Minting and Proof of Stake is what differentiates Peercoin from other cryptos, yet all the information on it is spread across many sources. I think we need a complete guide that will make it easier for newcomers to understand it and hopefully even increase the number of minters. This guide is currently a work in progress and feedback/suggestions/corrections are appreciated. Thanks to all the forum members whose posts on minting I have plagiarized
- What is minting?
- Why should I mint?
- How do I mint?
- How often should I mint?
- What happens if I solve a block?
- Is minting safe?
- The future of minting
1. What is minting?
Peercoin’s equivalent to Bitcoin’s Proof of Work is Proof of Stake, and instead of Bitcoin’s mining, Peercoin has minting. Rather than needing vast amounts of computer power to secure the network, Peercoin’s security is based on “coin age”. Coin age is calculated by multiplying the number of coins by the “age” of these coins i.e. the amount of time since they were last transacted. This means you can contribute to network security with almost any computer. You don’t need expensive and wasteful dedicated hardware like with Bitcoin.
To reward people for contributing to network security, Peercoin gives a reward to those who mint. This reward is equal to approximately 1% per annum. You do not receive this reward evenly over time, instead it comes in chunks every time you “solve” a Proof of Stake block. The amount you receive from each block is based on the coin age used to mint that block.
It is important to note that Peercoin does also use Proof of Work currently. However, it plays no role in network security, which is based completely on Proof of Stake. Proof of Work is only retained for distribution purposes in the early stages of the coin. It will likely be phased out or reduced to a negligible amount in the future. This method of distribution allows for a wider and fairer dispersal of coins than would be possible with an IPO or brief initial mining phase. Given that the number of coins someone owns is taken into consideration while minting, this wider distribution is vital to the security and viability of a Proof of Stake currency.
2. Why should I mint?
The most important reason for minting is to contribute to network security; as such, you are helping to protect your own investment. This is the beauty of Proof of Stake; control of the currency is in the hands of the people who actually own and use the currency, not some small group of unknown miners. As an additional incentive, people who mint receive a reward of approximately 1% of their peercoin balance per annum.
The complete removal of checkpoints will also arrive sooner if more people mint (there are already plans to make them optional in the next release of Peercoin). As the currency is likely to attract much more attention when that day comes, by minting you are helping the growth and adoption of the coin, and possibly even raising the price.
3. How do I mint?
Minting is very easy. All you need to do is enable it in your client, and leave your client running with a connection to the Peercoin network. To start with, you will need to have either the Peerunity client (recommended), or the Peercoin core client. You will also obviously need some coins in your wallet!
Next, make sure you have encrypted your client with a strong passphrase that you will not lose.
If you are using Peerunity, simply press the “Unlock Wallet for Minting Only” button, enter your passphrase and press OK.
That’s it! You are now minting, congratulations. If you don’t believe that anything crypto-related could be that easy, you can check you are minting by looking at the little padlock in the bottom right corner of the client. It should now be unlocked. If you hover your mouse over it, it should say “Wallet is encypted and currently unlocked for block minting only”.
Alternatively, if you are using the Peercoin v0.4 client instead of Peerunity, follow these steps to start minting:
Go to help>debug window>console and enter:
walletpassphrase abc 999999 true
where abc is your passphrase and 999999 is the time you want to mint for in seconds (you can change this to whatever you want, but in most cases it is easiest just to enter a very large number). If your passphrase has spaces then enclose it in quotation marks.
Clear your passphrase by entering Ctrl-L.
That’s all there is to it. Again, you can check to see if you are minting by looking at the padlock in the bottom right corner (it may take a few moments to update.)
Finally, it is also possible to mint by simply leaving your client unencrypted, as minting will occur automatically when it is synchronized to the network. However, be warned that this is not advised, as leaving your wallet unencrypted increases the chances of having your coins stolen.
4. How often should I mint?
While there isn’t any right answer to this (it is really up to you), minting constantly is generally seen as the best idea. By doing this you are always helping the security of the network, as well as slightly increasing your return due to compounding rewards.
Having said that, it is also true that you can work out the likelihood of you solving a block within a certain time-frame. Some may find it more convenient to do this and only mint for the amount of time that they have a high chance of getting a reward.
In calculating the odds of getting a reward, there are a few things that are taken into account. The first is that you must wait 30 days after a transaction before those coins are eligible for minting. The second is that after 90 days, your coin age no longer increases for the purposes of solving a block (it does however continue to increase for the purpose of calculating your reward, but we’ll get to that later). These measures exist to make minting more equitable, as well as making it much more difficult for someone to try to abuse or attack the network.
Thankfully, you don’t really need to worry about these things, because there is a website to do it all for you! If you go to poscalculator.peercointalk.org you can enter the number of coins, age since transaction, and the current Proof of Stake difficulty. You can find the current Proof of Stake difficulty by entering getdifficulty into the debug console of your client, or by looking at a recent Proof of Stake block on a block explorer. The new version of the Peerunity client also contains a minting tab which displays some of this information.
I mentioned before about how your coin age for the purposes of calculating your reward continues to increase after 90 days. So in a way, by not minting now you are deferring your reward to a later date. When you do eventually start minting, your reward will simply be larger. However, it is still better to mint regularly so you can get rewards more often (allowing them to compound) and provide more benefit to the network.
5. What happens if I solve a block?
If you solve a block, a new transaction will appear in your client called “Mint by stake”. Now, for the next 520 confirmations (about 3 and a half days), the coins you used to mint that block will be locked under the “stake” balance in your client. Don’t worry, they are still completely safe, this is just another measure to make minting fairer as large holders cannot constantly solve blocks (giving smaller holders a better chance) while also helping to ensure network security. After 520 confirmations, they will simply return to your normal balance and will be available for spending.
If you think you will need to spend your coins in the near future, then it is best not to mint for that time in case you solve a block and have them unavailable for a short period. It is also possible to set a “reserve balance” of coins that won’t be used for minting by using the
reservebalance [<reserve> [amount]] feature in the client.
The amount of reward you receive will depend on the coin age you put up for stake. An easy way to get an idea of how this works is to take a look at the recent blocks on a block explorer. There you can see the reward, amount staked, and coin age destroyed of each Proof of Stake block (you will also notice the less regular Proof of Work blocks that were mentioned earlier.)
6. Is minting safe?
There are no known vulnerabilities with minting, but as with any situation keeping cryptocurrency in a wallet connected to the internet, it is important to take precautions. Some optional extra steps you can take to increase security are mentioned below:
[ul][li]Ensuring you have a strong passphrase and that your system is free from malware, keyloggers etc.[/li]
[li]Minting without port forwarding enabled (if you never have more than 8 connections, then port forwarding is not enabled)[/li]
[li]Setting a very strong RPC password[/li]
[li]Minting on a dedicated device such as a Raspberry Pi[/li]
[li]Minting with tor needs more work to make this option user-friendly[/li][/ul]
7. The future of minting
There are many projects currently in progress to make minting easier and safer, such as a dedicated OS and hardware. You can read about the Peerbox project here.
Another feature that is often discussed is known as “cold-locked” or “cold-storage” minting. This is where the private key can be held offline without removing the incentive to run a node. This is currently being planned for the next release of Peercoin (v0.5). More info can be found here.
The most important thing at the moment is that as many people mint as possible to ensure that Peercoin remains secure and strong in the future, and I hope this guide is some help towards that.