Peercoin is an alternative cryptocurrency based on the Bitcoin foundation that was created in August 2012.
Peercoin, like Bitcoin, Litecoin, and Dash, is a cryptocurrency that stores value, provides perfect anonymity, and can be across the internet without the need for a central authority (such as a bank).
Sunny King and Scott Nadal, two software developers, created Peercoin. It was the first digital currency to adopt a consensus method that combined proof-of-stake (PoS) and proof-of-work (PoW).
Understanding Peercoin
Peercoin is a type of cryptocurrency. Any cryptocurrency that isn’t Bitcoin is known as an altcoin. Altcoins are frequently as superior to Bitcoin; Peercoin was the first altcoin to address Bitcoin’s high energy consumption. Peercoin’s founders wanted to provide better security as well as energy efficiency.
To validate transactions on a blockchain, Bitcoin’s protocol requires miners to solve complex arithmetic problems.
The first miner to solve a puzzle receives a reward in the form of newly minted bitcoins. Solving these puzzles necessitates a substantial amount of computational power and, as a result, uses a big quantity of electricity. This is one of the issues that Peercoin is attempting to address.
Peercoin tokens are first mined using the widely utilized PoW hashing algorithm. The PoS algorithm rewards users with coins as the hashing difficulty grows over time. PoS coin blocks are generated depending on the coins already owned by individuals; for example, someone holding 1% of the currency will receive 1% of all PoS coin blocks.
“Minting” is another term for this procedure.
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When compared to the process of creating hardware-intensive PoW hashes, block production using PoS uses very little energy. There is a transition to employing the PoS phase of the algorithm as the PoW blocks yield fewer rewards (which requires minimal energy for generating blocks). This means that the Peercoin network will use less energy over time.
Peercoin no longer ranks among the top coins to watch or buy in, despite a bright and innovative start.
This has a market capitalization of $23.6 million as of August 4, 2021, and ranks 631st on CoinMarketCap.com’s crypto list. Peercoin does, however, have an active foundation, and the Peercoin community continues to work on it.
How Is Peercoin Different From Bitcoin?
While Peercoin is on the same structure as Bitcoin, the two cryptocurrencies differ in their approaches to mining. Bitcoin uses a PoW technique to secure its network, while Peercoin is a hybrid cryptocurrency that also uses PoS. Peercoin was the first virtual currency to use Proof of Stake.
Participants who already hold Peercoin are the ones that validate transactions on the network under a PoS scheme.
The greater the number of peercoins a person has, the more valuable their verification is to the network.
Because having more peercoins benefits miners, this mechanism encourages users to save their Peercoins (rather than spending it).
Peercoin is a more energy-efficient means of protecting the blockchain than Bitcoin.
Peercoin’s Built-In Inflation
Sunny King, the founder of Peercoin, stated in an interview that there is a compromise between a cryptocurrency’s security and 0% inflation in its value. Miners of Bitcoin and their entire revenue will base on fees, reducing the economic incentive to maintain the network’s integrity.
Peercoin’s minting technique incorporates inflation into the system, providing miners with a constant economic incentive. Sunny King claims that “An alternate design approach is to accept the minimum inflation rate required to secure the network while allowing transaction fees to be destroyed in order to combat inflation.
This, in my opinion, is a better strategy that can offer the network with stronger and more consistent security while conditionally maintaining strong store-of-value features.”
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