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What is Peercoin – Introduction
Peercoin, which is also known as PPCoin or PPC, is a peer-to-peer cryptocurrency that uses both proof-of-stake and proof-of-work systems. It started just a few years ago in 2012, so it is one of the relatively early altcoins. Peercoin was based on an August 2012 paper which listed the authors as Scott Nadal and Sunny King. Nadal’s involvement had diminished by November 2013, leaving King as Peercoin’s sole core developer. Peercoin uses a hybrid proof of stake and proof of work where minters gain coins in line with their holding and where miners gain coins in line with the hashing power pointed at the network. As proof of stake, it is not very energy intensive; that is, it doesn’t require resolving any inversion problem. Its unique selling point has been its green credentials.
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With proof of stake in Peercoin, the reward is allocated according to the age of the coins in an address and for how long it has been unused multiplied by the number of coins. Only one hash per transaction output is performed every second making the processing load very low. Peercoin does not have a particularly hard limit on the number of possible coins. It was designed to get to the point of securing a yearly inflation rate of 1%. There is also a deflationary aspect to Peercoin because the transaction fee that is given to the network is destroyed. This feature, which includes increased energy efficiency, aims to allow for greater long-term scalability.
This works using a peer-to-peer network, and it is what takes care of Peercoin’s transactions. This cryptocurrency is issued when a good amount of hash value is found. The network balances the system using SHA-256 and the proof-of-work scheme. Note that when the hash is found, the block of transactions is added to the shared blockchain. It is this entire process that is referred to as mining.
Peercoin Payment Adress
Payments in the network are normally made to certain addresses, which are completely based on digital signatures. These addresses are strings of 34 numbers and letters which always begin with the letter P. It is possible to create as many addresses as you want without spending any Peercoins. It is quite common to use one address for one purpose only which makes it easy to see who sent the Peercoins.
Peercoin and Blockchain
Its transactions are stored in the Peercoin blockchain which is a ledger that is held by a good range of clients. Every new block is added to the blockchain with a targeted time of 10 minutes whenever a hash value is found for the proof-of-work scheme. Every transaction is not complete until after 60 minutes. Although for smaller transactions, fewer than 6 blocks may be required for adequate security.
Peercoin Mining & Minting
There are two different ways to create Peercoin; they include mining and minting. The Mining process uses the SHA-256 algorithm to properly make the network secure. The Minting process rewards users in proportion to the coins that they hold (targeted at 1% annually). There are long-term plans to carefully reduce the amount of mining. This is geared toward the goal of getting people to rely more on minting. It is to create a fair distribution and could even have to go gaining more regarding rewards.
Features of Peercoin
A major feature that makes Peercoin unique is that it uses a combined proof-of-stake system. The system was created and designed to take care of the issues that could occur under a pure system. As miners reduce, then the likelihood of a monopoly increases, and this in itself leaves the network vulnerable to the high percentage of attack. This is one of the challenges bitcoin faced as it has a monopoly on mining share. A suspected reason for this is that rewards from mining are programmed to decline, and it may further reduce the incentive to mine. However, with a proof-of-stake system, even more, coins are created based on individual holdings. This has the effect of making a monopoly more expensive, and it does a very effective job of separating the risk of a monopoly from its mining shares.
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The whole network uses the SHA-256 Algorithm. For each sixteen times increase in the network, the “proof-of-work” block reward is split. In July 2016 the Bitcoin mining reward halved causing a notable minority of miners to switch to mining it for better profitability. Researcher Adam Hayes explained that its network hash rate surged from roughly 500 terahashes per second (TH/s) to 6,500 TH/s following the halving.
Peercoin’s proof-of-stake system was developed to correct the high energy consumption rate of bitcoin. For example, as of April 2013, the generation of bitcoins cost approximately USD 150,000 per day in power consumption. The proof-of-stake method of generating coins requires significantly lower the consumption of energy. At its early stages of growth, a good amount of Peercoins will be generated by proof-of-work. Over a period, however, the proof-of-work will be phased out as it gets increasingly difficult. Needless to say, as this happens the block rewards also reduce. Note that in the same regard, as proof-of-stake becomes the major source of coin generation, the energy consumption level regarding its market cap, also reduces over a period.
Last but not the last of the interesting features of this cryptocurrency is that it is specifically designed to theoretically experience a steady 1% rate of inflation yearly, resulting in an unlimited number of coins. This is a combined result of the minting process, and scaling of mining difficulty. While this altcoin has a cap of two billion coins, the height is unlikely to be attained for the foreseeable future. If the cap were to be reached, it could easily be gotten; hence for all practical reasons the cryptocurrency can be considered to have inflation of 1% per year, with an unlimited supply of money. This was partially designed to address the growing population.
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