I can see preventing deflation help Peercoin become a better currency, but why exactly does this make Peercoin a better settlement layer or foundation? Is there a reason why we should include this fact here?
What do you have in mind?
I’d re-do this with both vertical and horizontal scaling in mind. Just a brief explanation.
I am not fond of this sentence.
At its essence, a Blockchain is a distributed public ledger where digital information is recorded and stored in a manner that prevents it from being easily edited or altered in the future.
But this is more like it:
Blockchain is a distributed public ledger which records and stores information in such a manner that it prevents editing and altering information.
Feels like an extra talking about the same thing as the previous paragraph.
Don’t mention Bitcoin. so drop “like” and “Bitcoin”.
I’d drop this.
A few more tweaks (these were written before Peerchemist made his points above)
+++
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 so actually runs the risk of centralizing a blockchain’s security over time . Because of this limitation, it is difficult for decentralized blockchains to be used on a mass scale, or by the general population.
A more viable path toward supporting mass use of cryptocurrency is achieved by refocusing 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 the blockchain, while utilizing using secondary layer technologies to indirectly increase – indirectly - the transaction capacity of blockchains.
With secondary layers, rather than transactions taking place directly on the blockchain, they are instead conducted off the blockchain through separate, independent networks built specifically for large volume and high speed transaction processing. This prevents congestion on the main blockchain by allowing micro transactions to be offloaded onto these secondary layer networks. In this way, the blockchain is treated as becomes the foundational settlement layer in a multilayered network.
At its essence, a blockchain is a public ledger where digital information is recorded and stored in 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.
As the base of a multilayered network, the blockchain provides a way for digital information to be recorded and distributed without the ability to alter it. 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 trustless security is the main value of the blockchain, and the reason why it is utilized as the base layer of the network.
Any independent layers built on the blockchain are designed to take advantage 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 decentralised . Together, they form an important relationship. The blockchain records and stores information in a permanent manner, while layer 2 networks 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 interacts with would be more easily compromised. Therefore, layer 2 networks are only as strong as their foundation need the strongest possible foundation. Equally, without layer 2 networks 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 in action is the Lightning Network, which was developed in order to help scale the Bitcoin blockchain. Micro Transactions are offloaded and processed through Lightning, while the blockchain is utilized to record final settlement, hence the name settlement layer. However There are other ways of handling layer 2 and Lightning is only one possible application. Other examples include atomic swaps, tokens, and smart contract protocols. Not only does 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.
As Peercoin’s creator Sunny King intended in 2012, the Peercoin blockchain’s mission was 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 robust definitive settlement layer. We’ve discussed these design choices in videos 1 to 4; to recap, 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 incentivise minting ; and removing replacing transaction fees with a continuous block reward, as a means of compensating block producers, replacing them instead with a continuous block reward .
Further , 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 through transaction fees, there can never be competition between Peercoin’s block producers and layer 2 node operators for transaction fees. This eliminates the conflict of interests that exists when both the settlement and secondary layers and 2nd layer node operators chase the same users for fees, ensuring all layer 2 infrastructure is perfectly aligned with Peercoin as its foundation .
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!
Peerchemist has sent me some articles on horizontal scaling to look at. As soon as I’m done I’ll modify the script to take into consideration both types.
I’m hoping to be able to post an updated version of this sometime tomorrow evening.
1 Like
I feel that “Layer 2” sounds a little too specific. “Secondary layers” has a generality about it, because one can refer to it in the plural. For instance:
“One example of layer 2 in action is the Lightning Network…”
becomes:
“One example of secondary layers in action is the Lightning Network …”
Another illustration: by replacing “layer 2 networks” with “secondary layers”, we don’t need to mention “networks” - except when we refer to a specific example, such as the Lightning Network.
EDIT - just been looking back though the posts, Sentinel tried “secondary layers” but went with “layer 2” - what was the reason?
1 Like
When I say networks, I am attempting to drill into people’s minds that blockchain and layer 2 are separate. I know I state that they are independent/separate, however I’m not confident someone new to this subject would get it right away, so I state a number of different ways throughout the text that they are separate. I start by referring to them as secondary layers. Then I make it clear they are separate/independent by calling them secondary layer networks. Then I speak about the hierarchy, labeling it a multilayer network with the blockchain as the foundation. As I go further, I start to shorten it simply to layer 2, because at that point I’m more confident the viewer has grasped what it is I’m referring to.
Also, while we’re on this subject, I just asked Peerchemist a clarifying question because I was interested why he wanted to remove PeerAssets and Perpera from the text as examples…
So this is the reason why they were asked to be removed, a mistaken assumption on my part that they were layer 2 applications. They are not considered that as they are really tools for recording specific types of data on the chain, rather than separate networks themselves.
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. 
1 Like
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.
1 Like
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.
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