{"id":167,"date":"2014-07-22T09:37:00","date_gmt":"2014-07-22T09:37:00","guid":{"rendered":"http:\/\/blog.holytransaction.com\/a-little-altcoin-sanity-peercoin\/"},"modified":"2022-02-25T20:08:30","modified_gmt":"2022-02-25T18:08:30","slug":"a-little-altcoin-sanity-peercoin","status":"publish","type":"post","link":"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html","title":{"rendered":"A little altcoin sanity: Peercoin"},"content":{"rendered":"
(CoinReport<\/a>) Litecoin, Namecoin, and Peercoin<\/a> are the three you consistently would hear referred to when people talked about alts. It probably helped that BTC-e, one of the early altcoin hubs, added them all, giving them greatly increased prominence in the community. In looking at these four cryptocurrencies \u2014 Bitcoin<\/a>, Namecoin, Litecoin<\/a>, and Peercoin \u2014 it\u2019s interesting to consider them in terms of how they differ from the original. Namecoin is the least distinct from Bitcoin: The only real distinction is the additional name-capturing feature. Litecoin is distinct in a few ways: block timing, total coins, and hashing algorithm (Scrypt). Still, neither of these were really all THAT different.<\/div>\n
<\/div>\n
Peercoin<\/a> actually IS different on a fundamental level. It introduced a concept now relatively commonplace within altcoins<\/a>: Proof-of-Stake. Before we go anywhere, though, specs:<\/div>\n
<\/div>\n
– Developed by Sunny King and Scott Nadal<\/div>\n
– Announced well in advance of release on August 12th, 2012<\/div>\n
– Mixed proof-of-work and proof-of-stake network security<\/div>\n
– No maximum coins, eventually maintains 1% inflation through Proof-of-Stake<\/div>\n
– 10-minute confirmations, like Bitcoin<\/div>\n
<\/div>\n
– Website<\/a><\/div>\n
– White Paper<\/a><\/div>\n
– Peercoin Forum<\/a><\/div>\n
<\/div>\n
So what exactly IS Proof-of-Stake (from here on out, PoS, no giggling please)? It\u2019s the use of coins held in wallets to secure the blockchain. On a very basic level (and apologies in advance for an analogy which distorts the situation, I only have so much space), pretend you\u2019re trying to account for all the gold in the world. You have a list of everyone who had some gold last time you checked. You ask all of those people \u201cHey, how much gold do you have?\u201d and they all send you proof of exactly how much they have. So you can cross those people off your list \u2014 you only need to go find the as-yet-unknown gold owners. Much less work. As a reward to those gold owners (Peercoin-owners) they get a tiny bit more Peercoin<\/a>, distributed based on how many Peercoins they own. This is essentially the basics of PoS: Instead of using electrical power to compute hashes to continuous prove ownership of coins and ensure network security, the PoS model just looks backwards in time to check and make sure proper ownership was verified, and that the coins have remained in that person\u2019s wallet since that last check. If both of those are the case, no more work is needed to be done.<\/div>\n
<\/div>\n
\n
So why would anyone want to use a PoS system? More directly, what are the advantages?<\/div>\n
<\/div>\n
First, it incentivizes owners of coins to own them. Generating 1% interest per year is a neat little benefit \u2014 not so much that it is a major problem for currency stability, or that it benefits holding coins so much that it promotes severe deflation, but just a little bit.<\/div>\n
<\/div>\n
\n
Second, it ends the possibility of some of the exploits the Bitcoin network needs to fear, such as the 51% attack. A 51% attack is essentially nonsensical when considered in terms of PoS, where an attacker would need to own 51% of the coins in order to perform it. I don\u2019t even want to consider what the market capitalization of Peercoin would have to reach for one entity to buy up half of the coins, but suffice it to say that it would be the most expensive act of cutting off one\u2019s nose to spite one\u2019s face any of us had ever bore witness to.<\/div>\n
<\/div>\n
Finally, since PoS replaces a significant portion of the role played by PoWork for securing the Peercoin blockchain, it is far more energy-efficient. No need to be running a huge amount of hashpower \u2014 those rooms full of Bitcoin mining ASICs don\u2019t have a place in Peercoin<\/a>. This is relevant for exactly the reason you would think: If you can achieve the same result (secure blockchain) with less expended resources (less energy), why wouldn\u2019t you? Or, to quote from the end of the Peercoin White Paper: \u201c\u2026we expect proof-of-stake designs to become a potentially more competitive form of peer-to-peer crypto-currency to proof-of-work designs due to the elimination of dependency on energy consumption, thereby achieving lower inflation\/lower transaction fees at comparable network security levels.\u201d<\/div>\n
<\/div>\n<\/div>\n
\n
Anytime resources must be expended in pursuit of a goal, the end-user must pay for those resources. The end-user of a cryptocurrency is its owners; why pay miners unless you have to? As Bitcoin did to banks and the fiat money system, so can Peercoin do to Bitcoin, at least in theory.<\/div>\n
<\/div>\n
But there\u2019s still one very unanswered question: How do we value Peercoin?<\/div>\n
<\/div>\n<\/div>\n
\n
Unfortunately, for once, I\u2019m going to have to tell you all something a little embarrassing: I have no idea. I understand what value it adds to the world (a blockchain which is cheaper to run than a purely PoWork model), but it\u2019s hard to say how that added value can be understood in terms of market capitalisation. Essentially, though, there are two potential options:<\/div>\n
<\/div>\n
1. Bitcoin and Peercoin<\/a> coexist. Bitcoin is used as the \u201creserve currency\u201d of the cryptocurrency world; the asset in relation to which all others are considered. Bitcoin is not commonly used for simple transactions due to high costs of exchange. Peercoin portefeuille<\/a>, being cheaper to use thanks to PoS, is used instead.<\/div>\n
<\/div>\n
2. Bitcoin\u2019s first mover advantage is somehow lost (or a black swan takes flight), and cheaper methods of curating the blockchain, such as PoS, take over. Peercoin takes on the role of reserve currency thanks to its competitive advantage over PoW, and due to its first-mover advantage relative to other PoS systems.<\/div>\n
<\/div>\n
And, of course, option three: Peercoin loses and becomes an unremarkable footnote to history. It is worth noting that option three is the path most altcoins are very likely to follow. I simply don\u2019t often discuss it, because the role of an investor is to look for potential value; if you spend all your time pointing at things you expect will fail, you\u2019re just wasting time.<\/div>\n<\/div>\n<\/div>\n

Open your free digital wallet here<\/a> to store your cryptocurrencies in a safe place.<\/p>\n","protected":false},"excerpt":{"rendered":"

(CoinReport) Litecoin, Namecoin, and Peercoin are the three you consistently would hear referred to when people talked about alts. It probably helped that BTC-e, one of the early altcoin hubs, added them all, giving them greatly increased prominence in the community. In looking at these four cryptocurrencies \u2014 Bitcoin, Namecoin, Litecoin, and Peercoin \u2014 it\u2019s […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[37,191,500],"tags":[871,1159],"yoast_head":"\nA little altcoin sanity: Peercoin -<\/title>\n<meta name=\"description\" content=\"Litecoin, Namecoin, and Peercoin are the three you consistently would hear referred to when people talked about alts.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"A little altcoin sanity: Peercoin\" \/>\n<meta property=\"og:description\" content=\"Litecoin, Namecoin, and Peercoin are the three you consistently would hear referred to when people talked about alts.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/facebook.com\/holytransaction\" \/>\n<meta property=\"article:author\" content=\"https:\/\/facebook.com\/holytransaction\" \/>\n<meta property=\"article:published_time\" content=\"2014-07-22T09:37:00+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-02-25T18:08:30+00:00\" \/>\n<meta name=\"author\" content=\"Satoshi\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@https:\/\/twitter.com\/holytransaction\" \/>\n<meta name=\"twitter:site\" content=\"@holytransaction\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Satoshi\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebPage\",\"@id\":\"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html\",\"url\":\"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html\",\"name\":\"A little altcoin sanity: Peercoin -\",\"isPartOf\":{\"@id\":\"https:\/\/holytransaction.com\/blog\/#website\"},\"datePublished\":\"2014-07-22T09:37:00+00:00\",\"dateModified\":\"2022-02-25T18:08:30+00:00\",\"author\":{\"@id\":\"https:\/\/holytransaction.com\/blog\/#\/schema\/person\/1643e2c0c2df67ae0d6eacff8a185e69\"},\"description\":\"Litecoin, Namecoin, and Peercoin are the three you consistently would hear referred to when people talked about alts.\",\"breadcrumb\":{\"@id\":\"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/holytransaction.com\/blog\/2014\/07\/a-little-altcoin-sanity-peercoin.html#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/holytransaction.com\/blog\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"cryptocurrency\",\"item\":\"https:\/\/holytransaction.com\/blog\/tag\/cryptocurrency\"},{\"@type\":\"ListItem\",\"position\":3,\"name\":\"A little altcoin sanity: Peercoin\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/holytransaction.com\/blog\/#website\",\"url\":\"https:\/\/holytransaction.com\/blog\/\",\"name\":\"\",\"description\":\"HolyTransaction's Blog - 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