For over a year now the Peercoin Team has been discussing whether to implement RFC-0011, which would incorporate a dynamic reward system in order to increase the level of participation in PoS minting.
RFC-0011 has gone through a number of different iterations, including a recent rewrite of the RFC to feature a static/dynamic reward split, with a Medium article accompanying it. After continued discussion by the development team however, consensus was ultimately blocked on RFC-0011.
Instead we will replace it with a simpler proposal, RFC-0018.
This proposal implements an increase to the coindays-based reward and adds an additional supply-based component to the reward. The result is similar in effect to RFC-0011, but without the dynamic adjustment. In the short term, we can expect nearly identical behavior from this proposal as RFC-0011, though in the long term the coindays-based component will remain at its fixed rate value even if participation increases. As a result, the total inflation due to PoS can exceed 1%.
RFC-0018 is objectively less complex than RFC-0011 and has 2 concrete protocol benefits over RFC-0011. The first is that all ‘timing attacks’ as spelled out in RFC-0011 are nullified, because there is nothing to time. The second is that the decrease in complexity makes it much easier to code, implement, and maintain. It should be noted that we can always upgrade from RFC-0018 to RFC-0011 in the future if consensus changes or a more elegant solution is found.
The parameter choices used in RFC-0018 are critical to what we can expect from it. The ‘3%+0.25’ option as written can result in PoS inflation at a maximum of 3.25% if 100% of the network participated in minting (a practical impossibility). In reality, this proposal will likely result in PoS inflation between approximately 1-2% (which is in line with most prominent economic policies of the 21st century). Other potential options are referenced in the ‘alternatives’ section of the proposal.
Other than the higher inflation, the other change of note is that RFC-0018 does not provide a dynamic pressure to minters to participate on a regular basis. The static portion of the reward will still provide incentive to minters to make as many blocks as possible, which should have a direct positive effect on the PoS difficulty and security of the chain. The dynamic system of RFC-0011 implies a decrease in incentive for large amounts of minters that participate only once in a while, which we may want to consider when revisiting RFC-0011 in the future.
All in all, you should expect a 3x increase in mint rewards, plus around 1.25 ppc (which will slowly increase with time). So if you minted 0.5 ppc in a block yesterday, in v0.9 you would have minted around 2.75 ppc instead, which is a 450% increase in reward. This is clearly substantial on an individual basis and we expect that it will drastically change the economics and security of the chain for the better.
For those who wish to delve even further into our reasoning for the change, we have decided to make a chat log available consisting of the past month of team development discussion with Sunny King pertaining to the PoS reward adjustment. You can view the full chat log at the link below…
Feel free to ask any questions you may have!
RC8 has been released! For those helping us test v0.9, please update and resync your client. This is to be used on testnet only!