PoS reward, coin age and minting time

[Sentinelrv]

In pure PoS systems, new coins only go to existing coin holders. In a hybrid system like Peercoin, PoW injects a small amount of new coins every year into the ecosystem outside of existing holders. These new coins are sold on exchanges by miners and can go to new holders, rather than existing holders.

This continual distribution improves the decentralization of the network over time as it creates new minters that can provide security for the network. Pure PoS has no inherent mechanism to improve distribution and decentralization except hoping existing holders sell their coins on exchanges to new holders.

Also, pure PoS coins are subject to the nothing at stake attack. Our vision for Peercoin and a fix for nothing at stake is letting the majority of blocks come from PoS minters while a minority come from PoW miners, which will inject some entropy into the system. Here are a couple quotes from our core developer @hrobeers…

@hrobeers

Every algorithm can be gamed.
Even our PoS algorithm can, but the gains are so small that it’s not worth spending time to do it.

The problem with algorithms like Casper or other so called non-naive PoS algorithms is that they are so complex and designed to be gamed to be able to “put something at stake”.

PoW is strong because it is extremely simple. That’s why I believe in a simple so called naive but fair PoS algorithm, combined with limited amount of PoW that injects entropy in the chain.

@hrobeers

Why would competition from Ethereum change once they switch from PoW to PoS?
That is like saying PoS is the only feature of Peercoin.

When talking about the PoS algorithm. The biggest difference is that on Peercoin every coin is one vote.
While on Ethereum, the system is designed so that there is competition between minters, minters can gain advantage by gaming the system. This means that the process of finding stake becomes more expensive and this cost should be paid by the network, which yields higher inflation rates.

You could argue Peercoin has PoW which increases inflation rate, which is true, but it provides us entropy to ensure our naive PoS algorithm is secure.
Compared to Ethereum, Peercoin uses two simple and proven algorithms, while ethereum uses one complex and unproven algorithm.

But like I said, there is much more to peercoin than just the algorithm.