Peercoin is a secure and sustainable digital currency. Much like Bitcoin, Peercoin is also decentralized. It allows users to transact directly from one person to another, instantly, anywhere in the world.
However, Peercoin and Bitcoin have major differences. Peercoin uses a hybrid Proof-of-Work and Proof-of-Stake to secure the network. Hold on, don’t panic. These fancy words are very easy to understand. You may have heard of “mining” Bitcoins. People who have specialized computers run their machines 24/7, 365 days to compete for bitcoins which we’ll term a block reward. They may also charge transaction fees for additional profit. These people are the ones responsible for the security of Bitcoin. Bitcoin was designed to be hard to acquire to encourage competition because if there was not enough competition, the whole Bitcoin network may be in great danger. This is the so called 51% attack that haunts bitcoin since its inception. If one entity has more than 51% of all the mining power, that one entity would have the ability to spend his/her bitcoins multiple times. And so, work was designed into bitcoin to make it hard and expensive for a person/group to have a large share, thus the term Proof-of-Work.
However, Proof-of-Work alone introduces new problems.
Number 1, the miners running their machines 24/7 waste a lot of energy which could have had been used for more productive activities.
Number 2, mining Bitcoin was once possible with ordinary CPUs but now specialized computers are required. Only the people who have access to these specialized computers would have the ability to mine - talk about decentralization.
Number 3, the block reward to mining was designed to half every four years. As the rewards get smaller, miners may charge higher and higher transaction fees because they get lesser bitcoins from the block reward. They will ofcourse try to break even with their investments.
Number 4, as the incentive to mining gets lower, there would be lesser competition and so it becomes easier to gain 51% of the total mining power. Thus, the security of the network may also taper in the future.
These problems in Bitcoin are usually overlooked. However, an innovative cryptocurrency, called Peercoin, was designed to be more sustainable while still preserve decentralization, and security over the longer term. Rather than buying specialzed hardware and using up large amounts of electricity to acquire coins, one can simply hold coins to acquire more coins much like interest. No “work” is required as in Proof-of-Work algorithm. Only aged coins are needed, a stake in the total coin supply, thus Proof-of-Stake. Peercoin started with Proof-of-Work to initially distribute the coins fairly but it is designed to transition to purely Proof-of-Stake.
The major advantages of Proof-of-Stake over Proof-of-Work are:
Number 1, We don’t abuse Mother Nature just to run a payment system. Tons of energy can be saved.
Number 2, No specialized computers are needed. Anybody who has Peercoins have the privilege of security the network and get a constant reward.
Number 3, The security of the network relies on adoption. In Bitcoin, the more the miners, the greater the security. In Peercoins the more the people who use it, the greater the security.
And finally at Number 4, Unlike Bitcoin, the block reward to secure the network doesn’t taper and so in Peercoin, transaction fees won’t go higher so using Peercoins would be far cheaper to transact. It also costs essentially nothing to secure the network and so it may also cost nothing to transact.
The currency of the future is here. Peercoin, the secure and sustainable cryptocurrency.
Note: It’s a bit hard to explain why Peercoin is secure without explaining a 51% attack. I hope this will be useful. You can edit it, just get the thought framework, or even just get bits and pieces. Good luck.
