Table of Contents
The History of Peercoin
The cryptocurrency known as Peercoin launched in August of 2012. The main developers of Peercoin created a new viable way to maintain a network while at the same time decreasing the energy consumption. Peercoin can be considered a fork of Bitcoin. In fact, Peercoin was the first coin that introduced a hybrid of PoW and PoS algorithms.
Peercoin’s Original Mission
Peercoin was originally developed to tackle the issues which were found with the proof of work system that are used by; Bitcoin, Ethereum, Monero. The biggest issue was tackled with the proof of work/proof of stake hybrid algorithm model. Due to this new technology, Peercoin was able to offer a more secure coin which could prevent ‘51% attacks’ as well as reach a model in which decentralization is better obtainable. A 51% attack is an attack on a blockchain executed by a group of miners who control more than 50% of the network’s computing power. When you want to perform a 51% attack on Peercoin, you will have to own 51% of all the Peercoins on the network.
One of the reasons why Peercoin has chosen for the proof of stake model is to fight against the energy consumption which is used by mining rigs when mining cryptocurrency. When you are minting coins, you do not require extra hashing power to ensure you get the best orders to validate. When minting Peercoin it does not matter how much hashing power you have. The minter who will get the reward for completing a block is randomly chosen.
Specifications of Peercoin
|Date of Release||12 August 2012|
|Consensus mechanism||Proof of Stake|
|Average Block Time||10 Minutes|
|Mining / Staking reward||1% yearly|
|Average blocksize||400 bytes|
|Next Block Halving||n/a|
The Price of Peercoin
Unique Aspects of Peercoin
In the traditional sense, miners used to be the lifeline of the blockchain. They would perform difficult mathematic problems in order to create blocks and gain a reward in the form of newly created bitcoins. This reward is the incentive for miners to keep producing new blocks. The rewards received were also used to pay for the expenses brought by the heavy energy consumption for solving these issues or to further invest in better equipment. Better equipment meant a higher chance of solving the mathematic problem first. Besides the energy consumption issue, Peercoin saw this as an inefficient means of the sustainability of the blockchain.
Peercoin’s Proof of Stake Algorithm
Peercoin’s Proof of Stake system is a process of validating new transactions and blocks that works quite differently. Miners in Peercoin are called minters. Instead of difficult calculations, Peercoin emulates PoW competition in its protocol by using time as an alternative limited resource. In order to select the minter that produces the next block, Peercoin’s protocol relies on a concept called coin age.
Coin age is a number that is calculated from multiplying the amount of coins a minter owns by the number of days those coins have been held in their wallet. There are a number of rules coded into the protocol to keep minters with a high coin age from being able to dominate the process of minting new blocks. Minters are first required to hold coins in their wallet for a total of 30 days before they can become eligible to compete in the process of minting new blocks.
Minting New Blocks
Once a new block is minted, a transaction is automatically generated. This transaction sends the coins that were used to mint the block back to the minter. This automated transaction back to the minter of the new block causes the age of the coins to be reset. The minter then needs to start from scratch and wait another 30 days in order to be eligible to participate in the minting process again. A third rule also states that a minter’s probability of finding a new block reaches its maximum after 90 days and their chances of minting a new block are maxed out.
Proof of Stake minters in Peercoin are compensated with block rewards that are automatically generated by the network, similar to Bitcoin. Users who engage in the PoS minting process earn an annual total of about 1% on their holdings every year. This interest on the stake they hold comes to them throughout the year as blocks are produced and not all at the same time.
A recognized problem in blockchains that are solely run on Proof of Stake is that coins are much more difficult to properly distribute. When first creating a pure PoS blockchain, the entire supply of coins needs to be created at the same time. This supply is then usually distributed to a small group. This is where the PoW hybrid comes in. PoW assists with security indirectly by providing for a more distributed network, this is achieved by mining blocks just as in Bitcoin, the newly created Peercoins are then distributed through the network as the miner will sell these coins to pay for the expenses during their mining operations.
Why Use Peercoin?
The annual reward of 1% for Peercoin holders makes Peercoin a great coin for store of value. If you would like to help the network, Peercoin has developed Peerbox which is one of the more user-friendly ways of setting up a cryptocurrency full nodes. This node can run on any computer. Even small computers such as the Raspberry Pi. Peercoin has a nice integration guide on the website for merchants looking to accept this cryptocurrency as a payment option. Although it seems not many companies have accepted Peercoin payments as of today, this does not prevent Peercoin from further developing their platform.