Hopefully the final version
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 final 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 or base layer.
In the early days of cryptocurrency, it was believed by many that decentralized blockchains would compete with 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.
A more viable path toward global use of cryptocurrency is achieved by shifting the role of the blockchain to that of a settlement layer. This is attained achieved by splitting the blockchain’s responsibilities of record keeping and transaction processing. With this shift in focus transactions are to be processed mostly off the blockchain through the use of vertical and horizontal scaling, while the blockchain is used to record final settlement, hence the name settlement layer. This has the effect of increasing - indirectly - the transaction capacity of the blockchain, while permitting maximum decentralization. Let’s take a closer look at the two forms of off-chain scaling.
Horizontal scaling involves sidechains, which are separate blockchains linked to a parent blockchain. Sidechains are typically designed to increase functionality, providing the user access to low cost and near instant transactions, smart contracts, and overall greater scalability. When the user is finished with these expanded functions, they can settle their coins to the parent blockchain.
Vertical scaling involves independent networks that exist as secondary layers on top of the blockchain, also known as layer 2. These secondary layers undertake functions that the blockchain is unable to achieve by itself, such as processing large volumes at low cost, and high speed payments. Whereas we think of sidechains as allowing the blockchain to scale horizontally, secondary layers allow it to scale vertically. One such example is the Lightning Network, which was designed to vertically scale the Bitcoin blockchain.
Both scaling technologies prevent congestion on the blockchain by offloading transactions onto separate networks built for high capacity processing. The blockchain, acting as a settlement layer and foundation for these off-chain networks, permanently records final settlement on its ledger. Essentially, sidechains and secondary layers leverage the permanence of the data stored on the settlement layer, expanding utility off-chain by creating new ways of interacting with this data.
Peercoin’s original creators showed incredible forethought in 2012 when they anticipated the need for such a foundational layer. From the outset, all of Peercoin’s design choices were made with this mission 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. Peercoin’s characteristics create a stable, secure base for the emerging cryptocurrency eco-system.
At its essence, 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, 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 to retain its long-term security.
Peercoin performs particularly well as a settlement layer thanks to its security model. Many settlement layers conflict with scaling because their block producers chase the same users for transaction fees as the node operators of secondary layers. Peercoin avoids this competition - and aligns itself with secondary layers - by maintaining its security through a continuous block reward, rather than transaction fees.
We hope you have enjoyed this, and the previous four videos, and that you have come to the realization that Peercoin is not just another crypto-clone, but an exceptional and well designed blockchain with a lasting mission; that of preparing a foundation for crypto’s re-definition of possession ownership and trust - away from information flows conducted via central authorities and between parties which are untrusted, and towards a society where every actor, asset or and transaction has its own blockchain identity that certifies and tracks authenticity.
If you 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 final 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 or base layer.
In the early days of cryptocurrency, it was believed by many that decentralized blockchains would compete with 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.
A more viable path toward global use of cryptocurrency is achieved by shifting the role of the blockchain to that of a settlement layer. This is achieved by splitting the blockchain’s responsibilities of record keeping and transaction processing. With this shift in focus transactions are processed mostly off the blockchain through the use of vertical and horizontal scaling, while the blockchain is used to record final settlement, hence the name settlement layer. This has the effect of increasing - indirectly - the transaction capacity of the blockchain, while permitting maximum decentralization. Let’s take a closer look at the two forms of off-chain scaling.
Horizontal scaling involves sidechains, which are separate blockchains linked to a parent blockchain. Sidechains are typically designed to increase functionality, providing the user access to low cost and near instant transactions, smart contracts, and overall greater scalability. When the user is finished with these expanded functions, they can settle their coins to the parent blockchain.
Vertical scaling involves independent networks that exist as secondary layers on top of the blockchain, also known as layer 2. These secondary layers undertake functions that the blockchain is unable to achieve by itself, such as processing large volumes at low cost, and high speed payments. Whereas we think of sidechains as allowing the blockchain to scale horizontally, secondary layers allow it to scale vertically. One such example is the Lightning Network, which was designed to vertically scale the Bitcoin blockchain.
Both scaling technologies prevent congestion on the blockchain by offloading transactions onto separate networks built for high capacity processing. The blockchain, acting as a settlement layer and foundation for these off-chain networks, permanently records final settlement on its ledger. Essentially, sidechains and secondary layers leverage the permanence of the data stored on the settlement layer, expanding utility off-chain by creating new ways of interacting with this data.
Peercoin’s original creators showed incredible forethought in 2012 when they anticipated the need for such a foundational layer. From the outset, all of Peercoin’s design choices were made with this mission 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. Peercoin’s characteristics create a stable, secure base for the emerging cryptocurrency eco-system.
At its essence, 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, 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 to retain its long-term security.
Peercoin performs particularly well as a settlement layer thanks to its security model. Many settlement layers conflict with scaling because their block producers chase the same users for transaction fees as the node operators of secondary layers. Peercoin avoids this competition - and aligns itself with secondary layers - by maintaining its security through a continuous block reward, rather than transaction fees.
We hope you have enjoyed this, and the previous four videos, and that you have come to the realization that Peercoin is not just another crypto-clone, but an exceptional and well designed blockchain with a lasting mission; that of preparing a foundation for crypto’s re-definition of ownership and trust - away from information flows conducted via central authorities, and towards a society where every actor, asset and transaction has its own blockchain identity that tracks authenticity.
If you 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!
