One thought: many of our viewers are BCHers trying to scale onchain, so it’s fine to say that layer 1 scaling is “difficult” — but we want to avoid saying it’s impossible. 
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I think this can be best done by using consistently “secondary layers”. By definition, they must be in addition to the settlement layer, which is the blockchain.
It is taking a little longer than I thought it would because the script was designed to only talk about vertical scaling, so I’m trying to adapt it to talking about both. I think I’m nearing completion though.
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With Formatting
Hi, I’m Chronos, and welcome to Part 5 of the Peercoin Primer. Peercoin is one of the world’s most established cryptocurrencies, and each video in this series will explore a different aspect of it.
Show overview onscreen:
Part 1: Launch
Part 2: Security
Part 3: Benefits
Part 4: Economics
Part 5: Mission
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that the Bitcoin blockchain would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes and attempting to do doing so actually runs the risk of centralizing a blockchain’s security degrades a blockchain’s decentralized security. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale or by the general a global population…
NOTE: Peerchemist asked me to remove the part about centralizing security, but I tried here to say it a different way. If you’d rather me remove it completely, just let me know, but I think it’s important to keep this in here to show that on-chain scaling is dangerous to the security of the network and that a better way is needed.
A more viable path toward supporting mass global use of cryptocurrency is achieved by shifting the role of the blockchain away from day to day payment processing and towards focusing on the role of settlement layer, thus permitting maximum decentralization within of the blockchain, while using secondary layer vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With secondary layers vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain.
NOTE: The intro to this sentence felt too loaded with words, so I cut it down some. I also introduced vertical/horizontal scaling as Peerchemist suggested.
Horizontal scaling utilizes sidechains, which are separate and independent blockchains. Sidechains are linked to a parent blockchain such as Bitcoin or Peercoin through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged from the parent blockchain to the sidechain. As an example, on the parent blockchain a user sends some of their coins to a specific address, which locks them. After a small waiting period, an equivalent amount of coins are released on the sidechain. As sidechains are designed with expanded functionality, the user may now have access to lower cost transactions, smart contracts, near instant payments and greater scalability through an increase in the number of possible transactions. When finished using these expanded functions, the user can then settle back on the parent blockchain, reversing the process by sending their coins to a specific sidechain address, which locks them. The coins on the parent chain are then unlocked and become spendable again.
Vertical scaling utilizes through separate independent networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Where sidechains allow the blockchain to scale horizontally, secondary layers allow it to scale vertically. This Both solutions prevents congestion on the main blockchain by allowing transactions to be offloaded onto these secondary layer off-chain networks, whether they be sidechains or secondary layers. In this way, the blockchain becomes the foundation of a multilayered network linked by multiple chains and layers.
At its essence, A blockchain is a distributed public ledger where digital information is recorded and stored in a which records and stores information in such a manner that prevents it from being easily edited or altered in the future. This immutability means the data becomes permanently recorded into the blockchain. This leads to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and immutability of recorded data. This security is the main core value of the blockchain, and the main reason why it is utilized as the base layer of the network.
Continuing with vertical scaling, any independent layers built on top of the blockchain are designed to take advantage leverage of the permanence of the data stored on the chain. These secondary layer networks undertake functions that the blockchain is incapable of achieving by itself, if it is to remain decentralized. Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while layer 2 networks secondary layers expand utility by creating new ways of interacting with that information. Without an immutable blockchain as the base of the system, the underlying data that layer 2 secondary layers interacts with would be compromised. Therefore, layer 2 networks secondary layers need require the strongest possible foundation. Equally, without layer 2 networks secondary layers to expand beyond existing functionality, the blockchain would be less useful, as data would be stored with fewer ways of interacting with it.
One example of layer 2 secondary layers in action is the Lightning Network, developed in order to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is utilized used to record final settlement, hence the name settlement layer. There are other ways of handling layer 2 and Lightning is only one possible secondary layer application. Other examples include atomic swaps, tokens, and smart contract protocols. Not only does secondary layers layer 2 help solve transaction scaling issues, it also gives birth to a broader ecosystem of new utility with the blockchain as its foundational settlement layer.
NOTE: I added the ending back in because it no longer felt right to me (I removed the word foundational though). “with the blockchain as its settlement layer” flows into the next sentence “the Peercoin blockchain’s mission is to become this settlement layer.” Without it, “this settlement layer” feels like it’s referring to a previous sentence that is no longer there.
As Peercoin’s creator Sunny King intended in 2012, the Peercoin blockchain’s mission is to become this settlement layer. This shows incredible forethought, as Bitcoin did not adopt this strategy until years later after it became obvious the blockchain alone could not support transactions on a mass scale.
From the outset, all of Peercoin’s design choices were made with the goal of becoming a the definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of minting power; allowing for 1% annual inflation to prevent deflation and to incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
These design choices mean that Peercoin actually acts better as a settlement layer than blockchains like Bitcoin that rely on security through transaction fees. Given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition between Peercoin’s block producers and layer 2 secondary layer node operators for transaction fees. This eliminates the conflict of interests that exists when both settlement and secondary layers chase the same users for fees.
NOTE: Continuous is important to stress here, so I added it back in. Bitcoin has a block reward too, but it’s not continuous. That’s the main differentiator here, besides the lack of requirement to earn fees.
NOTE 2: I left in the last sentence because it has been heavily edited by Robert and shortened. Let’s see if Peerchemist likes it better.
Unwritten concluding paragraph
If you enjoyed these videos, and want to learn more about Peercoin, be sure to head over to the official website at peercoin.net. There’s also a great community, very knowledgeable and friendly, on the official forums at talk.peercoin.net. And lastly, there’s a ton more educational material at university.peercoin.net, where you can really get in-depth with this beautiful blockchain.
If you have any questions or comments, let us know! Post below the video, or just head over to the forums. We’d love to hear from you.
Oh, and don’t forget to subscribe. I’m Chronos. Thanks for watching!
Without Formatting
Hi, I’m Chronos, and welcome to Part 5 of the Peercoin Primer. Peercoin is one of the world’s most established cryptocurrencies, and each video in this series will explore a different aspect of it.
Show overview onscreen:
Part 1: Launch
Part 2: Security
Part 3: Benefits
Part 4: Economics
Part 5: Mission
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that the Bitcoin blockchain would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes and doing so actually degrades a blockchain’s decentralized security. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale by a global population.
A more viable path toward global use of cryptocurrency is achieved by shifting the role of the blockchain away from day to day payment processing and towards the role of settlement layer, thus permitting maximum decentralization of the blockchain, while using vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain.
Horizontal scaling utilizes sidechains, which are separate and independent blockchains. Sidechains are linked to a parent blockchain such as Bitcoin or Peercoin through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged from the parent blockchain to the sidechain. As an example, on the parent blockchain a user sends some of their coins to a specific address, which locks them. After a small waiting period, an equivalent amount of coins are released on the sidechain. As sidechains are designed with expanded functionality, the user may now have access to lower cost transactions, smart contracts, near instant payments and greater scalability through an increase in the number of possible transactions. When finished using these expanded functions, the user can then settle back on the parent blockchain, reversing the process by sending their coins to a specific sidechain address, which locks them. The coins on the parent chain are then unlocked and become spendable again.
Vertical scaling utilizes separate networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Where sidechains allow the blockchain to scale horizontally, secondary layers allow it to scale vertically. Both solutions prevent congestion on the main blockchain by allowing transactions to be offloaded onto off-chain networks, whether they be sidechains or secondary layers. In this way, the blockchain becomes the foundation of a network linked by multiple chains and layers.
A blockchain is a distributed public ledger which records and stores information in such a manner that prevents it from being edited or altered. This immutability means data becomes permanently recorded into the blockchain. This leads to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and immutability of recorded data. This security is the core value of the blockchain, and the main reason why it is utilized as the base of the network.
Continuing with vertical scaling, any independent layers built on top of the blockchain are designed to leverage the permanence of the data stored on the chain. These secondary layers undertake functions that the blockchain is incapable of achieving by itself, if it is to remain decentralized. Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while secondary layers expand utility by creating new ways of interacting with that information. Without an immutable blockchain as the base of the system, the underlying data that secondary layers interact with would be compromised. Therefore, secondary layers require the strongest possible foundation. Equally, without secondary layers to expand beyond existing functionality, the blockchain would be less useful, as data would be stored with fewer ways of interacting with it.
One example of secondary layers in action is the Lightning Network, developed to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is used to record final settlement, hence the name settlement layer. Lightning is only one possible secondary layer application. Other examples include atomic swaps, tokens, and smart contract protocols. Not only do secondary layers help solve transaction scaling issues, it also gives birth to a broader ecosystem of new utility with the blockchain as its settlement layer.
As Peercoin’s creator Sunny King intended in 2012, the Peercoin blockchain’s mission is to become this settlement layer. This shows incredible forethought, as Bitcoin did not adopt this strategy until years later after it became obvious the blockchain alone could not support transactions on a mass scale.
From the outset, all of Peercoin’s design choices were made with the goal of becoming the definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of minting power; allowing for 1% annual inflation to prevent deflation and incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
These design choices mean Peercoin actually acts better as a settlement layer than blockchains that rely on security through transaction fees. Given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition between Peercoin’s block producers and secondary layer node operators for transaction fees. This eliminates the conflict of interests that exist when both settlement and secondary layers chase the same users for fees.
Unwritten concluding paragraph
If you enjoyed these videos, and want to learn more about Peercoin, be sure to head over to the official website at peercoin.net. There’s also a great community, very knowledgeable and friendly, on the official forums at talk.peercoin.net. And lastly, there’s a ton more educational material at university.peercoin.net, where you can really get in-depth with this beautiful blockchain.
If you have any questions or comments, let us know! Post below the video, or just head over to the forums. We’d love to hear from you.
Oh, and don’t forget to subscribe. I’m Chronos. Thanks for watching!
I changed this as you requested. If everything else looks good here, we still need a concluding paragraph.
Thanks Sentinel
I’ll print it out and have a read-through tomorrow.
By the way, I’ve had a go at summarising Nagalim’s comments on this thread:
https://talk.peercoin.net/t/time-as-a-scarce-resource
This summary does not have to be the final paragraph, but I like the idea of chronology as a theme, and the idea that, whereas POW is destined to centralise, PPC is designed to distribute ever outwards. Perhaps this can be worked on as a recap and conclusion.
Blockchains determine chronology in a distributed manner. Each block comes out in succession, which determines which coins were spent first and so makes double spending impossible. Proof of Work blockchains achieve this by using computation as a scarce resource. Peercoin’s Proof of Stake uses ownership over the established timeline as the scarce resource. This is why distribution of coin ownership is important for Peercoin.
Peercoin first embedded an initial historical timeline by using Proof of Work, then used ownership of that timeline, via the holding of coins, to determine truth of chronology. Whereas Proof of Work blockchains carry the risk of increasing centralizing in their rising costs of computational power, Peercoin’s Proof of Stake can easily remain dispersed.
Peerchemist suggested a couple more deletions. Let me do that before you print.
With Formatting
Hi, I’m Chronos, and welcome to Part 5 of the Peercoin Primer. Peercoin is one of the world’s most established cryptocurrencies, and each video in this series will explore a different aspect of it.
Show overview onscreen:
Part 1: Launch
Part 2: Security
Part 3: Benefits
Part 4: Economics
Part 5: Mission
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that the Bitcoin blockchain ** decentralized blockchain networks**would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes and doing so actually degrades a blockchain’s decentralized security. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale by a global population.
A more viable path toward global use of cryptocurrency is achieved by shifting the role of the blockchain away from day to day payment processing and towards the role of settlement layer, thus permitting maximum decentralization of the blockchain, while using vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain.
Horizontal scaling utilizes sidechains, which are separate and independent blockchains. Sidechains are linked to a parent blockchain such as Bitcoin or Peercoin through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged from the parent blockchain to the sidechain. As an example, on the parent blockchain a user sends some of their coins to a specific address, which locks them. After a small waiting period, an equivalent amount of coins are released on the sidechain. As sidechains are designed with expanded functionality, the user may now have access to lower cost transactions, smart contracts, near instant payments and greater scalability through an increase in the number of possible transactions. When finished using these expanded functions, the user can then settle back on the parent blockchain, reversing the process by sending their coins to a specific sidechain address, which locks them. The coins on the parent chain are then unlocked and become spendable again.
Vertical scaling utilizes separate networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Where sidechains allow the blockchain to scale horizontally, secondary layers allow it to scale vertically. Both solutions prevent congestion on the main blockchain by allowing transactions to be offloaded onto off-chain networks, whether they be sidechains or secondary layers. In this way, the blockchain becomes the foundation of a network linked by multiple chains and layers.
A blockchain is a distributed public ledger which records and stores information in such a manner that prevents it from being edited or altered. This immutability means data becomes permanently recorded into the blockchain. This leads to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and immutability of recorded data. This security is the core value of the blockchain, and the main reason why it is utilized as the base of the network.
Continuing with vertical scaling, any independent layers built on top of the blockchain are designed to leverage the permanence of the data stored on the chain. These secondary layers undertake functions that the blockchain is incapable of achieving by itself, if it is to remain decentralized. Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while secondary layers expand utility by creating new ways of interacting with that information. Without an immutable blockchain as the base of the system, the underlying data that secondary layers interact with would be compromised. Therefore, secondary layers require the strongest possible foundation. Equally, without secondary layers to expand beyond existing functionality, the blockchain would be less useful, as data would be stored with fewer ways of interacting with it.
One example of secondary layers in action is the Lightning Network, developed to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is used to record final settlement, hence the name settlement layer. Lightning is only one possible secondary layer application. Other examples include atomic swaps, tokens, and smart contract protocols. Not only do secondary layers help solve transaction scaling issues, it also gives birth to a broader ecosystem of new utility with the blockchain as its settlement layer.
As Peercoin’s creator Sunny King intended in 2012, the Peercoin blockchain’s mission is to become this settlement layer. This shows incredible forethought, as Bitcoin did not adopt this strategy until years later after it became obvious the blockchain alone could not support transactions on a mass scale.
From the outset, all of Peercoin’s design choices were made with the goal of becoming the definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of minting power; allowing for 1% annual inflation to prevent deflation and incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
These design choices mean Peercoin actually acts better as a settlement layer than blockchains that rely on security through transaction fees. Given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition between Peercoin’s block producers and secondary layer node operators for transaction fees. This eliminates the conflict of interests that exist when both settlement and secondary layers chase the same users for fees.
Unwritten concluding paragraph
If you enjoyed these videos, and want to learn more about Peercoin, be sure to head over to the official website at peercoin.net. There’s also a great community, very knowledgeable and friendly, on the official forums at talk.peercoin.net. And lastly, there’s a ton more educational material at university.peercoin.net, where you can really get in-depth with this beautiful blockchain.
If you have any questions or comments, let us know! Post below the video, or just head over to the forums. We’d love to hear from you.
Oh, and don’t forget to subscribe. I’m Chronos. Thanks for watching!
Without Formatting
Hi, I’m Chronos, and welcome to Part 5 of the Peercoin Primer. Peercoin is one of the world’s most established cryptocurrencies, and each video in this series will explore a different aspect of it.
Show overview onscreen:
Part 1: Launch
Part 2: Security
Part 3: Benefits
Part 4: Economics
Part 5: Mission
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that decentralized blockchain networks would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes and doing so actually degrades a blockchain’s decentralized security. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale by a global population.
A more viable path toward global use of cryptocurrency is achieved by shifting the role of the blockchain away from day to day payment processing and towards the role of settlement layer, thus permitting maximum decentralization of the blockchain, while using vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain.
Horizontal scaling utilizes sidechains, which are separate and independent blockchains. Sidechains are linked to a parent blockchain through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged from the parent blockchain to the sidechain. As an example, on the parent blockchain a user sends some of their coins to a specific address, which locks them. After a small waiting period, an equivalent amount of coins are released on the sidechain. As sidechains are designed with expanded functionality, the user may now have access to lower cost transactions, smart contracts, near instant payments and greater scalability. When finished using these expanded functions, the user can then settle back on the parent blockchain, reversing the process by sending their coins to a specific sidechain address, which locks them. The coins on the parent chain are then unlocked and become spendable again.
Vertical scaling utilizes separate networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Where sidechains allow the blockchain to scale horizontally, secondary layers allow it to scale vertically. Both solutions prevent congestion on the main blockchain by allowing transactions to be offloaded onto off-chain networks, whether they be sidechains or secondary layers. In this way, the blockchain becomes the foundation of a network linked by multiple chains and layers.
A blockchain is a distributed public ledger which records and stores information in such a manner that prevents it from being edited or altered. This immutability means data becomes permanently recorded into the blockchain. This leads to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and immutability of recorded data. This security is the core value of the blockchain, and the main reason why it is utilized as the base of the network.
Continuing with vertical scaling, any independent layers built on top of the blockchain are designed to leverage the permanence of the data stored on the chain. These secondary layers undertake functions that the blockchain is incapable of achieving by itself, if it is to remain decentralized. Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while secondary layers expand utility by creating new ways of interacting with that information. Without an immutable blockchain as the base of the system, the underlying data that secondary layers interact with would be compromised. Equally, without secondary layers to expand beyond existing functionality, the blockchain would be less useful, as data would be stored with fewer ways of interacting with it.
One example of secondary layers in action is the Lightning Network, developed to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is used to record final settlement, hence the name settlement layer. Lightning is only one possible secondary layer application. Other examples include atomic swaps, tokens, and smart contract protocols. Not only do secondary layers help solve transaction scaling issues, it also gives birth to a broader ecosystem of new utility with the blockchain as its settlement layer.
As Peercoin’s creator Sunny King intended in 2012, the Peercoin blockchain’s mission is to become this settlement layer. This shows incredible forethought, as Bitcoin did not adopt this strategy until years later after it became obvious the blockchain alone could not support transactions on a mass scale.
From the outset, all of Peercoin’s design choices were made with the goal of becoming the definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of minting power; allowing for 1% annual inflation to prevent deflation and incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
These design choices mean Peercoin actually acts better as a settlement layer than blockchains that rely on security through transaction fees. Given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition between Peercoin’s block producers and secondary layer node operators for transaction fees. This eliminates the conflict of interests that exist when both settlement and secondary layers chase the same users for fees.
Unwritten concluding paragraph
If you enjoyed these videos, and want to learn more about Peercoin, be sure to head over to the official website at peercoin.net. There’s also a great community, very knowledgeable and friendly, on the official forums at talk.peercoin.net. And lastly, there’s a ton more educational material at university.peercoin.net, where you can really get in-depth with this beautiful blockchain.
If you have any questions or comments, let us know! Post below the video, or just head over to the forums. We’d love to hear from you.
Oh, and don’t forget to subscribe. I’m Chronos. Thanks for watching!
More edits
With Formatting
Hi, I’m Chronos, and welcome to Part 5 of the Peercoin Primer. Peercoin is one of the world’s most established cryptocurrencies, and each video in this series will explore a different aspect of it.
Show overview onscreen:
Part 1: Launch
Part 2: Security
Part 3: Benefits
Part 4: Economics
Part 5: Mission
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that decentralized blockchain networks would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes and doing so actually degrades a blockchain’s decentralized security. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale by a global population.
A more viable path toward global use of cryptocurrency is achieved by shifting the role of the blockchain away from day to day payment processing and towards the role of settlement layer, thus permitting maximum decentralization of the blockchain, while using vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain.
Horizontal scaling utilizes sidechains, which are separate and independent blockchains. Sidechains are linked to a parent blockchain through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged from the parent blockchain to the sidechain. As an example, on the parent blockchain a user sends some of their coins to a specific address, which locks them. After a small waiting period, an equivalent amount of coins are released on the sidechain. As sidechains are usually designed with expanded functionality, the user may now have access to lower cost transactions, smart contracts, near instant payments and greater scalability. When finished using these expanded functions, the user can then settle back on the parent blockchain, reversing the process by sending their coins to a specific sidechain address, which locks them. The coins on the parent chain are then unlocked and become spendable again.
Vertical scaling utilizes separate networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Where sidechains allow the blockchain to scale horizontally, secondary layers allow it to scale vertically. Both solutions prevent congestion on the main blockchain by allowing transactions to be offloaded onto off-chain networks, whether they be sidechains or secondary layers. In this way, the blockchain becomes the foundation of a network linked by multiple chains and layers.
A blockchain is a distributed public ledger which records and stores information in such a manner that prevents it from being edited or altered. This immutability means data becomes permanently recorded into the blockchain. This leads to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and immutability of recorded data. This security is the core value of the blockchain, and the main reason why it is utilized as the base of the network.
Continuing with vertical scaling, any independent layers built on top of the blockchain are designed to leverage the permanence of the data stored on the chain. These secondary layers undertake functions that the blockchain is incapable of achieving by itself, if it is to remain decentralized. Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while secondary layers expand utility by creating new ways of interacting with that information. Without an immutable blockchain as the base of the system, the underlying data that secondary layers interact with would be compromised. Equally, without secondary layers to expand beyond existing functionality, the blockchain would be less useful, as data would be stored with fewer ways of interacting with it.
One example of secondary layers in action is the Lightning Network, developed to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is used to record final settlement, hence the name settlement layer. Lightning is only one possible secondary layer application. Other examples include atomic swaps, tokens, and smart contract protocols. Another example is a project called Open Transactions. Not only do secondary layers help solve transaction scaling issues, it also gives birth to a broader ecosystem of new utility with the blockchain as its settlement layer.
As Peercoin’s creator Sunny King intended in 2012, the Peercoin blockchain’s mission is to become this settlement layer. This shows incredible forethought, as Bitcoin did not adopt this strategy until years later after it became obvious the blockchain alone could not support transactions on a mass scale.
From the outset, all of Peercoin’s design choices were made with the goal of becoming the definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of minting power block producers; allowing for 1% annual inflation to prevent deflation and incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
These design choices mean Peercoin actually acts better as a settlement layer than blockchains that rely on security through transaction fees. Given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition between Peercoin’s block producers and secondary layer node operators for transaction fees. This eliminates the conflict of interests that exist when both settlement and secondary layers chase the same users for fees.
Unwritten concluding paragraph
If you enjoyed these videos, and want to learn more about Peercoin, be sure to head over to the official website at peercoin.net. There’s also a great community, very knowledgeable and friendly, on the official forums at talk.peercoin.net. And lastly, there’s a ton more educational material at university.peercoin.net, where you can really get in-depth with this beautiful blockchain.
If you have any questions or comments, let us know! Post below the video, or just head over to the forums. We’d love to hear from you.
Oh, and don’t forget to subscribe. I’m Chronos. Thanks for watching!
Without Formatting
Hi, I’m Chronos, and welcome to Part 5 of the Peercoin Primer. Peercoin is one of the world’s most established cryptocurrencies, and each video in this series will explore a different aspect of it.
Show overview onscreen:
Part 1: Launch
Part 2: Security
Part 3: Benefits
Part 4: Economics
Part 5: Mission
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that decentralized blockchain networks would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale by a global population.
A more viable path toward global use of cryptocurrency is achieved by shifting the role of the blockchain away from day to day payment processing and towards the role of settlement layer, thus permitting maximum decentralization of the blockchain, while using vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain.
Horizontal scaling utilizes sidechains, which are separate and independent blockchains. Sidechains are linked to a parent blockchain through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged from the parent blockchain to the sidechain. As an example, on the parent blockchain a user sends some of their coins to a specific address, which locks them. After a small waiting period, an equivalent amount of coins are released on the sidechain. As sidechains are usually designed with expanded functionality, the user may now have access to lower cost transactions, smart contracts, near instant payments and greater scalability. When finished using these expanded functions, the user can then settle back on the parent blockchain, reversing the process by sending their coins to a specific sidechain address, which locks them. The coins on the parent chain are then unlocked and become spendable again.
Vertical scaling utilizes separate networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Where sidechains allow the blockchain to scale horizontally, secondary layers allow it to scale vertically. Both solutions prevent congestion on the main blockchain by allowing transactions to be offloaded onto off-chain networks, whether they be sidechains or secondary layers. In this way, the blockchain becomes the foundation of a network linked by multiple chains and layers.
A blockchain is a distributed public ledger which records and stores information in such a manner that prevents it from being edited or altered. This immutability means data becomes permanently recorded into the blockchain. This leads to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and immutability of recorded data. This security is the core value of the blockchain, and the main reason why it is utilized as the base of the network.
Continuing with vertical scaling, any independent layers built on top of the blockchain are designed to leverage the permanence of the data stored on the chain. These secondary layers undertake functions that the blockchain is incapable of achieving by itself, if it is to remain decentralized. Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while secondary layers expand utility by creating new ways of interacting with that information. Without an immutable blockchain as the base of the system, the underlying data that secondary layers interact with would be compromised.
One example of secondary layers in action is the Lightning Network, developed to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is used to record final settlement, hence the name settlement layer. Lightning is only one possible secondary layer application. Another example is a project called Open Transactions. Not only do secondary layers help solve transaction scaling issues, it also gives birth to a broader ecosystem of new utility with the blockchain as its settlement layer.
As Peercoin’s creator Sunny King intended in 2012, the Peercoin blockchain’s mission is to become this settlement layer. This shows incredible forethought, as Bitcoin did not adopt this strategy until years later after it became obvious the blockchain alone could not support transactions on a mass scale.
From the outset, all of Peercoin’s design choices were made with the goal of becoming the definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of block producers; allowing for 1% annual inflation to prevent deflation and incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
These design choices mean Peercoin actually acts better as a settlement layer than blockchains that rely on security through transaction fees. Given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition between Peercoin’s block producers and secondary layer node operators for transaction fees. This eliminates the conflict of interests that exist when both settlement and secondary layers chase the same users for fees.
Unwritten concluding paragraph
If you enjoyed these videos, and want to learn more about Peercoin, be sure to head over to the official website at peercoin.net. There’s also a great community, very knowledgeable and friendly, on the official forums at talk.peercoin.net. And lastly, there’s a ton more educational material at university.peercoin.net, where you can really get in-depth with this beautiful blockchain.
If you have any questions or comments, let us know! Post below the video, or just head over to the forums. We’d love to hear from you.
Oh, and don’t forget to subscribe. I’m Chronos. Thanks for watching!
Question: if secondary layers are not blockchains, what are they?
Continuing with vertical scaling, any independent layers built on top of the blockchain are designed to leverage the permanence of the data stored on the chain.
Another question: why should this not apply equally to side chains?
You’re right, they do. But as I said earlier, the script was originally designed only to talk about vertical scaling. Currently the script introduces both of them, horizontal and vertical. Then it talks about the nature of the blockchain as a base for permanently recording data. Then it goes back to mainly talking about vertical scaling and secondary layers. There may be places like this where it really should be talking about both. However this latter section is where I really expanded on vertical scaling, so it was difficult for me to figure out how to include both toward the end. Do you have any ideas?
What we want to do is to present the viewer with two polarities - the settlement layer, and the “working” layer. We can sub-divide the working layer into verticle and horizontal, but must draw them back together again to continue discussing the relationship between the two polarities - otherwise, we end up with three polarities: settlement, verticle, and horizontal, which we don’t want.
I’m making some notes/edits and will update tonight or tomorrow. Overall, I like the way the new bits on verticle and horizontal fit in, very much.
1 Like
That sounds like a good way to put it. I’m interested to see what you come up with to tie them back together again.
Do we know when horizontal and vertical layers, as concepts, became evident in crypto? Was it before 2012, or later. It would help the video if it was after 2012.
Check when we had first mention of open transactions for vertical and first mention of sidechains for horizontal.
Hope to update this later today … the issue, as I see it, is that we are presenting vertical and horizontal layers as the solution to the blockchain when, in fact, we want to say that Peercoin is the solution to the vertical and horizontal layers. I am therefore trying “re-pivot” the text to bring this aspect out. Also, Peercoin is towards at the end of the script, we need to bring it in earlier.
1 Like
Okay, a lot of changes here, so I’ve also done a version (next post) with edits incorporated.
+++
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that decentralized blockchain networks would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale by a global population.
A more viable path toward global world use of cryptocurrency is achieved by shifting splitting the role of the blockchain away off from day to day payment transaction processing and towards the role of instead using it as a settlement layer, thus permitting maximum decentralization of the blockchain , that is, recording the final settlements of transactions , while using inviting vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain. Let’s look at the two, in turn.
Horizontal scaling utilizes involves sidechains, which are separate and independent blockchains Sidechains are linked to a parent blockchain through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged from between the parent blockchain to and the sidechain. As an example, a user can send some of their coins on from the parent blockchain a user sends some of their coins to a specific address, which locks them. After a small short waiting period, an equivalent amount of coins are released on to the sidechain. As sidechains are usually typically designed to with expanded increase functionality, the user may now have has access to lower cost transactions smart contracts, near instant payments and greater scalability. When he has finished using these expanded functions, the user can then settle back on return his coins to the parent blockchain , reversing the process by sending their coins to a specific sidechain address, which locks them. The coins on the parent chain are then unlocked and become spendable again .
Vertical scaling utilizes involves separate networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Where Whereas we think of sidechains as allow allowing the blockchain to scale horizontally, secondary layers allow it to scale vertically.
Both solutions technologies prevent congestion on the main blockchain by allowing transactions to be offloaded onto off-chain networks, whether they be sidechains or secondary layers . In this way, the initial blockchain becomes the foundation records settlement of transactions processed by networks linked by of sidechains or secondary layers multiple chains and layers , hence the name settlement layer .
Peercoin’s creator Sunny King showed incredible forethought in 2012 when he anticipated the need for just such a layer which would not, in itself, carry high transaction loads. This means that, from the outset, Peercoin has the distinction that all of Peercoin’s its design choices were made with the this goal in mind of becoming the definitive settlement layer .
[ inserted from below ] We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of block producers; allowing for 1% annual inflation to prevent deflation and to incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
Without a blockchain such as Peercoin as the base of the system, the underlying data that sidechains and secondary layers would be compromised. Any blockchain being used as a settlement layer must have integrity as a distributed public ledger which records and stores information in such a manner that prevents it from being edited or altered. This immutability means data becomes permanently recorded into the blockchain This leads leading to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and immutability permanence of recorded data. This security is the core value of the blockchain settlement layer and why it must have the characteristics of a blockchain like Peercoin. and the main reason why it is utilized used as the base of the network .
[ Suggest removing this entire paragraph; it is superceded by the new paragraphs on vertical and horizontal technologies ] Continuing with vertical scaling Independent layers built on top of the blockchain are designed to leverage the permanence of the data stored on the chain. These secondary layers undertake functions that the blockchain is incapable of achieving by itself, if it is to remain decentralized. Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while secondary layers expand utility by creating new ways of interacting with that information.
One example of secondary layers in action development is the Lightning Network, developed designed to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is used to record final settlement, hence the name settlement layer . Lightning is only one example of a possible secondary layer application. Another example is a project called Open Transactions. Not only do secondary layers help solve transaction scaling issues, it also gives birth to a broader ecosystem of new utility with the blockchain as its settlement layer .
As Peercoin’s creator Sunny King intended showed incredible forethought in 2012 when he intended the Peercoin blockchain’s mission is to become this such a settlement layer. This shows incredible forethought, as Bitcoin did not adopt this strategy until years later after it became obvious the blockchain alone could not support transactions on a mass scale.
Peercoin’s distinction is that , from the outset, all of Peercoin’s design choices were made with the goal of becoming the definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of block producers; allowing for 1% annual inflation to prevent deflation and incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
Since providers of secondary layers and sidechains will certainly charge transaction fees, those that rely on settlement layers that also charge fees will be chasing the same customers for fees. Another area where Peercoin scores, therefore, is that, given These design choices mean Peercoin actually acts better as a settlement layer than blockchains that rely on security through transaction fees. Given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition for fees between Peercoin’s block producers and secondary layer node operators for transaction fees . This eliminates the conflict of interests that exist when both settlement and secondary layers chase the same users for fees.
Concluding paragraph
With edits incorporated, for ease of reading:
+++
In this video, we’re going to talk about Peercoin’s mission. In particular, we will focus on the role of the Peercoin blockchain itself. Sunny King, the anonymous founder of Peercoin, said in 2013: (pause)
“From my point of view, I think the cryptocurrency movement needs at least one ‘backbone’ currency, that maintains a high degree of decentralization, maintains a high level of security, but doesn’t necessarily provide a high volume of transactions.” (pause)
When Sunny talked about Peercoin as a backbone currency, he was actually introducing a concept that has since become known in the broader crypto community as a settlement layer.
In the early days of cryptocurrency, it was believed by many that decentralized blockchain networks would compete with other payment processing networks such as Visa or Mastercard, and even act as a replacement for paper money. However, in reality it turned out that decentralized blockchains struggle to support high transaction volumes. Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale by a global population.
A more viable path toward world use of cryptocurrency is achieved by splitting the role of the blockchain from day to day transaction processing and instead using it as a settlement layer, that is, recording the final settlements of transactions, while inviting vertical and horizontal scaling technologies to increase – indirectly - the transaction capacity of blockchains. With vertical and horizontal scaling, rather than transactions taking place directly on the blockchain, they are conducted off the blockchain. Let’s look at the two, in turn.
Horizontal scaling involves sidechains, which are separate blockchains linked to a parent blockchain through a two-way peg. This two-way peg makes it possible for cryptocurrency and other assets to be exchanged between the parent blockchain and the sidechain. As an example, a user can send some of their coins from the parent blockchain to a specific address, which locks them. After a short waiting period, the coins are released to the sidechain. As sidechains are typically designed to increase functionality, the user now has access to smart contracts, near instant payments and greater scalability. When he has finished using these expanded functions, the user can return his coins to the parent blockchain.
Vertical scaling involves separate networks that are built specifically for large volume and high speed processing. These independent networks are not blockchains, but secondary layers that exist on top of the blockchain. Whereas we think of sidechains as allowing the blockchain to scale horizontally, secondary layers allow it to scale vertically.
Both technologies prevent congestion on the main blockchain by allowing transactions to be offloaded onto off-chain networks. In this way, the initial blockchain records settlement of transactions processed by networks of sidechains or secondary layers, hence the name settlement layer.
Peercoin’s creator Sunny King therefore showed incredible forethought in 2012 when he anticipated the need for just such a layer which would not, in itself, carry high transaction loads. This means that, from the outset, Peercoin has the distinction that all its design choices were made with this goal in mind.
We’ve discussed these design choices in videos 1 to 4; they include: removing the conflict of interests between miners and coin holders by allowing coin holders to mint their own blocks; achieving an efficient and inexpensive security protocol based on scarcity of time, rather than electricity; attaining geographical decentralization of block producers; allowing for 1% annual inflation to prevent deflation and to incentivize minting; and replacing transaction fees with a continuous block reward, as a means of compensating block producers.
Without a blockchain such as Peercoin as the base of the system, sidechains and secondary layers would be compromised. Any blockchain being used as a settlement layer must have integrity as a distributed public ledger which records and stores information in such a manner that prevents it from being edited or altered. This immutability means data becomes permanently recorded into the blockchain leading to a state of trustless security, where all users of the network can depend on the blockchain’s ability to guarantee the accuracy and permanence of recorded data. This is the core value of the settlement layer and why it must have the characteristics of a blockchain like Peercoin.
One example of secondary layers in development is the Lightning Network, designed to help scale the Bitcoin blockchain. Transactions are offloaded and processed through Lightning, while the blockchain is used to record final settlement. Lightning is only one example of a secondary layer application. Another example is a project called Open Transactions.
Since providers of secondary layers and sidechains will certainly charge transaction fees, those that rely on settlement layers that also charge fees will be chasing the same customers for fees. Another area where Peercoin scores, therefore, is that, given that Peercoin’s security is maintained through a continuous block reward, and not transaction fees, there can never be competition for fees between Peercoin’s block producers and secondary layer node operators.
Concluding paragraph
I’ve read through this, but there are a lot of changes here. I’m going to need some more time with it.
One thing I’m not sure about is this claim…
I know layer 2 node operators charge transaction processing fees, but I’m unsure how it works with sidechains, or if it’s possible for the sidechain and the main chain to be in competition with each other for fees. I’m thinking that’s not how it works, but I need clarification on that.
1 Like
Yes, I was wondering about that as I wrote it - perhaps change “certainly” to “are likely to”.