I think to make another altcoin. maybee. :P.
Why did Sunny KIng set perecoins PoS to 1% per year?
For me it should be more like 4.5-5.5%
I’m thinking to make a peercoin fork, more for research than for creating an altcoin.
My best guess is that this is because we also have a lot of inflation due to mining (totals around 7%). When mining of coins slowly reduces or disappears there is potentially more leverage to increase PoS interest.
The other problem is that Peercoin can’t currently lend money or somehow make a profit like banks do. In the future with developments like Peershare and contracts on Ethereum this would likely be possible. In the distant future I suspect this will become more integrated and Peercoin will more act like a decentral bank. Until that moment there is no real source of income for the network and therefore any expenses (like interest) in the network translate into dilution of value (inflation).
Good luck with your research, would be great if you can publish some of your results here on Peercointalk.
The purpose of inflation in Peercoin is to secure the network and not inflation just for inflations sake. Since cryptocurrencies can be divided into unlimited units (with some updates to the source code), there are not any issues when it comes to the “money supply should grow with the economy” argument. Bitcoin has also shown us that people will spend their money even though the value of it is going up.
I agree with reason #1. Reason #2 too, but I don’t know how to measure that so I’m inclined to ignore it.
#3 there are two approaches to intentional (monetary) inflation to keep prices free of (price) inflation or deflation, so that they are stable and reflect the value of the goods and services without being distorted by the value of the currency to the extent that is possible. One is to index (monetary) inflation to the population. Prices then become relative to each person’s share of the total pie. The other way is what you suggested in your third suggestion: index (monetary) inflation to growth in GDP. That way prices are set relative to the total portion of the economy that a particular good or service represents.
I personally prefer indexing to the rate of population growth because I look at money in terms of individual buying power, and that’s the relationship that I think is most important to preserve. However, reasonable people can and do disagree about that so I think the more important point I want to make about item #3 is that #1 and #3 are two different approaches and should not be compounded. Either increase for population (my preference) or increase for GDP. But not both.
(Also, GDP grows at unpredictable rates. True for the population as well, but that’s much more stable.)
#4 is a myth. Stable currency valuation is the most important thing. Obviously runaway deflation is terrible—so is runaway inflation. But 2% deflation doesn’t damage an economy any more than 2% inflation—and probably hurts an economy less than inflation because it doesn’t make dependency on credit as important.
However, even if the neokeynesians are right and I’m wrong, the effect of (monetary) inflation directly into people’s hands actually has the opposite effect of a government increasing the money supply. So the kind of (monetary) inflation that happens with minting should have a short-term effect more like moderate (price) deflation because it increases the spending power of the person holding the money. More simply (and simplistically) put: it’s money that someone can spend, not money that someone can borrow and then spend.
So I’m sticking with “1% and tell people not to lose their wallets.”
But this is an important topic and should be discussed. Thank you for bringing it up.
the 1% number has nothing to do with inflation. It is only an mark of to what extent spenders pay savers. If it is too high, then nobody want to spend. 1% is a reasonable number.
Because every saver’s money increase by the same rate, so there is no money flow between them. Every user has the choice to be a saver, that’s why it is not traditional inflation. There is no harm to individuals from this new type, decentralized ‘inflation’.
What we need is for cryptoeconomists to start to model these out, but thank you for bringing up the topic, because it’s useful for helping us all understand what the differing viewpoints are.
The 1% per annum reward is useful, as designed, but in the back of my head, I’ve often wondered how the rate of monetary expansion would be affected if everyone were to receive 1% per annum, regardless of minting (as long the coins were held on the network; this is intended to counter-act the variability of small/large staked amount) and a separate reward for solving a block via proof-of-stake was paid out like we pay proof-of-work today, but perhaps at a fixed rate of ~25 or ~50 PPC.
Perhaps it is just me, but I would really like to see anyone who has a stake in the network, regardless of their staked sum, be able to have an even shot at “winning” a block. For someone with a 200,000 PPC balance, it’s not a huge deal, but “hey, free money!”. On the other hand, for someone who has 10 PPC in hand, putting that stake up to secure the network, and then seeing a deposit of 50 PPC into their wallet; I imagine it would be an amazing experience.
With a finite amount of blocks per year, and more and more people coming on to the network every day, your chances would decrease over time, but it would definitely still keep the “little guy” in the game. The 1% per annum M inflation would be partially to fully offset by the amount of peercoins destroyed via transaction fees, and the number of p-o-s blocks solved can be estimated/determined with good enough accuracy that we could then figure out if the transaction fee needs to be variable to adapt the overall inflation or deflation of the currency
I’m sure there are (potentially big) holes in that scheme, but if it is something that the community finds interesting, I’ll start a separate conversation for debate.
[quote=“maka, post:5, topic:1994”]the 1% number has nothing to do with inflation. It is only an mark of to what extent spenders pay savers. If it is too high, then nobody want to spend. 1% is a reasonable number.
Because every saver’s money increase by the same rate, so there is no money flow between them. Every user has the choice to be a saver, that’s why it is not traditional inflation. There is no harm to individuals from this new type, decentralized ‘inflation’.[/quote]
I agree with your reasoning, but the expansion of the money supply is inflation. Or as I referred to it before (monetary) inflation as opposed to (price) inflation. Most people talk about inflation as prices going up but it originally referred to the expansion of the money supply. Which devalues a currency and causes prices to rise absent other factors, so it’s easy to see how people could have gotten confused a long time ago and used the word in that sense for long enough that it became common usage.
http://www.clevelandfed.org/research/commentary/1997/1015.pdf
So it is proper to talk about the inflation built in to Peercoin, and to talk about the inflationary effects. Now you’re right that they are bound to be very small; on further reflection (and the fact that as you point out only some fraction of the money supply will ever be saved long enough to mint) there is more cause to talk about the deflationary nature of Peercoin, because it won’t grow relative to the population it serves.
However, in practice, while 1) mining is still going on and 2) more people are starting to use Peercoin, the effects of either minting or the world’s population growth on the value of the currency are academic topics.
The 1% reward is mainly an encouragement to those who keep the network functioning by keep finding POS blocks.
[quote=“Ben, post:6, topic:1994”]Perhaps it is just me, but I would really like to see anyone who has a stake in the network, regardless of their staked sum, be able to have an even shot at “winning” a block. For someone with a 200,000 PPC balance, it’s not a huge deal, but “hey, free money!”. On the other hand, for someone who has 10 PPC in hand, putting that stake up to secure the network, and then seeing a deposit of 50 PPC into their wallet; I imagine it would be an amazing experience.
With a finite amount of blocks per year, and more and more people coming on to the network every day, your chances would decrease over time, but it would definitely still keep the “little guy” in the game.[/quote]
I agree it’s better for the network to let everyone have the same chance to get POS blocks if they spend the same amount time searching POS blocks. To encourage longer search of POS blocks – hence a more secure network – the reward could be 1) greater reward for greater coinage as in current PPC implementation, or, 2) greater chance of reward just for greater age of stake, with a reward amount of total_number_of_coins_currently_exist*1%/number_of_POS_blocks_per_year, which is about 4PPC currently. The second method effectively gives out a fixed total reward to those who searches POS blocks, with a winning probability proportional to how long everyone searches. It helps to offset the #4 problem given here https://bitcointalk.org/index.php?topic=101954.msg1952272#msg1952272 (“an increase in price creates an incentive to move coins out of stake, effectively weakening the network”) because less number of POS block searchers means better return for the remaining searchers.
I agree it’s better for the network to let everyone have the same chance to get POS blocks if they spend the same amount time searching POS blocks.[/quote]
But how do you differentiate people in “everyone”? What would stop me from splitting my stake in 100 parts to pretend I’m 100 different people and get 100 times more chances to get the reward? We’d be back to something similar to PoW where more technical resources provides more reward.
I’m not sure how this would change the security. It would certainly increase the incentive to mint for small stakes but maybe too much. The fact that you loose your chances if you don’t mint would encourage people to run their client all the time, even if they have a very small chance to get the reward. This is not very energy efficient.
With the current system it’s not a big deal if you don’t run 24/7 because it just delays the reward.
I think it would also increase the probability for large stakes to find multiple blocks in a row because they don’t “spend” their coin age when they find one. It would be a big risk for the network.
But how do you differentiate people in "everyone"? What would stop me from splitting my stake in 100 parts to pretend I'm 100 different people and get 100 times more chances to get the reward? We'd be back to something similar to PoW where more technical resources provides more reward.
There isn’t a solution for that, but it is no different than today’s situation, where large amounts of coinage generate significantly larger chances to mint a block.
On the other hand, if you tied PoS minting to the wallet, rather than the address, does it make this less of an issue? Sure, you could set up a bunch of systems, each with a unique wallet, but even if you do, we’re likely talking about a relatively small increase in your chances, out of the rest of the users.
Is there value in consuming everyone’s coinage once a year (or weekly/monthly/quarterly) – staggered of course, based on the first transaction date – as a function of network security?
The fact that you loose your chances if you don't mint would encourage people to run their client all the time, even if they have a very small chance to get the reward. This is not very energy efficient.
If the Peercoin protocol eventually becomes embedded in a dedicated device, say, a phone, tablet or computer, this would add nominal overhead to your energy consumption. The primary energy concern is with proof-of-work processing, rather than the running of the clients. I can imagine that securely running your wallet software would be useful for network stability and speed of transaction propagation, but perhaps it really would be negligible because of how the protocol is architected.
I agree it’s better for the network to let everyone have the same chance to get POS blocks if they spend the same amount time searching POS blocks.[/quote]
But how do you differentiate people in “everyone”? What would stop me from splitting my stake in 100 parts to pretend I’m 100 different people and get 100 times more chances to get the reward? We’d be back to something similar to PoW where more technical resources provides more reward.
I’m not sure how this would change the security. It would certainly increase the incentive to mint for small stakes but maybe too much. The fact that you loose your chances if you don’t mint would encourage people to run their client all the time, even if they have a very small chance to get the reward. This is not very energy efficient.
With the current system it’s not a big deal if you don’t run 24/7 because it just delays the reward.
I think it would also increase the probability for large stakes to find multiple blocks in a row because they don’t “spend” their coin age when they find one. It would be a big risk for the network.[/quote]
“longer search of POS blocks” in the second method above is similar to burning coinage – the age accumulated by relevant transaction is consumed once you find a POS block. You can’t reuse age that has been consumed. Running the wallet 7/24 lets you try more often (just like Peercoin now) but even you don’t, as your chance is proportional to transaction age, your search is more effective if your coins are older.
One can indeed split funds to create many minters. Because POS searching is transaction based, there is a limit on how many transactions you can split your fund into tiny transactions due to the 0.01PPC fixed tx fee. Every PPC can be splitted to 100 transactions maximum. Those who split their fund have a better chance to find POS blocks than those who have the same fund but don’t split. However it is no worse than in current PPC implementation where as bigger fund holder have better chance automatically. The difference is that there are many more minters looking for POS blocks. Anyone can create many minters. Executing a 51% attack is more difficult.
There are some details I want to know ( asked here ) but still not sure about. Assuming POS searching is transaction based and the wallet loops through all transactions it contains for every POS search (once every second), then the PPC network is going through all the transactions that have unspent input (not sure if that is the right way to call it) every second. There are 21million PPCs in the world currently so there can be at most 2.1billion transactions that have unspend input. To hash through all these transactions every second looking for POS block means 2B hash/sec POS total hash rate. So allowing people to split funds to small pieces doesn’t cost much energy. It is 10 million times smaller compared with bitcoin’s 18P hash per sec. There is a low ceiling for any arms race looking for POS blocks.
I think to make another altcoin. maybee. :P.Why did Sunny KIng set perecoins PoS to 1% per year?
For me it should be more like 4.5-5.5%
- 1% is population growth worldwide
- 1% lost coins in computerc crash, lost wallet pw, owner dies and nobody uses coins anymore
- 2.5 % GDP growth per year in Switzerland over the last 100 years
- 1% normal inflation, because deflation is bad: people don’t spend there money anymore
I’m thinking to make a peercoin fork, more for research than for creating an altcoin.
You have point in questioning this magic number 1%. Why it is not 0.5% or 0.9 or 1.1 or 4-5%? It’s hard to figure it out what best reward would be.
Problem:
This 1% inflation rate maybe should fluctuate to give enough incentive to mint blocks with just enough coinage so network remain secure. Having said that I think 1% will be good enough so that fluctuating inflation rate is not really necessary.