PPC identity

We got into a chat about vending machines and merchants in the chat box and I shared a few thoughts. Posting as a thread to open up the discussion to everyone.

The idea of PPC vending machines points directly to the problem with the PPC theory and a mixed up dual identity.

On the one hand, if PPC is meant to be gold and store value, it is useless in vending machines. We never use gold that way

On the other hand if PPC is a currency then its super useful for vending machines, but then it isn’t like gold

So which is it going to be? We gotta pick one because each requires different strategies.

If PPC is a currency, then getting merchant adoption and stuff like vending is how we win adoption, make it useful to the masses, and maximize our value.

If PPC is gold, then there is a totally different path to adoption and success. This would likely involve getting pension funds to hold it and things like that

Dual identity issues aren’t unique to PPC and have a track record of causing problems. For example, dual identity is part of why namecoin doesn’t have household recognition. If it just tried to be distributed DNS and not a currency, it could spread in the right circles of users and be useful (therefore valuable) to them. But its trying to be both currency and DNS. And failing at both. CLee even noted this in his miami keynote.

In deciding which path to go down, someone mentioned that even though they aren’t really into economics, their gut reaction was that there’s more use as a store of value due to transaction fee and minting. Thus adoption with merchants isn’t that important

For those who aren’t into economics a tiny bit of background info about minting. Minting is an account interest payment. Interest payments don’t really have too much bearing on whether PPC is a currency or not. Every fiat currency pays some sort of interest on deposits ranging from 0-0.25%in the US to 2.5% in Australia to far more in developing nations. Thus we could be, or not be a currency regardless of having a 1% interest payment.

Secondly, it is really important to think through what it means for something to be a store of value. There are two parts to this thought path, figuring out what “value” is and then figuring out how to “store” that value.

At the bottom, value is another word for usefulness. There are two kinds of usefulness (or value) - practical usefulness (what can I do with the thing) and aesthetic usefulness (how does the thing make me feel?). Our cryptos are valuable over the long term only insofar as they are useful in those ways

To really dig into value let’s think through a non crypto scenario. Take postage stamps. Imagine you were tasked with getting a letter from where you are now all the way to alaska. How how much is it “worth” to you to be able to send a letter from where you are to alaska and know it will get there in 3 days? To figure this out you think through the alternative - getting it there on your own. How much time would it take? How difficult would it be to handle the logistics? How mentally tiring would it be? When you imagine you had to transport it yourself you realize that this is super hard. So if someone else builds a system that can move it in three days and charges you $5, you pay it because you get the value of moving your thing (which is very useful) all that distance at far cheaper than if you did it yourself

Same thing with money - how much is it worth to you to know that you can pass a transaction on the internet in a way that cannot be counterfeited to anyone ? eg deposit on btc-e in russia, move to coinbase in the us, withdraw to bank account in canada

For anyone who wants o use money in any of these places, it is very valuable which is why banks can charge fees, just like post offices. The alternative of carrying the money by hand which is totally impractical.

So then, It is the utility of the payment processing that cannot be counterfeited that is the core attribute thing that gives cryptos a practical value. If we can counterfeit it, it stops being useful (hence the fear of 51% attacks) it stops being useful it losses value. Also, there is usefulness (value) to be had in how fast coin can be moves. ALL other things being equal, in most situations a 60 minute confirmation time for a financial transaction time is less useful than 10 minute which is less useful than a 1 minute. Now in real life, all things are usually not equal and there are trade-offs, so it becomes important to think through the value (usefulness) of the trade offs. eg Gold is hard to counterfeit and pretty, but it is also heavy and there isn’t enough of it to go around. Paper money is easier to counterfeit, but it is lighter and there is more of it to go around. Thus we use paper money instead of gold… Or in cryptos 10 minute blocks mitigate attacks and double spending, so taking longer and being more secure can be more useful than being faster and less secure

This brings us to the second issue - How do we “store” this value? That is much simpler to think through. Storing something is simply putting a thing in a position where you can trust it will be available to you in the future. That’s it. This means that storing the value of the payment processing that cannot be counterfeited only require that the system be trustworthy stable and accessible into the future.

So this bring us back to the initial question - how are we going to be useful? We’re not aesthetically useful like gold, or DOGE. So we need to decide how we are practically useful?

Are we a currency and useful to merchants and vending machines and what not? Are we making peoples lives easier the world over because they can send transactions and trust that they’ll be secure and get there? Does PPC provide the masses with value in this way?

If not a currency, then who are we trying to be useful to? What solution do we provide to what problem? Will that target audience have enough of a network effect to be stable over the long term, thus creating a store of value over the long term?

Thanks IHC for posting this. It gets straight to the root of our problem in explaining what the purpose of Peercoin is, what it’s supposed to be used for. We’re trying to build a video with Tripper on the marketing board, but it’s hard to come up with a script because we need to know who we’re marketing to and what problems we’re solving for them. Without knowing this, we can’t properly market Peercoin.

I’d really like Sunny to join this conversation if possible because he is the architect. He has a vision for Peercoin, thus he could help us answer these questions and in turn focus our efforts.

and this was what i said in the chat:

i personally think there’s more use as a store of value due to transaction fee and minting. i don’t see why adoption with merchants is so important but then again i know nothing about economics

I think your questions are very legitimate. I studied Innovation Engineering, and the core thing I have learned from this is you always have to create an extra value for your costumer.

So if you look at peercoin as a product, what does it have to offer for the costumer= coin owners?

For myself, its clearly the POS, but 1% is, in my opinion, to low. But this is not the discussion here.

As currency bitcoin is much more convient in the moment. And only if btc fails some other crypto currency can take over. Will they fail? The concentration on mining pool is a issue. (51% Attack)

But if bitcoin fails, every 1.Generation CC will be affacted, also Peercoin, even if an 51% Attack is less likely because of the checkpointing.

It makes no sense using Peercoin as an often used transaction coin, because then the POS will not work anymore. (If nobody keeps it for 30 days, no POS).

Also as an enterprenuer myself, I know you need to have a strategie, because otherwise people outside will not understand what your are doing.

So the strategie was gold and I think peercoin should stick with that.

nice one iheartcryptocoin, interesting thoughts. got me thinking as to why i thought Peercoin was useful.

first, i need to save money for the future and at the moment i would prefer to save it in Peercoin where i get 1% return per annum and any increase in value. this is better than any bank account i can find in the uk due to current low interest (my current account offers 0% despite always having somthing in it for example). secondly i can move that money anywhere in the world without significant transaction fees.

why Peercoin over other crypto-currencies?

i like that it cares about the environment as that fits in with my own beliefs and i think that useless computer processing is a waste.
[li]well-posiitioned, innovative developer
i also like that Peercoin was positioned in the cryptocurrency arena early on and that the developer also developed another innovative coin such as Primecoin - although the developer is anonymous i have more faith in him then many other crypto-developers.
[li]good community
lastly the bunch of people on this forum are a good community who are hard-working, dedicated, sensible and approachable. best of all, so far, they have resisted well from going down a road of pure hype which other cryptocurrencies have.
[li]good name
i also like the name.[/li][/ul]

a store of value (savings account)?
if Peercoin could be established as the coin to store value with, then i believe it would be valuable to a lot of people. i am worried that in the long term bitcoin may end up fulfilling that role. but on the plus side, bitcoin does not offer a 1% return per annum - this might not sound like much but all things being equal, surely this is an advantage.

not suitable for everyday low value transactions?
on the other side, Peercoin has slow transaction speeds compared to some other crypto-currencies and also has a fixed transaction fee which to me don’t make it suitable for everyday, low value use… so i don’t think that option is really available.

to summarise:
a green, secure store of value is how i view Peercoin and that is how i am using quite happily so far… having said all that i know next to nothing about economics and these are just my basic thoughts

EDIT: a couple of errors

Rootsical, maybe that’s how we should market Peercoin, like a savings account. It’s more secure than other cryptos and more sustainable in the long-term. I think it will also become more stable in price once the value gets up there, the reason being that the transaction fee will also rise causing people to buy and sell less. And the main feature, the 1% yearly interest.

These features make it suitable to be marketed as a savings account, where Bitcoin will be marketed as the checking account. This would simplify Peercoin’s marketing, because everyone knows what a savings account is. It’s where you store your money long-term and collect interest. I believe it would make it much easier to get the idea behind Peercoin across to normal people. What do you all think?

i agree. but first i think we need someone with some economics background to take a look at the viability. the good thing is resource-efficiency and security through proof-of-stake. but why 1%, could someone come up with a, say, 2%/x% coin? lastly, is it viable to store value in something without it actually being used for anything but storage of value? intuitively i feel peercoin already has enough behind it in reputation for this to work but it would be good to get some other opinions. could we get in touch with some economics students from top universities for opinions or to suggest as a paper to write? or maybe just test the waters with anyone really…

The problem is that economists disagree so much on things, for example Keynesians vs Austrians. One might think this is great where another thinks it’s wrong. I believe the majority of economists in top universities are Keyensians, so going that route would probably give you a one-sided view of things. I’d like to know what Sunny thinks about it.

Another good point you bring up is the potential problem of other competitors popping up offering a higher interest rate. This might look great to regular people buying it so they can get a higher return, but how does it affect the viability of the coin long-term.

My background is in international politics/law, computer science, and econ, and comparative religious studies. That will certainly put a lens on the comments I make so please keep giving feedback!

It is very important that we really figure out the answer to whether PPC can act like a savings account if no one buys usually goods with it?

The first question we’d have to look at is getting people to switch from the current status quo in savings - If I can already save in my local currency and earn a return, what advantages do peercoin give me as a savings account? Why would people switch?

I’m not really sure there is a good compelling answer. The international banking system already does a good job of letting money sit unused in accounts. Additionally gov’t put insurance on deposits in the case of loss which ppc does not have.

Let’s assume for argument sake that people are willing to switch and use PPC as a savings instead of normal savings, then what?

The next issue is people whether people will broadly see peercoincoin as a proxy for value?

For this to happen, they have to trust that everyone knows what it is, and that everyone would be willing to accept some in exchange for goods and services (or fiat) when it comes time to cash the savings.

I see a glaring hurdle here and it is a problem I also see plaguing NXT rippple and bitcoin etc. PPC like all of these other coins is very narrowly distributed. Only a very small number of individuals have some, and only a fraction more know what it is. Cryptos that act like currencies can overcome this by inserting themselves into the stream of commerce. Currency is the medium everyone uses every day to buy things, so as people adopt cryptos to buy everyday things, the distribution evens out and more people trust it. The easiest way to make this happen is to produce all of the coins at once and distribute them widely (which nxt and ripple totally botched) or to distribute them overtime and ensure a wide number of individuals have the ability to collect from the ongoing distribution. Mining allows some people to get coins, but that number shrinks with asics over time. this means coins need to be wide spread enough that they can be purchased through other means, and distributes through transactions before the mining base becomes too narrow.

So even if we convince some people to use PPC as a savings vehicle, of we aren’t using it as part of the everyday stream of commerce, the coins won’t have a natural way of being distributed to the masses and the trust that others will take the coin when it is time to cash out savings will never be built. This is a serious problem. f we get payment processors to include it along side bitcoin (or whatever coin becomes the daily use coin) then we might be alright. But if that isn’t the case, and we are only on coin exchanges, things could fizzle out as all the attention goes to the coins the masses are familiar with.

If peercoin is meant to be used worldwide, then an inflation rate of 2% is appropriate as this wold match the rough global population growth rate since world war 2. The population growth rate can act like a simple though imperfect proxy for the growth in demand. If there are more people, they need more money to split between them.

If peercoin is meant to be used by a smaller group of people, then we don’t want the interest rate to outpace the number of folks in that community.

To this base interest I would add an additional % to capture coin attrition from lost passwords, failed hard drives etc etc. There is no hard data on this as coins are new, so a rough estimate of 0.5%/year to offset these losses could be a reasonable start. This would mean an annual inflation of 2.5%

Another consideration is whether all coins will actually realize the coin stake interest. My understanding is stake is done in a lottery form where coin days act like tickets. Thus if I have 10 coin and everyone else has 9 other people 100 coin, my ten coin will have to lose 10 rounds of stake and everyone else win one round each before my total coin days would be equal to what everyone else got during one round of stake. If I were unlucky I might have to wait another 10 rounds before I finally have enough coin days to win at which point I would only win a fraction of the 1%. It could happen over the course of a year that I only win a few tiny stake blocks and thus only earn half on 1% of my account. If many accounts were relatively small balances and disadvantaged in this way, then a substantial number of total coins wouldn’t earn the full 1% meaning total inflation would be less than the 1% target. If that’s the case, then the max inflation should again be higher to offset this. (eg 3.5% as the max, even though only 2.5% would be realized in a given year). 1% is probably too low

Thanks IHC for bringing up such a good topic. I would like to start with my personal experience first.

I bumped into bitcoin last April and started buying and holding BTC and PPC. I tried LTC but dropped it soon because I see no innovation in it other than its SCRYPT and 2.5 min confirmation. And I have lots of fun in digging innovations behind PPC, and of course great rewards as well.
Last July or August, I spent around 0.12 BTC (or around 100RMB back then) to charge my cell phone because other conventional methods, including online charge, somehow not working. That’s the 1st time I used BTC until now. I don’t see btc as a better means than fiat payment system.
I think many ppl just treat cyrpto-currency as one way of speculation and later transform into believers, at least for me. From this perspective, I think PPC is perfect for this job and PPC resembles a lot in properties of gold and that is, I think, exactly what Sunny has envisioned it to be.
So let’s stick to the idea of backbone currency or storage of value. Let BTC and LTC do the daily payment job. PPC is not cut for that.
BTW: 1% PoS is quite sufficient if you look at 100 years from now.

Interesting discussion. While I agree that we need to clearly define PPC´s identity, I am not sure I agree that it has to be either-or. Why cant PPC be marketed as a coin with multiple purposes? A digital “gold plus” coin, which can be used both for storing value and to purchase at least relatively expensive things? As far as I remember, the transaction fee can also be changed at some point if the value of the coin continues to go up.

Btw, how do you guys respond if someone were to claim that BTC is better for storing value since it is deflationary in nature?

^^ This

Good discussion here BTW and like to reply, but don’t like double posting. In another thread about Peercoin its value I posted something like the following statement:

Peercoin is like a house. It is store of value, but it also needs to be usable. On top of that you also want to be able to sell it and buy another house when time comes. So you need a store of value, usability and liquidity.

The trick is in getting the right mix in the marketing message in the context of where we are now.

A strong focus on value would just alienate a lot of users, so I think it is important to work on acceptance first in marketing terms (I think liquidity is already good, may exchanges). The market will do its job when people notice they need to pay some fee and that will change their behaviour how they would use the currency over time. By that time we should change focus from acceptance into store of value gradually.

Just my 0.02 PPC

PPC is pretty much the most complex coin I’ve seen. I’m not just saying that because it’s my #1 coin, and I’m also not saying it’s even an entirely good thing.

So far I think it’s both but it’s very early to tell. Big name merchants are starting to accept Bitcoin, if it succeeds then it obviously provides some benefit to merchants/consumers. PPC can do the same thing, it would just be reserved for expensive purchases.

If we had to choose one path though, I’d go for the store of wealth/backbone currency/gold aspect as that seems to be why it was designed. In the words of Sunny King “Bitcoin wants to dominate everything” whereas PPC can specialize in a certain area. I don’t know enough about gold to know if it solves any problems with gold, I just know if I had the choice between storing my ‘value’ in gold or PPC and they were both stable, I’d choose PPC.

Overall I think it’s clear we need to do much, much more in educating people about PPC and how it differs from BTC.

As a “backbone” cryptocurrency, the most effective position would be the primary coin in an exchange.

As in, Peercoin should be able to convert to nearly any currency easily and in one step. That includes fiat and crypto.
So instead of BTC/LTC, BTC/DOGE, BTC/DGC, BTC/WDC, etc. it would be PPC/LTC, PPC/DOGE, PPC/DGC, PPC/WDC etc.

Once Peercoin has that, I think it may be in a prime position to become the “long-term store of value” currency.

This says a mouthful, and I agree.

Peercoin was never designed to be a transactional currency for “small” purchases. It was made to be a backbone currency for a large store of value. When something moves in the blockchain it should be a large and infrequent transfer. (This is why there is such a hefty 0.01 per kb transaction fee)

As time goes on, the transaction fee may be adjusted, but the point of Peercoin will be the same.

Be a relatively “small” blockchain, with lots of Proof-of-stake nodes supporting the network, with minimal mining power needed. Let it be a reference currency for others to relate to, so it could be PPC/LTC or PPC/FTC or PPC/BTC or PPC/DOGE or whatever.

If you want to visualize Peercoin, think of it like a Tetris piece.

At some point, Peercoin is going to come down and click into place, like a tetris piece in the right area. It’s going to prove its usefulness (and some could say it already has with Peershare)

People already love the small Peercoin blockchain. People love the fact that you can run your wallet on something low powered like a Raspberry PI on a tiny linux distribution and even mint coins with it.

Peercoin is already sleek and attractive in it’s infrastructure, and we’re still developing what great potential it has…

PPC as a reserve is nice in theory, how does the theory get executed?

The phrase “store of value” people keep tossing around is really quite empty “Value” is a synonymy for “useful.” That’s really it. The question is what kind of useful do we need to be.

The current world reserve currency is a valuable (useful :-p) example to look at. The USD is the most liquid currency backed by the strongest military, a relatively high tax base and (the past few years not withstanding) a stable government that seamlessly transfers power from one administration to the next. Thus is has the smallest likelihood of all the fiat currencies of disappearing. That stability and liquidity (there is enough USD for whole world to use) is incredibly useful. The fact that the stability looks robust and should last a long time means the USD isn’t just stable and useful now, but that it stores that stability over time. Thus the USD is called a store of value. “Value” is just a one word synopsys for all of the ways the USD is useful. If you don’t believe me take a look at how the USD behaved during the global financial crisis - even though the US has a horrible debt problem, because it is still relatively the best option, the USD value shot up. When the US credit rating was cut, the USD still went up. It’s still relatively the most liquid, and backed by the strongest infrastructure.

This usefulness is why oil and other commodities are only priced in USD right now. This asset pricing creates a feedback loop that makes the USD even more useful. Not only is the currency supported by a massive infrastructure, but everyone uses it which means if I use it I can trust I’ll have the flexibility to do the transactions I want later. Once enough countries behave like this, the network effect forces all of the other to also hold on to USD.

Most importantly, this usefulness is not imputable. During colonialism the British empire ad the power and stability that caused its currency to be treated as reserve. Post world war II the US was took on the role of global power juxtaposed against the USSR and in the 1990’s the US became the sole global hegemon. But just as the US rose so too will it eventually be replaces. Whenever a new more stable global power rises us, that new currency will have a stronger backing and become the global reserve. Being reserve is not the birthright of the US, the USD is a “store of value” because it is a “store of usefulness”

To echo the above history in crypto, PPC would have to far and away be seen as the most useful currency out there with the most stable infrastructure. It would also need a large amount of infrastructure build around it to ensure assets are priced in it and trigger teh network effect that makes the currency even more useful. This is not a trivial task at all. (es with competition - eg the ripple protocol is also trying to be a reference for everything else (and by implication gain reserve status)

It is really nice to theorize about trying to have things priced in PPC terms, but practically speaking how do we get there? A minimum we’d have to start and and control all of the pre-imminent changes and make sure PPC is the prime market. We’d have to work with commodity traders to start shadow exchanges parallel to the official USD priced ones. There are many other issues as well I am sure. The path from where we are today is really unclear and contains a lot of high cost hurdles (eg setting up exchanges is expensive and difficult)

Relatively speaking, it is also harder than trying to be an everyday currency. A currency that tries to be useful (valuable) by enabling the common every day transactions that people do has a much clearer path to success. Get enough merchants on board selling things prices in that currency so that everyone is society hears about it and is confident they can get goods for it into the future. Once that confidence is in place people will be willing to get wages in that currency and the virtuous cycle will take place. The usefulness will be enshrined into the future meaning the usefulness is now stored for the future (and the currency is called a store of value). The only super high level question in crypto is which currency will be able to trigger those network effects first by being the most useful for daily transactions? This path to success is pretty painfully obvious. The practical steps for PPC’s path to success, if it really wants to be a reserve, is not obvious in the same way at all.

PPC as a reserve is nice in theory, how does the theory get executed?

PPC is more than nice in theory. It’s an established coin, with active development, with a design that still is working as intended.

It sounds like you want a solid blueprint of Peercoin’s future.

That is impossible to give you, because cryptocurrency and the internet in general is an organic organism that changes every single day.

All a blueprint at this point would do is:

  1. Put your development “in stone”, thereby limiting yourself to make significant changes later without people panicking that you’ve changed the direction. It is better to keep what you divulge somewhat quiet until the time is right and you are near a developmental launch. If you retract one of your ideas because of industry developments (which you should do), people will finger point with accusations just to cause disruption and favor their own coin.

  2. Encourage to plethora of similar altcoins, which just confuses the market even more when there are so many similar solutions. Right now, people can copy Peercoin’s source. But they can’t copy Sunny King nor the development team about to be established soon.

What Sunny King may have decided was the path he designed to take in Oct 2011 much of it still holds true, but as part of the Peercoin steering committee, he still maneuver Peercoin as necessary to keep current with what the market demands.

Maybe it’s a good idea that we look back in time as an exercise and look at how we got here. This might help bring clarity on where Peercoin might be going next.


+1 on ppcman post… looking back in time made me all nostalgic https://bitcointalk.org/index.php?topic=99735.msg1106902#msg1106902

still need to digest everyone else’s posts in here b4 larger comment