The same way the success of Facebook triggered the sprouting of different social networks, so did Bitcoins success in the world of crypto-currencies. Peercoin is one of the numerous clones of Bitcoins, but which has recorded a high rate of success of on its own. In terms market capitalization, Peercoin trails only Bitcoin and Litecoin. It is not very different from Bitcoin, except that unlike Bitcoin, it has no specific limit on the total number of cryptocoins mined, and it also has a premeditated 1% inflation rate in the long run. The latter feature is one of Peercoin’s strength and which is likely to ensure its durability.
Peercoin was developed in August 2012 by Sunny King, a software developer who also later developed Primecoin.
As aforesaid, the cryptocoin shares a lot with Bitcoin, as it was developed based on the latter’s source code and general implementation.
When it was first developed, Peercoin was meant to employ a proof-of-work setup mining system, the same as Bitcoin. However, this has been changed to proof-of-stake set up. Under this new system, instead of the need to process power, Peercoin algorithm calculations are based on the size of a person’s holdings.
In the Peercoin network, addresses are based on digital signatures and have strings of 34 characters, which consist of only numbers and letters. The addresses have the prefix P and one can create as many he/she needs, without spending a coin. Since there are no charges involved in creating addresses, people prefer to use one address for one purpose only to make it easier to identify the sender of the cryptocoins.
Just like Bitcoin transactions, Peercoin transactions are recorded in the blockchain. The block-chain is a ledger held by most, if not all, Peercoin clients. The blocks are updated at intervals, approximately 10 minutes each. However, for a new block to be added, a small enough hash value has to be found for the proof-of-work scheme. One complete transaction is often equivalent to 6 blocks, or is recorded after 60 minutes. In some cases, lesser blocks may be considered as transaction for ample security.
Peercoins are mined by spending the combined ages of the coins. The ages of the coins determines the chances of mining success, and the mining itself reset the ages of the coins. This system, proof-of-work setup, addresses the wastefulness of Bitcoin mining. There has been outcry on how Bitcoin mining wastes energy. On this note, Peercoin is the best choice for environmentally conscious cyber-currency enthusiasts, who want to stay true to their course.
Apart from being environment friendly, the proof-of-stake setup addresses the 51% attack vulnerability of the proof-of-work system in Bitcoin mining. Under proof-of-work system, monopoly of mining share increases as the miners decrease. When one party holds more than half of the mining share, the system may allow the party to double spend the coins, which results in a 51% attack.
In order to check this, the proof-of-stake hybrid setup generates coins proportionate to individual’s holdings. If you own 1% of PPCoins, you can only generate 1% of your holdings. The approach uses the coin age concept to incorporate the time factor into account. Therefore, the duration your coins have remained static is also factored in.
Under Peercoin mining, monopoly become much expensive and thus the process split the threat of domination from proof-of-work mining shares and consequently prevent the system take over. Another benefit is consistent fee structure that may lead to relatively lower transaction fees in the coming days.
The supply of Peercoins is determined by the proof-of-work mining, the difficulty of mining, number of transactions and proof-of-stake system. As a result of these factors:
Like any other altcoins, in the first few days of PPCoin the difficulty level was low and therefore high mintage was experienced. Some people pin this as a weakness, but they forget that it happens to every currency. When the difficulty is low, there are always lots of miners interested in participating in the process, thus causing faster block generation, which in turn results in high mintage per day. However, for peer-to-peer coin the starting difficulty level was premeditated and set at a higher initial value of 256.
If you are new in the world of virtual currencies, you may want to consider PPCoin ahead of other altcoins for a few reasons. First and foremost, it is friendly to the environment since its mining requires less power compared to Bitcoin and Litecoin. It has also distinguished itself by using hybrid Proof-of-Stake/Proof-of-Work setups. It is this hybrid system that requires less energy. Other reasons include:
Currently Peercoin does not enjoy the kind of maniac buying that Bitcoin is experiencing. However, the future is brighter for this altcoin, which many see will be the backbone of every altcoin in the future. This currency was designed long-term purpose and, if my instincts are right, then it is probably going to be more worth than Bitcoin.