PPC’s Energy Efficiency & Hashrate Cap: Linked to the .01 Transaction Fee
Please peer-review my analysis on PPC’s long-term energy efficiency.
I would like to have this critiqued, so as to verify my conclusions. Can other people concur? I am open for discussion. I think it is important that we focus on this. Understanding and clarifying PPC’s energy efficient aspects, would be powerful marketing tools. Energy efficiency is one of PPC’s greatest improvements, and should not be pushed under the rug.
ABSTRACT:
Peercoin’s supreme energy efficiency is linked to it’s fixed .01 transaction fee
Because of the fixed transaction fee, PPC has a market determined hashrate limit (i.e. capped hashrate)
Once the hashrate cap is reached, PPC will be orders of magnitude more energy efficient than it is now
Decreasing the transaction fee would directly result in undermining PPC’s energy efficiency
As of November 12, 2013
Market Cap: (Bitinfocharts)
Bitcoin 11,984,125 BTC
Peercoin 37,439 BTC
Hash Rate:
Bitcoin 5.1Q
Peercoin 12.25T
Value secured by a Giga Hash
Bitcoin: 11,984,125 / 5,100,000 = 2.35 bitcoins secured per GH
Peercoin: 37,439 / 12,250 = 3.06 bitcoins worth of Peercoins secured per GH
CONCLUSION:
Currently PPC is about 30% more energy efficient than BTC; as long as we don’t hard fork and decrease the .01 transaction fee this gap could and should increase to over 1,000% +++ after about 10 years. This is HUGE!!!
It’s a so great analyse relating the hashrate with transaction fee.
I also did a rough estimate of the energy efficiency and the money supply a month ago, and from peercoin data at that time it was estimated about several hundreds Peta Hash Per Second of PoW at the peak and then the hashrate will gradually decrease. So the question is what is the PoW peak/upper limit hash rate.
My reasoning is based on an assumption as I posted a question in the other thread:
That’s the assumption the money supply from PoW and PoS in a unit time will be at the same level at the peak hashrate and from then on. As the hashrate increases, PoW money supply will decrease and it will eventually hits the PoS money supply in a unit time. After that, How will be PoW hashrate going? It seems that depends on the value of peercoin, the value of the ASIC equipment and the electricity from the mining standpoint. It is so interesting to understand and predict Peercoin model evolution dynamics. If the above assumption is reliable, the estimated peak hash rate will be several hundreds Petahash, that’s about 4~5 PoW reward halves from now on.
It’s a so great viewpoint in the OP that related hashrate Cap with transaction fee. Such an analyse gives us the ultimate limit hashrate Cap. Will Peercoin network need so much hashrate?
[quote=“Alertness, post:1, topic:733”]PPC’s Energy Efficiency & Hashrate Cap: Linked to the .01 Transaction Fee
Please peer-review my analysis on PPC’s long-term energy efficiency.
I would like to have this critiqued, so as to verify my conclusions. Can other people concur? I am open for discussion. I think it is important that we focus on this. Understanding and clarifying PPC’s energy efficient aspects, would be powerful marketing tools. Energy efficiency is one of PPC’s greatest improvements, and should not be pushed under the rug.
ABSTRACT:
Peercoin’s supreme energy efficiency is linked to it’s fixed .01 transaction fee
Because of the fixed transaction fee, PPC has a market determined hashrate limit (i.e. capped hashrate)
Once the hashrate cap is reached, PPC will be orders of magnitude more energy efficient than it is now
Decreasing the transaction fee would directly result in undermining PPC’s energy efficiency
As of November 12, 2013
Market Cap: (Bitinfocharts)
Bitcoin 11,984,125 BTC
Peercoin 37,439 BTC
Hash Rate:
Bitcoin 5.1Q
Peercoin 12.25T
Value secured by a Giga Hash
Bitcoin: 11,984,125 / 5,100,000 = 2.35 bitcoins secured per GH
Peercoin: 37,439 / 12,250 = 3.06 bitcoins worth of Peercoins secured per GH
CONCLUSION:
Currently PPC is about 30% more energy efficient than BTC; as long as we don’t hard fork and decrease the .01 transaction fee this gap could and should increase to over 1,000% +++ after about 10 years. This is HUGE!!![/quote]
One possible typo in the table:
If the fixed transaction fee was ever raised, it would raise the cap on total network hashes per second, and therefore decrease PPC's energy efficiency.
I’m very much in favor of attempts to analyze the future of PPC. I do think your statements need to be more precise and better supported by arguments in order to really make a point.
First of all, what do you mean by efficiency? You seem to define efficiency as the ratio between the market cap and the current PoW hashrate, expressed in BTC per GH/s. That could be a useful definition, so please make it clear that this is what you mean.
I think there may be even better definitions of efficiency. Hashrate (in GH/s) does not translate very well to energy consumption (in Watt) because mining hardware is still becoming more efficient. Market cap in BTC does not mean very much because the BTC price is not stable. Perhaps we should define energy efficiency as the ratio between market cap (in USD) and the energy cost required to sustain the current hash rate (in USD/s).
Efficiency [seconds] = market_cap [USD] / hashrate [GH/s] * hash_efficiency [GH/J] / energy_price [USD/J]
- Because of the fixed transaction fee, PPC has a market determined hashrate limit (i.e. capped hashrate)
I'm not convinced. In your table, you say that PoW hashing becomes pointless once the block reward is so low that the 1% PoS interest over the PoW block reward is less than the transaction fee. I don't see how you come to that conclusion. As long as PoW hashing produces some amount of value, it may be profitable. I do not understand how PoS hashing and transaction fees have anything to do with that.
Of course the PoW hashrate is limited by the market in the sense that the energy cost required to sustain the hashrate must always be lower than the revenue from block rewards. If the energy price goes up, the hash rate goes down. If the PPC price goes up, the hashrate goes up. But you seem to be talking about something different.
- Once the hashrate cap is reached, PPC will be orders of magnitude more energy efficient than it is now
How do you know that? The PoW hashrate will certainly never be lower than what it is now. So apparently you assume that the PPC market cap will become orders of magnitude larger than what it is now. That is a pretty wild prediction. It seems that the PPC market cap, expressed in BTC, has not increased very much over the last 6 months.
Currently PPC is about 30% more energy efficient than BTC; as long as we don't hard fork and decrease the .01 transaction fee this gap could and should increase to over 1,000% +++ after about 10 years.
Where do you get this number 1000%? It does not follow from your data. Is it just a wild guess?
I see a different effect of the transaction fee: The transaction fee puts an effective limit on the market cap of PPC (expressed in USD, or expressed in terms of average annual income). Nobody will pay more than 100 USD as transaction fee. As a result, the PPC price can never be more than 10,000 USD. It seems likely that the total amount of PPC will stay below 80M PPC, which implies a maximum market cap of 800B USD.
I define energy efficiency as the amount of hashes securing the network/market cap. New innovation will bring more hashes for less watts, yet Bitcoin and Peercoin are both SHA-256, so greater energy efficient innovation is a mute point. What it really comes down to is hashes per second compared to the total value (market cap). Energy prices will change, innovation will happen, but these are unknowns and variable. Mining hardware becoming more efficient will just drive up more hashes on both networks, but in the case of PPC, there is a maximum limit on how many hashes/per second you can do because of the fee.
I'm not convinced. In your table, you say that PoW hashing becomes pointless once the block reward is so low that the 1% PoS interest over the PoW block reward is less than the transaction fee. I don't see how you come to that conclusion. As long as PoW hashing produces some amount of value, it may be profitable. I do not understand how PoS hashing and transaction fees have anything to do with that.
Of course the PoW hashrate is limited by the market in the sense that the energy cost required to sustain the hashrate must always be lower than the revenue from block rewards. If the energy price goes up, the hash rate goes down. If the PPC price goes up, the hashrate goes up. But you seem to be talking about something different.
I’m not saying my numbers are final or absolute. Just trying to get across this the point.
For example: Say you are mining in a pool and receive just a fraction of the block reward (say it’s 1%). If the block reward is .72 then you receive .0072 of a PPC. When you transfer this amount out of the pool and is sent to your wallet, you would have to lose .01 which is more than your reward. I’m not saying this has no value, but there is eventually going to be a cut-off point for miners, and therefore eventually a limited hash-rate.
How do you know that? The PoW hashrate will certainly never be lower than what it is now. So apparently you assume that the PPC market cap will become orders of magnitude larger than what it is now. That is a pretty wild prediction. It seems that the PPC market cap, expressed in BTC, has not increased very much over the last 6 months.
The value of ppc may continue to increase, however the PoW hashrate is limited. If the hashrate is limited, then energy expenditure is limited. If energy expenditure is limited, but value increases, then it means it becomes more energy efficient, "relatively speaking". Comparing energy/value.
Where do you get this number 1000%? It does not follow from your data. Is it just a wild guess?
I see a different effect of the transaction fee: The transaction fee puts an effective limit on the market cap of PPC (expressed in USD, or expressed in terms of average annual income). Nobody will pay more than 100 USD as transaction fee. As a result, the PPC price can never be more than 10,000 USD. It seems likely that the total amount of PPC will stay below 80M PPC, which implies a maximum market cap of 800B USD.
I don’t see why anyone would have a problem paying 100 USD as a transaction fee because it is relative to 1% of the total value of 1PPC. A 1% fee is not much. As long as you are smart enough to always transact in denominations of 1 ppc or more, you can get your .01 ppc back via PoS minting after 1 year. This is sort of my point in regard to mining, if you are only getting something like .02 ppc for a PoW block reward, then relative to the fee, the fee would cost you 50% to move it, which is not profitable. So at some point PoW becomes limited, therefore hashes per second become limited, therefore, energy expended is limited, therefore after this point, Peercoin may become orders of magnitute more energy efficient relatively speaking compared to other coins such as Bitcoin.
Right. I think it is a very useful number to study. But I would not call it energy efficiency since it does not really consider energy.
Transferring at least 1 PPC may be unpractical if the value of PPC increases. This is the problem with the fixed transaction fee: If the price of PPC increases too much, only very rich people will be able to use the coins.
This is sort of my point in regard to mining, if you are only getting something like .02 ppc for a PoW block reward, then relative to the fee, the fee would cost you 50% to move it, which is not profitable. So at some point PoW becomes limited, therefore hashes per second become limited, therefore, energy expended is limited, therefore after this point, Peercoin may become orders of magnitute more energy efficient relatively speaking compared to other coins such as Bitcoin.
Ok, I see your point much clearer now. As a result of the transaction fee, pooled mining will become unpractical when the block reward drops below a certain level. (Although other forms of pooled mining might be able to work around this; for example a PPC mining pool could pay its shareholders in BTC.)
My point is that this same aspect of the transaction fee – impossibility of transferring small amounts – will be a huge practical problem for PPC before the block reward reaches such low levels.
