PoW & PoS vs. pure PoS - future of Peercoin consensus

#1

Hello.

At first I would like to apologize for my English - it’s not my first language, and chaotic sentences - I’m still editing this post, as I’m thinking over it.

As I know, I’m venturing into waters, that maybe I shouldn’t be touching, as it was carved design ‘in-stone’, but I would like to step in nonetheless :wink:.

I don’t have strong opinions on either of the options, I’m not a proponent of a change - I’m here just to hear opinions about it.

What I think that would make the change beneficial is:

  • the fair distribution is already in place - there is 7 years of ongoing PoW distribution - so coins are distributed into the hands of enough people interested - although it could be extended to for example 10 years
  • switching to PoS now is much more easier, because coins are distributed and thus attacks such as Nothing-at-stake aren’t really feasible or possible
  • miners make inflation of Peercoin higher - instead of max 1%, it’s between 2,5-3% constantly - although it’s small, it’s still 2,5-3x higher than with pure PoS model
  • miners dump their coins onto the market - making market pressure on the market - which for Peercoin is quite shaky currently (without major exchange that was BTC-E/WEX)
  • current mechanism of PoW rewards are depending on difficulty in the network and have variable block reward - thus providing miners with unreliable system, where they don’t know how much they will mine - less miners are really incentived to do it
  • it’s not “eco-friendly” - which was mainly value propostition for Peercoin for long time
  • more stable block generation times and possibility for shorter block generation times (and thus having more capacity “on-chain”, besides making “blocks bigger”) - which is just theoretical as for now, there is only 100-400 txs per day.

I think argument, about mining it instead of buying from the market, when there is a pump/cornering market have really lost it’s sense - miners can switch between coins with the same algos in matters of seconds/minutes, and there are so much ASIC miners for Bitcoin, that it really doesn’t make sense anymore - the difficulty and network hashrate would spike immediately, if PPC would start to appreciate in rapid way.

  • it’s not really an argument, but some people on peercoin forum, and in other resources were inidicating that there will be “final” switch to pure PoS, somewhere in the future - I was always interested why they thought about it, when there wasn’t any decision towards it.

What are the advantages of current model? I think they are important:

  • miners stabilizes market (dump their coins when market is high, according to @peerchemist buy coins when it’s low - I’m not really sure, about this, but it’s possible looking into the example of pure “dead” coin, which is Primecoin - but I think here also makes a difference that it’s still listed on quite popular and liquid altcoin exchange - Poloniex - which makes up for the traders and speculators - if it was delisted from there, Primecoin would be really “dead” in terms of market activity, price and capitalization). Although as I say there are example, that are countering it. I think that main thing that is floating coin around and make it “live” - it’s the liquidity - and this is first provided by the exchanges, which are liquid (for example: Binance - although there is wash-trading, as far as I have investigated this exchange, Bittrex, Poloniex, Kraken, Bitstamp)
  • it provides entropy and thus secure better blockchain and native asset
  • it’s set “in-stone” design that was crafted and made 7+ years ago
  • interested miners can take part in the development - making protocol updates and other/new functionalities better - increasing decentralization of the ‘team’ (although with current model of rewards based on difficulty/hashrate - there aren’t really a lot hobbyist miners, because it’s too unpredictable to calculate profit, and pro-miners are usually just switching coins over, where is more profit) - actually maybe this a good case to think about merge mining? Just a thought, because hashrate, entropy should vastly increase then, and rewards would drop down - thus lowering monetary inflation
  • better distribution over years - still ongoing, without back-stage deals, ‘private sales’, ICOs, IPOs etc. which improves transparency

As from the typical speculator-investor (more of speculator, as cryptocurrencies are speculative assets, unfortuntely that’s main objective for Peercoin, and other altcoins, but I wanted to include some “fundamental” data also) perspective, I see that they would like to have:

  • low/none inflation or deflation of the asset they are buying into
  • no group/s that can dump coins and can posses large amount of it (miners)
  • protocol that is evolving and developing over a time, with increased usage
  • at least 2-3 liquid exchanges
  • “handy” liquidity (in the span of 1% of order book, if not possible than in the span of at least 10% span) - to be at least 100K USD (calculated from BTC or other coins/“stablecoins”)

These points are a little altered by miners, even tho it’s much better than in other cryptocurrencies.

If you have more points, please provide it, so I can add to the proper sides.

PS. Merged mining is a good proposition IMO -
It’s losing some freedom in terms of miners (although they are now switching coins as it’s sha256).
But as a reward it’s getting plugged into large pool of BTC/BCH/BSV hashrate.
Although I don’t know how hard would it be with current PoW/PoS, maybe it’s the main problem?
I’m not a developer, I think it would be interesting to see if it’s even possible.

#2

It is important to have a continuous method by which new coin lineages are introduced to the system. This provides a method by which the Peercoin economy can always bootstrap itself. If the current coin holders cease to care about the network (or, for example, die with their private keys) new minters can be created from PoW. Leaving the PoW component intact allows Peercoin to stay alive for hundreds or thousands of years to come.

The variable PoW reward causes a paradigm by which we will see the inflation rate dwindle if real adoption is achieved. This means that we don’t need to guess when the PoW component has done its job, rather it will take a back seat when it is ready to. And conversely, if needed again, it can come to the forefront in the event of global disasters or the like that wipe out big mining farms. Ultimately, the hybrid nature of Peercoin allows for a universally stable protocol that gauges the prosperity of the network and becomes more and more PoS dominated when that prosperity grows.

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#4

I see Peercoin’s PoW as one of it’s most genius design choices. It fulfills so many roles in the system.
First and the most obvious role is the distribution, there is no fairer system to distribute the coins but through competitive PoW mining. I say competitive as Peercoin uses sha256, as sha256 is the only algo to have entire industry behind it (the chip producers, asic producers…). There are other PoW algos but they are mostly aimed at hobbyist who are expected to mine with of the shelf GPUs at home.
Beside providing the fair distribution, a independent mining of Peercoin allows hobby miner to mine a bit of Peercoin for himself rather than going to the exchange to buy some from traders. This is a huge advantage over “pure PoS” systems which are 100% economically dependent on traders and speculators. There is simply not other way to enter the system in those, PoW allows for entrance even without trade and barter. It’s simply a proof-of-burn (of energy) for new Peercoins.

Next bit advantage is the entropy, PoW blocks which occasionally pop out make the system less predictable. Pure PoS systems are horribly predictable (deterministic) otherwise.

About inflation. The system is progressing exactly as it was intended. It’s slowly “tangenting” toward the zero. With value as low as 2.5% in 2019. With next generation of the mining hardware which is expected this year, this will go down even further.

Screenshot%20from%202019-05-03%2012-32-39

As I’ve explained somewhere before:

Peercoin PoW issuance is pegged to the sha256 mining industry.

Eventually sha256 mining industry will get so saturated that it will drive the Peercoin issuance to near zero (imagine 10 new Peercoins via PoW a year).

Another big aspect of having continual issuance via PoW is increased network resilience and ability to recover after black-swan events. Imagine someone stealing a decent chunk of Peercoin supply, let’s say 1M Peercoins. This entity can now mint them and keep it’s advantage to others for ever basically.
However with continual PoW issuance, the non-PoS inflation will slowly erode it’s advantage and return the balance of powers.

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