In our quest to bring you the most thorough and up-to-date information on digital currencies, we like to step aside from time to time and take an in-depth look at one particular cryptocurrency. This time around, we're gonna focus on Peercoin, also known as PPCoin or Peer-to-Peer Coin. We'll take a look at its history and features—especially the ones that make it unique.
Peercoin was introduced in August 2012 by Sunny King. In just over a year, it's become the third-largest alternative currency in the world (after Bitcoin and Litecoin); that's not bad in a field that's been characterized by explosive growth and steep competition. Like most types of cryptocurrency out there—especially the ones that were released after Bitcoin was in 2009—Peercoin has been called a mere “Bitcoin clone” by its detractors. We should note here that almost every digital currency introduced after Bitcoin has fallen under that generic claim at one time or another. As CoinDesk noted in a recent article, “Everyone knows the first person who walked on the moon. Lots of people know the second. But whoever remembers the third?”
Peercoin's advocates would argue very strongly against the “Bitcoin clone” claim—and they do, whenever they get the chance. Their web page has a "Myths” section, and they offer the following as a means of shooting that claim down:
Peercoin is one of the truly unique alt coins that are not a clone of the original Bitcoin. Peercoin is the first coin to introduce a Proof of Stake/Proof of Work combination along with other energy efficient mechanisms.
We give them an “A” for effort for that sentence—and they go into much more detail on their regular website —but we'd like to break that down into clearer language. So, what makes Peercoin different?
The majority of alternative currencies offer earnings based on what's called “proof of work;” that means when you mine blocks of data for the currency issuer, you are ultimately rewarded for the work you do, the reward being a given number of coins. Peercoin uses this system, as well, but they also implement what they call “proof of stake” rewards. In plain English, you're rewarded for the currency holdings you already have on hand in addition to the work you perform. You'll earn from this system even if you don't do any mining, simply by holding a percentage of the currency that's out there. It's designed to be energy-efficient, since it doesn't rely solely on mining—which can eat up a lot of electricity and computer time—for currency generation. At the time of this writing, Peercoin is the only major player in the cryptocurrency industry that uses this proof of work and proof of stake combo.
Another argument for this system is its ability to ward off 51% stake attacks, which means it's much more expensive and difficult for someone to claim a larger stake of a currency and monopolize it. Think of it as a sort of hostile takeover of an entire currency—something the issuers and other members definitely do not want to have happen. Advocates of the proof of work/proof of stake combination argue it's a fail-safe against such attacks, which are a concern to issuers of other cryptocurrencies. This issue is explored in more detail in this Wired article.
All Peercoin transactions are identified by a unique 34-character digital signature that begins with the capital letter “P.” Peercoin's transaction verification is often somewhat slower than that of other digital currencies. Blocks of data are processed, on the average, every six minutes, and many larger transactions require ten blocks be processed before a transaction is okayed. This means a transaction could take as long as an hour to be validated, though smaller transactions take much less time. One final note: Peercoin's transaction fees are set by its network of stakeholders, as opposed to the variable system used by most other digital currencies.
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