different focus or maybe because Peercoin’s model as a store of value is hard to beat in the crypto world.

Edit: I think my response is still standing after your changes.

If the 1% interest was being taken from others, then it would be profit, or an increase in wealth

But if everyone gets an extra 1% in coins, then there is no actual wealth increase - only a mild (1%) deflation of the value of each coin, alongside a 1% increase in the number of coins

So, perhaps the word “interest” is not entirely accurate?

Kactech posted this: Cryptoblog - notĂ­cias sobre bitcoin e criptomoedas! a while ago. It shows the inflation of Peercoin in time and the increasing importance of PoS blocks
PoW will technically never finish. It is only getting less and less profitable over time. PoW might regain interest when Peercoin’s value goes up for some reason offsetting the costs of mining.
I suspect that mining Peercoin is already not that profitable but that people hope that Peercoin’s value rises (speculation). Looking at some stats you are better off to mine one of the many crypto clones and sell them quickly for Peercoins than just mining Peercoins.

And if what I wrote above is true, (Without reading the other responses yet) then the rich get richer argument should also be false. Let’s say 99% of people own a small to average amount of Peercoins while the remaining 1% are super rich. The rich would only get richer if the newly minted coins were unequally distributed, for example some or all of the coins that should have gone to the 99% go to the 1% instead.

What should be happening is that someone who owns a small to average amount of PPC is getting a small fraction of their value wiped out through inflation, but then to make up for that they get some newly minted coins. On the other side, the few people who hold massive amounts of PPC should have a much larger portion (Compared to the 99%) of their coin value get wiped out through inflation, but then they get a much larger portion of the newly minted coins to make up for that. In the end, whatever portion of their wealth gets wiped out through inflation, the same portion of value should be given back in the form of new coins. Nobody should be getting more or less value than they originally had. Correct or no?

[quote=“RobertLloyd, post:14, topic:1941”]If the 1% interest was being taken from others, then it would be profit, or an increase in wealth

But if everyone gets an extra 1% in coins, then there is no actual wealth increase - only a mild (1%) deflation of the value of each coin, alongside a 1% increase in the number of coins

So, perhaps the word “interest” is not entirely accurate?[/quote]
There is no increase in wealth in the network as a whole. But there is an increase in wealth of users who actually do the PoS minting religiously as opposite to user who are not. In the middle are users who don’t have their coins on-line or users who do a lot of transactions offsetting their 1% interest.
In fiat it is the same, interest doesn’t increase wealth of everyone if you just keep your dollars under your bed, it only does increase your wealth in comparison to others (or offsets your wealth loss as you wish) if you actually put them in a bank and let them work for you (e.g. the bank lending them to others or buying the right shares).

Happy to adopt another word, but interest seems to be pretty common use for some time in this context :wink:

[quote=“Sentinelrv, post:16, topic:1941”]And if what I wrote above is true, (Without reading the other responses yet) then the rich get richer argument should also be false. Let’s say 99% of people own a small to average amount of Peercoins while the remaining 1% are super rich. The rich would only get richer if the newly minted coins were unequally distributed, for example some or all of the coins that should have gone to the 99% go to the 1% instead.

What should be happening is that someone who owns a small to average amount of PPC is getting a small fraction of their value wiped out through inflation, but then to make up for that they get some newly minted coins. On the other side, the few people who hold massive amounts of PPC should have a much larger portion (Compared to the 99%) of their coin value get wiped out through inflation, but then they get a much larger portion of the newly minted coins to make up for that. In the end, whatever portion of their wealth gets wiped out through inflation, the same portion of value should be given back in the form of new coins. Nobody should be getting more or less value than they originally had. Correct or no?[/quote]
Sounds correct to me. The issue some might have is that some people might not have the ability to obtain their 1% as they need to make transactions for a living, where the rich not necessarily need to do that or to a lesser extent.

I’m making money mining, because I’m still seeing more per day than my energy costs, but it’s basically ~$20/day @ 180GH/s

by JonnyLatte

"The fixed fee is there to keep the blockchain from bloating up with dust. I agree it could be smaller but it is doing its job with Peercoin being in the top 5 currencies for an extended period of time without the blockchain size going over 300MB

Dogecoin has been running for just over 2 month (2013-12-06) and its blockchain has grown to 2.89G, according to http://bitinfocharts.com/dogecoin/ .

It will be a monster size if it keeps growing at this rate.