Peercoin, also known as “PPCoin”, “P2P coin”, and “Peer-to-peer coin”, is a crypto-currency that uses both proof-of-stake (PoS) and proof-of-work (PoW) systems. As of April 2014, Peercoin is the third-largest minable crypto-currency by market capitalization with a total value $100 million PPC in circulation. The creators of Peercoin are Scott Nadal and Sunny King. King also created Primecoin. Nadal has all but disappeared from the Peercoin scene, leaving King as its sole core developer. Peercoin is distributed under the MIT/X11software license.
Like many crypto-currencies, Peercoin was inspired by Bitcoin, and it shares much of the source code and technical implementation of Bitcoin. Unlike Bitcoin, Namecoin, and Litecoin, Peercoin is not subject to a hard limit on the number of possible coins though it is designed to eventually attain an annual inflation rate of 1 percent. This feature, along with increased energy efficiency, aim to allow for greater long-term scalability. Peercoin is designed so that it can theoretically experience a steady 1% “decentralized” inflation per year, yielding an unlimited number of coins. Although Peercoin technically has a cap of 2 billion coins, it is only for consistency checking, and the cap is unlikely to be reached in the foreseeable future. If it were to be reached, it could easily be raised, hence for all practical purposes Peercoin can be considered to have inflation of 1% per year, with a limitless money supply. There were 20.7 million Peercoins in existence as of November 19, 2013 and the current inflation created by proof-of-work mining is at about 8%.
Peercoin’s transactions, balances and issuance are handled through SHA-256, the proof-of-work scheme. Peercoins are currently traded for fiat currencies, bitcoins, and other crypto-currencies, mostly on online exchanges. Credit cards and other reversible transactions are generally not used to buy Peercoins. This is because Peercoin transactions are irreversible, and therefore there is a concern for possible chargebacks. Similarly, Payments in the Peercoin network are made to addresses, which are based on digital signatures. Peercoin signatures consist of 34 numbers and letters which always begin with the letter P. One can create as many addresses as needed without spending any Peercoins. It is quite common to use one address for one purpose only which makes it easy to see who actually sent the Peercoins.
Peercoin transactions are recorded in the Peercoin blockchain which is a ledger that is held by most clients. A new block is added to the blockchain roughly every 10 minutes and transactions are usually considered complete after 6 blocks, or 60 minutes. For smaller transactions, less than 6 blocks may be needed for adequate security.
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Peercoin’s major distinguishing feature is that it uses a proof-of-stake/proof-of-work hybrid system. The proof-of-stake system was designed to address vulnerabilities that could occur in a pure proof-of-work system. The proof-of-stake system was developed to address the high energy consumption of Bitcoin. For example, as of April 2013 the generation of Bitcoins was using approximately $150,000 USD per day in power consumption costs. The proof-of-stake method of generating coins requires very minimal energy consumption; it only requires the energy to run the client software on a computer, as opposed to running resource-intensive cryptographic hashing functions.