PoS reward, coin age and minting time


#1

Hi,

Some thoughts on peercoins PoS system with coin age and minting time…

As far as I understand, the likelihood to find a block with PoS depends solely on the coin age, but not on the time the wallet is open for minting. The older the coins in my wallet grow, the more I can expect them to generate a new block and the reward for that block. But I don’t need to be online and minting for that to happen, it is enough to “age the coins”, without being minting. Now, criticism exists in the blackcoin community that this does not lead to the desired effect in securing the network, and people with high stakes can just be online a very short time to collect the reward and then go offline [1]. Is that so? And if yes, is there anything that should be done about it?

Second, the PoS reward is said to be ~ 1% p.a. - From an investors point of view that is not very much. Especially given the high volatility in cryptos. Blackcoin claims to generate 1-8%, currently 5% for coins at stake, which is already 4% more.
Wouldn’t it be possible and useful to let the PoS reward increase with coin age and minting time?: The older the coins are, the more likely they are to find a block; and the longer they have been minting at this event, the more reward is given? That would users animate to let their wallet open for minting, which secures the network, and acquire more reward the longer they leave it open. From an investors point of view its like a fixed-term deposit, earning more interest the longer the coins are “bound”…

What do you think?

[1] https://blackcoin.co/blackcoin-pos-protocol-v2-whitepaper.pdf


#2

Not sure how it’s possible to track minting time.

Also, it would make more sense to weigh the interest more towards lower coin age and gradually decrease to 1% as the coin age increases. That encourages active minting to take advantage of compound interest. Compound interest of 1% is not really much, if anything. Those that wait longer for coin age don’t receive the extra incentive and stay at 1%.


#3

While it’s not possible to mint without having wallet online, it’s expected that many do not want to have large amounts of peercoin minting all the time. Fortunately, cold minting is in the labs. With that implemented, security for minting and peercoin itself will be better

1% increase is increase of peercoins in circulation. This shouldn’t directly be thought as a interest such as in bonds or appreciation of stock. Economics of peercoin is very different. I’m pressed on time, so I won’t go in details. That would require few pages essee to go through.


#4

Not sure either, but I guess the start of minting timestamp could be stored in the block/coins that are minting, and then the time could computed on success…

Hm, I think that is counter-productive from an investment point of view.
A fixed-term deposit usually yields more interest with longer deposit time and less with shorter deposit times. It would be natural to resemble that (esp. since peercoin was brought into the crypto world as an asset/bond substitute rather than a currency). Besides that there would be two other problems:

  1. From which interest (coupon) shall be started? 10%, 20%? Even more? Ok, that question counterwise would be where to stop…
  2. People with low stakes have a disadvantage compared to people with very high stakes. Because the rich are more likely to win blocks just based on their stakes with low coin age, thus are proliferating their stakes even more with high interest yields. Contrary the people with low stakes always get the lowest yields, because they need higher coin age to generate a block, and by that time the interest is close to 1% again.

#5

Well, there is a 0.01 ppc fee on every transaction that is just burned, afaik… I am not sure how many peercoins really do circulate given that burned fee :slight_smile:. Especially if you estimate the ppc price somewhere in the 100 or 1000 USD, the 0.01 ppc fee gets really expensive.


#6

How should that cold mining work and how would it contribute to securing the network? Is any proposal or white paper already out there?


#7

One way to look at it is that 1% of say 100 ppc gives you 1 ppc a year which you can use for a bunch of transactions. Peercoin is never intented to be a coin to pay cups of coffee with, just the big stuff


#8

Sure, I understand that and I like the idea. But still it’s just 1%, whereas blackcoin offers me 5%. Or a regular fiat bond might promise me somewhat around 10% (if I am willing to take the risk in a very risky one, or with higher interest rates in 20 yrs maybe :grin:).
Peercoin was made for an investment, a backbone to the cryptocurrency market. Understood. But for a real investment, the return is pretty low and static at 1%. Not even considered the exchange rate volatility… thats not very appealing. I am thinking of ways to make the coin more attractive as such an investment.


#9

1% inflation is more attractive than 5% inflation.


#10

If the coin would be used as a currency, yes. But it is not used as a currency, nor is it suitable for that. Too expensive with the 0.01 depletion fee for every transactions, and too slow. Other coins such as blackcoin are better suited. Short block generation times, low transaction fees and a small inflation rate, that is great for a currency. And a lot of infrastructure of course, debit cards, web shops accepting it etc.

But peercoin started out as an asset for long term investments and imho it should aim to be competitive as such.
As for the inflation rate: I’ve seen a chart on the internet somewhere from 2014, which claims that peercoin would be more deflational than bitcoin in the long term…


#11

If I own 1 coin out of 100 (1%), and everyone mints for a year, i will then have 1.01 coins out of 101 (still 1%). If we multiply the rate by 10, I would have 1.1 coins out of 110 at the end of the year (which is still 1%). If we make it 100%/year, i still will only have the same % of the total supply at the end of the year as I started with.

1% mint inflation with 0.01 min fee essentially means you get 1 free txn/year/ppc. If we increase it to 5%, you would get 5 free txn/year/ppc. Youve not made an argument for why we should be giving out more free txns than we currently are.


#12

I think you’re misunderstanding the purpose of Peercoin. So many blockchain projects seem to be attempting to imitate payment processors with high speed transactions and low fees. Only Peercoin seems to recognize at a fundamental level that blockchain technology is not meant to perform functions like these.

The focus of the Peercoin blockchain is to be a decentralized store of wealth. This wealth can take many forms, from trading fiat to store in peercoin or owning PeerAssets that represent equity in real companies.

Regardless of the form it takes, the purpose of the blockchain is to store this wealth in a decentralized manner, which makes it resistant to censorship, interference and theft by governments and other parties. The blockchain is a safe haven that is exposed to fewer threats from the outside world, as long as you take proper security precautions.

The Peercoin blockchain is designed to be focused on fairness, security and sustainability rather than features like fast transaction speeds and low fees. Focusing on the former will result in a rugged and robust blockchain that retains its decentralization over the long-term. Focusing on the latter however (speed and low fees) will result in a centralized network that is controlled by fewer people as well as a massive blockchain size, in effect reducing both chain security and its ability to act as a store of value.

There is no reason why Peercoin can’t act as a currency though. The Peercoin philosophy is to build things on top of the chain, rather than into the chain itself. This means that the blockchain should forever continue acting as a secure base layer on top of which 2nd layer protocols are developed to handle everything else.

Keep the blockchain the way it is and let it do what it does best, (securing value) while secondary protocols take care of additional features such as tokens, smart contracts and high speed transaction processing. This way the core protocol remains secure and stable while additional infrastructure is built on top to support it in being used as a currency as well as plenty of other use cases.

In short, the blockchain itself should not be changed to make it usable as a currency, rather supporting 2nd layer technologies can be developed to interact with the blockchain to make wide scale currency use possible in the future. So I believe the argument for minimal amount of inflation stands.


Peercoin value - I dont get it
#13

it’s been done. For example Decred randomly picks minting stakes and only the on-line stakes get to mint blocks. This comes with a cost of increased network complexity, which i don’t know is worth it.


#14

And what if the exchange rate grows into the 100/1000 €/ppc and wealth begins to start at very low amounts of ppc? Would you mind redoing your calculation with the case that I own 0.01ppc? (which could still be worth several 1000 €…)


#15

But if I am a wealthy person, I have many thousand options to store my wealth. And ideally I’d choose a portfolio that maximises my gains while minimizing my risk of loss. That’s the entire point of storing wealth and the huge industry of financial services around that. If, additionally, my wealth is seen suspicious by certain parties, governments etc., I would additionally like to make sure that my portfolio and transactions are anonymous… but even if they are totally legal, I would gladly take this as a bonus.

So then, when I look into investing into crypto currencies, I have a vast amount of alternatives which do look more promising than ppc. I like ppc, but I must frankly admit that, e.g. Blackcoin offers anonymous transactions, 5% PoS reward, a low built in inflation of 0.95% (which is but more than compensated with the PoS returns), and even enough infrastructure to spend the coins directly, without exchanging them again (at least it is said so). Monero and dash offer anonymous transactions and huge exchange rate grows. Bitcoin/Cash offers at least the latter and start to be trusted in like gold.

A growing PoS Reward with time would be a new outstanding feature for peercoin and make it more attractive as an investment asset. Imo :slight_smile:


#16

Here’s some details on cold minting https://medium.com/peercoin/a-path-to-cold-minting-252acd310e82 written by @Nagalim


#17

The mission statement on the Peercoin website says:

“Peercoin seeks to be the most secure cryptocoin at the lowest cost, rewarding all users for strengthening the network by giving them a 1% annual PPC return when minting.”

The mission statement was put together by myself and Chronos about two years ago, when the website was being updated.

The first half (“Peercoin seeks to be the most secure cryptocoin at the lowest cost”) still holds good.

But I now believe the second half (“rewarding all users for strengthening the network by giving them a 1% annual PPC return when minting”) is problematic. Although accurate, it gives the impression that the investment benefit of Peercoin is that 1% interest. This is a misunderstanding - the benefit of the 1% is to remind people to mint, and to inject a little inflation, both of which are designed to support the Peercoin eco-system.

When the website is redesigned, I hope is the second half of the mission statement is re-thought.


#18

The calculations are the same. Assume a fixed marketcap, then no matter what the mint rate is (even 1000000%/year) you still have 1000 € year after year.


#19

If the rate is 1000,-€/ppc, then 0.01 ppc equals 10,-€. That means, every transaction costs 10€, no matter if the transaction amount is 100ppc (100T€), 10ppc (10T€), 0.01ppc (10€) or 0.001ppc (1€), or less.
And then, if I have say 100€ in ppc, that is 0.1 ppc. My minting gain would be 0.001 ppc p.a., while the transaction fee is still 0.01ppc. Then the transaction fee outweighs the minting gain and I am better off to never transfer any money, not even for liquidation :grin:.

If the gain is 1% for minting and it is said to cover 1 transaction per year, why is the transaction fee not 1% as well?


#20

where is it said that 1% should cover 1 transaction a year?