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

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: https://www.peercointalk.org/index.php?topic=1984.msg15619#msg15619 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.

2.89GB? Do the Dogecoin developers have a plan to mitigate that going forward?

Sure, but would you invest in new hardware given that Peercoin value stays the same? And as said it’s probably more attractive to mine some altcoin and exchange for Peercoins.
I suspect you’re mining Peercoins to support the network you invested in, which I do like, but that wouldn’t work for a newbie.

Kactech posted this: https://www.peercointalk.org/index.php?topic=1984.msg15619#msg15619 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.[/quote]
Thank you very much for the answer.

Kactech posted this: https://www.peercointalk.org/index.php?topic=1984.msg15619#msg15619 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.[/quote]
Sorry it seems the link is broken or not correct, could you please kindly check it again.

Sure, but would you invest in new hardware given that Peercoin value stays the same? And as said it’s probably more attractive to mine some altcoin and exchange for Peercoins.
I suspect you’re mining Peercoins to support the network you invested in, which I do like, but that wouldn’t work for a newbie.[/quote]

To be honest, I haven’t looked at the mining options lately for anything other than Peercoin, because, as you said, mining here is helpful for the network as a whole, and because I believe that long term I’m making a good decision today.

Edit: Actually, I just checked, and other than Unobtanium (and only by the slimmest of margins), Peercoin is the most profitable SHA-256 coin to mine right now.

Kactech posted this: https://www.peercointalk.org/index.php?topic=1984.msg15619#msg15619 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.[/quote]
Sorry it seems the link is broken or not correct, could you please kindly check it again.[/quote]
Link works perfectly fine for me. Possibly swapping the https for http might work for your browser

Sure, but would you invest in new hardware given that Peercoin value stays the same? And as said it’s probably more attractive to mine some altcoin and exchange for Peercoins.
I suspect you’re mining Peercoins to support the network you invested in, which I do like, but that wouldn’t work for a newbie.[/quote]

To be honest, I haven’t looked at the mining options lately for anything other than Peercoin, because, as you said, mining here is helpful for the network as a whole, and because I believe that long term I’m making a good decision today.

Edit: Actually, I just checked, and other than Unobtanium (and only by the slimmest of margins), Peercoin is the most profitable SHA-256 coin to mine right now.[/quote]
You might have been right when you looked as those charts change quickly. When I looked Peercoin was 5th. When the value of Peercoin increases we get more miners trying to match the market, it is interesting to see those dynamics.

[quote=“Cybnate, post:18, topic:1941”][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.[/quote]

The 99% are living on a cheque-to-checque basis. They have to spend their earned coins to pay bills. The 1% put most of their coins in POS mode. That is where the “rich gets richer” is from.

This problem might be circumvented if Peercoin becomes a “pure” backbone currency, which every owner buys and holds as a store of value only, almost nobody spending or trading it. Then there must be another problem, i.e. where is PPC’s value (exchange rate) determined? It must come from very thin trading on some exchanges. Thin trading means huge fluctuation in prices. Someone’s cashing out their PPCs to pay surgery could trigger a slump in price. Huge fluctuation in prices means huge risk and high instability of the value of your stash of PPCs. Risk and instability reduce confidence.

A “backbone currency” has to be highly liquid to be stable. Those “highly liquid” coins earn no POS and don’t contribute to securing the network. There appears to be a contradiction.

Economics are not black and white. Peercoin can be both a backbone currency with a lot of holders and be reasonably liquid. As in my earlier posts in this thread, I believe the transaction fee is not high at all. If you look at the costs of a fiat bank account without any interest on small balances (as most people have), Peercoin is not that different. US$ is also considered a store of value in this world even when the inflation is high. So I think that proves that liquidity is important for a crypto which is also a store of value. I think SK’s latest response to Sentinelrv was also along those lines. One doesn’t rule out the other.

And I think that the costs of running the PoS/PoW network is cheaper than the PoW only network in the long term. As said before it is only a matter of time that those giant Bitcoin miners are going to charge for their mining operations. Then the real cost will become clear and Peercoin will have one of the lowest fees on average. If there is anything to improve in the current network in relation to this, than I would say that we need some algorithm to automatically adjust the fees against the real costs (PoS+PoW inflation) to maintain the network. The issue is that most people don’t like fee increases, so any adjustments must be slow and small and not too often.

BTW The highly liquid coins do contribute to the network as a whole by destroying transactions fees, which makes the coin a little bit more scarce and a better store of value for those using it mainly as a savings account. So I think this model is very well thought through. Have been probing and shooting it for a while, but it appears to be pretty robust.

Edit: In the future more sophisticated fee models might be possible. In the banking world a lot of people pay only a monthly fee or yearly fee for their account or creditcards. Most people seem to prefer that instead of paying a fee for every transaction. I think that is how people perceive costs, having to pay for every single thing appears to be more expensive than one-off fees. Most people tend to forget quickly after they paid. It also give people better control of their costs.

OK it just occurs to me that keeping a large portion of Peercoin liquid doesn’t mean those coins can’t earn POS. Large trading exchanges can hold a lot of coins at any given moment. Although members can be trading, depositing, and withdrawing all the time, but most of the coins in the wallet of the exchange are not moving for longer than 30 days. The exchange can earn POS on these coins (and even pay the earning back to fund owners as an incentive). So collectively these coins are contributing to liquidity AND network security.

Payment processors and on-line wallet service providers could do similarly.

Another one of these conversations has just started on the Vertcoin subreddit: http://www.reddit.com/r/vertcoin/comments/1xfn3q/peercoin_vs_vertcoin/

I think this reddit op and many others have problem with peercoin’s ‘store of value’ argument because they share a wrong concept of ‘value’.

So let me be clear and specific: Value doesn’t come from usefulness. Value comes from people’s consensus.

Please read our discussion here: Suggestion for better PPC: better system for reward & less "Transaction Fee" when Trading (One that will make PPC better than bitcoin for sure)

We talked about the “store of value” and “lowering transaction fees”, and we had a very good discussion there that will give you insight. Or perhaps gives you a “wow” for peercoin.