PPCoin criticism - YouTube video

I’m so glad that some people could clearly explain the flaws in the percent question. And thank goodness someone showed that despite your profit being higher, everyone’s purchasing power remains the same.

Naturally, there is something from this that falls out though (people who are fervent followers of the Austrian School of Economics may want to cover your ears): and that’s the effect of Monetary Velocity.

In this particular case, if PPC was to be used as a transactional vehicle (rather than a store-of-value), then indeed the person with the most coins “wins.”

Before I get into that particular argument, let me address that my starting basis for this argument is that in order for any currency (including) to successfully thrive, it must either be pegged to something of static value or be used for widely-accepted transactional purposes (i.e., the gold vs. cash analogue). From what I’ve seen and experienced on these forums, it sounds like PPC is intended to be transactional rather than a store-of-value. (As a note, most crypto-currencies directly show the effects of Monetary Velocity in an incredibly accelerated process akin to penny stocks: pump-and-dumps, FUD, and other types of hype. It’s pretty crazy honestly.) Take away the premise that PPC is meant to be transactional, then this argument fails to hold weight.

Anyhow, back to the why the rich “wins.” In a nutshell, it’s because they have no impetus to move their stores of PPC. Yes, we know that market return rates are substantially higher than PPC’s 1% (technically, PPC’s true inflation rate has to be higher than 1%, more on that later), but that is assuming a stable pegged rate between PPC and USD. Still though, even if there is a relatively stable rate (fluctuations at the level of 33% of gold), we’d have something just at market return rates for a treasury-grade A bond (due to the fluctuations). [I’ll try to give a screenshot of this analysis later.] And many investors have a small divestment into something stable like bonds/low-risk (or even risk-free) securities. So it’s likely that there would be some users that would use PPC as a store-of-value.

So this rich person wins because of the way PoS works. The person that uses PPC as a transactional vehicle wouldn’t be able to build up the same level of stake as the person who uses PPC as a store of value (which would be the rich person). Let’s say that the “normal” person only is able to put only half of their PPC into stake. Then that person only receives 1/2% whereas the rich person gets 1% per annum. Compound this with the lost value from transactions that the normal person would incur and not the rich person, and the effect becomes even greater.

All in all, the rich person ends up getting truly “richer.”

With that being said, despite that significant issue, I still very much like PPC and can see the value of it’s use. As with most things, you can’t have everything you want, but PPC is able to take care of several very key technical aspects and will continue to show great promise.

It’s a tricky thing honestly. I think that people will tend to use PPC as a store of value primarily because of the Proof-of-Stake mechanism. But there are issues if everyone uses it in that manner. It falls into the whole Value Through Use versus Intrinsic Value argument (Do crypto-currencies gain most of their value from their use mechanism as a cash/accounting mechanism or do they inherently gain their value intrinsically like a precious metal [although it’s a societal thing that has determined the prices of most metals]? We can’t deny that they gain value from both, the question is which is the greater driving force.)

With that said, if we truly consider PPC to be a crypto-currency there are issues with Monetary Velocity that need to be addressed. We’ve seen what happens when currencies aren’t circulated both in the general populace and in the realm of cryptocurrencies. Data has shown on many occasions that circulation of money has a hand in dictating the purchasing power of a currency. The fear is that if too many people don’t circulate the money (i.e. most people uses PPC as a store of value rather than a transaction ledger [which is the purpose of the blockchain]), then it affects in diminishing the value of a coin. If money doesn’t circulate to purchase other things with intrinsic value (needs/wants), then what’s the point of it (and it definitely doesn’t fall into the realm of being a “currency”)?

To clarify my argument in succinct terms:

Premise: Most people use PPC as a transactional ledger and for the sake of this example spends 55% as a currency (buys things, pays bills, etc.) and saves the other 45%. A few people primarily use PPC as a store-of-value and saves 90%.

Outcome: The average person would only be able to obtain stake with that 45%. Then we have those that have stake with 90%. As an example, after 10 years, the average person has 1.0045^10 value, where as the person with more has 1.009^10 value. Dividing the percent added value of the second from the first, we ~2.0411. So the purchasing power of the person who stored a higher percentage of their money has gained an additional 4.11% on the one who has less.

Mind you, I didn’t qualify whether this was a good or bad thing. After all, this is how most banks operate. This is why you see tiered percentages based on the amount that you have. I just was responding to the argument about purchasing power that has been laid out in this thread and the statement that purchasing power will always be equal. Idealistically speaking, it’s true, but from a practical standpoint, it isn’t. Those with more money will end up having more purchasing power as time passes by (both in PPC and in real-life). Unfortunately, this can be perceived as an issue for some. Although we don’t realize it (or maybe just don’t acknowledge it), a lot of the mechanisms that have been experienced in the young crypto-currency scene function as traditional banking vehicles and as an financial analyst this makes PPC particularly fascinating.

@coolbeans94[quote=“coolbeans94, post:20, topic:87”]First of all, there is nothing wrong with being rich.[/quote]

No one is saying being rich is wrong here. The “rich get richer” referrs to the fact that those who have most PPC will get most POS coins without doing anything. Since there is no cap for PPC, that means a few people are guaranteed to own most part of PPC money base eventually, by doing nothing. Many people have problem with those who get economic benefit without doing the work. PPC gives the impression that the early miners in the first few months have a huge advantage over late-comers.

I don’t know. Peercoin as a transactional ledger isn’t outstanding compared with many other coins. Why do people have to like Peercoin? I think PPC is special not only because there is POS reward per se, but because POS makes the network secure without POW mining. From what I read (not sure if its true) that it is extremely difficult to 51% attack the POS network. POS reward should be there to reward people who secure the network. But the current POS reward policy is a liability to PPC, IMHO. It gives PPC bad names.

I think there is a simple solution to boost POS security and eleminate “the rich get richer” effect at the same time. That is start POS generation at the moment when the coin enters a wallet, without the 30-day waiting period. Anyone who has PPC in the wallet for any period of time will have opportunity to generate POS proportional to coin age. There will be more wallet mining POS at any time, making the network more secure, and the “poor” people’s transactional coins also earns her “interest” at the same rate as the “rich” people’s coin, at least percentage wise everyone is equal.

There is a problem with the 520-block wating time if there is no distinction between coins allowed to generate POS and the “reserved” coins — if I put some coins in my wallet and they generate POS, I’d have to wait for 520 blocks time before I can spend these coins. I guess I could be given an option either to wait or to use the coin right away and forfeit the POS reward?

I also like peercoin. But we should take a hard look at every aspect of it for peercoin’s own good.