What is Peercoin?
Peercoin is also recognized as PPCoin, which is a peer to peer cryptocurrency that uses proof of stake and proof of work systems. Peercoin basis is dated back to Aug. 2012 paper that revealed the authors as Scott Nadal and Sunny King. Sunny King was also the creator of Primecoin, is known to be a pseudonym. The involvement of Nadal decreased on Nov. 2013, ignoring King as the sole developer of Peercoin. The inspiration of Peercoin arose from Bitcoin, and its source code is similar alongside with Bitcoin Technical implentation. The source code of Peercoin is shared under the MIT/X11 software license. Peercoin was rated 4th among the largest minable cryptocurrency by market capitalization. The market cap for Peercoin was USD30 million as of 20th of July, 2014. Unlike Litecoin, Namecoin and Bitcoin, Peercoin’s inflation rate is 1%. This includes increasing energy efficiency and targets to provide greater long term scalability.
A peer to peer network controls the transactions of Peercoin, balances and issues via SHA-256, the proof of work scheme which states that Peercoins are issued when very small hash value is located, whereby the point of the block of transactions is joined with the distributed block chain. The process of locating these hashes and creating the blocks is known as mining. Peercoins are recently traded for fiat currencies, Bitcoins, and other forms of cryptocurrency, majorly for exchanges online. Transactions that are reversible like those with credit cards are not normally used to purchase Peercoins because transaction of Peercoind cannot be reversed, so there is risk of chargebacks.
Peercoin payments are made to addresses that are on the basis on digital signatures. They are 34 string numbers and letters which always begin with the letter P. Someone can create multiple addresses as needed without spending any Peercoins. It is very popular to operate on an address for a single purpose that makes it simple to check the Peercoin sender.
Transactions are stored in the block chain of Peercoin, a ledger that mostly all the clients have, a new block is joined to the block chain around 10 minutes interval whenever a minimal hash value is located for the scheme of proof of world, a transaction is termed complete after 6 blocks, which may also be an hour, but might take less than 6 blocks for transactions that are not much.
PROOF OF STAKE
The main distinguishing feature of Peercoin is that it makes use of proof of stake and proof of work hybrid system. The design of the proof of stake is to take charge of vulnerabilities that may arise in a pure system of the proof of work. Like in Bitcoins, there is fair of attacks that came from a monopoly on mining share. This happens because gains from mining are designed to decrease exponentially, which may reduce the mining incentive. As miners reduces, the monopoly likelihood increases, and it exposes the network vulnerability to a 51% attack meaning that when a single entity system gives room to the entity to access a large quantity of coins. With the system of proof of stake, generation of new coins is based on the individuals.
Peercoin design is made to experience a steady 1% decentralized inflation in every year, resulting to an unlimited number of Coins. This is a joint result of the mining process of the proof of stake, alongside with scaling of mining difficulty with popularity. But Peercoin has a cap technically of around 2 billion coins, mainly for confirming consistency, and the cap may not be reached for the forecasted future. If the cap were to be reached, the raising could be easy, hence for all practical purposes that Peercoin can be termed to have an inflation of 1% per year, with unlimited money supply.
Peercoin was made to remove variable and optional transaction fees to favor the defined transaction of protocol fee which is currently 0.01 PPC. The transaction charges are fixed at the level of protocol and are destroyed instead of heading to miners. This is aimed to against inflation by deflating the money supply and regulates the volume of transaction, and stop spam network. The major issue with protocol defined transaction fee is that it does not rise with the value of currency units, and might request a hardfork for adjusting transaction charges.
I accordance with original paper, Peercoin makes use of a centrally broadcast checkpoint mechanism. The paper cites argument of Ben Laurie that Bitcoin has not solved the shared consensus problem completely as the checkpointing mechanism is not shared.