What Is Peercoin?
There have been many altcoins that have emerged since Bitcoin made its debut. Only one of them has a stated goal of minimizing the resources required to create new tokens. Peercoin was introduced in 2013 with a hybrid model of mining. This combination of Proof of Work and Proof of Stake models is what makes Peercoin somewhat unique. It is otherwise similar in its function to other examples of digital tokens.
Peercoin is a digital token like Bitcoin, Ethereum, and Litecoin. It uses blockchain technology to enable transfers between individuals. The blockchain is a digital ledger which preserves a complete record of all transactions that are made with Peercoin tokens. In this regard, Peercoin is a true cryptocurrency that functions similar to Bitcoin and other altcoins.
Cryptocurrencies made it possible for individuals to transfer a form of money without the need for a bank or traditional payment processor. The most famous cryptocurrency, of course, is Bitcoin. It became the inspiration for all other digital tokens that emerged in its wake. As innovative as Bitcoin is, the token is not without its problems. Two major issues that have plagued the token since its introduction are a lack of scaling and the extensive energy resources that are needed to mine, or create, new tokens. The guiding principle of Peercoin was to address those limitations.
Peercoin tackles scaling by using a model that supports the unlimited creation of tokens. Compare that with Bitcoin which has a limit of 21 million tokens. Peercoin, in theory, has no limitation on the number of tokens that can be created. There is an inherent 1% yearly inflation rate for the token, and the mining difficulty is structured in such a way that it increases over time.
Peercoin has not had an easy road during its short life. It remains one of the least popular altcoins. On any given day its market cap and trading volume place it outside the 100 most popular altcoin cryptocurrencies. Some have speculated that the reluctant acceptance of its hybrid mining model is to blame for the lack of trader enthusiasm.
Like other cryptocurrencies, Peercoin is a transparent open-source platform. It is easy to use and does offer some advantages over Bitcoin. These advantages are faster processing times for transactions and the potential for lower fees. Despite its advantages, the coin has struggled since it made its debut. There is a possibility, however, that it could become a model for the future development of altcoins.
The Hybrid Nature of Peercoin
There are two ways that new Peercoin tokens can be created. These are by mining and minting. Mining coins is accomplished similar to the manner in which Bitcoin is mined, by virtue of a Proof of Work or PoW protocol. Minting coins is accomplished through a protocol known as Proof of Stake, or PoS, which rewards those who already hold Peercoin tokens. The reward is proportional based upon the number of tokens a person holds.
The developers of Peercoin have stated that they have a long term goal of expanding the minting side of the platform while reducing the mining side. This is the premise which would allow Peercoin to reduce the energy consumption required to generate new coins.
Peercoin was based on a modified version of the Bitcoin protocol, but it combines Bitcoin’s PoW model with a PoS protocol that is being adopted by many cryptocurrencies today. PoW and PoS both have their own challenges to contend with, but there is a general opinion that Proof of Stake models can lead to a greater amount of security on a cryptocurrency network.
Proof of Stake models have one primary goal. This is to reduce the amount of electrical resources which are required to validate transactions on a blockchain and create more tokens. Cryptocurrency mining has become difficult for the average Bitcoin investor because it requires specialized equipment and a lot of energy to accomplish. As a result, many individuals are turning to mining pools as an alternative.
PoS has been around since 2012, but it has only recently gained traction as a viable alternative to PoW. This protocol does not require an individual to purchase expensive mining equipment. Instead, it stakes token holders based on the amount of tokens they hold in their wallet. Those who have more tokens have a statistical advantage when it comes to verifying blocks and adding them to the blockchain.
Those who mint Peercoin are essentially guaranteed a 1% return on their holdings each year. Coins in a Peercoin wallet begin to mint after 30 days. This reward is in addition to any tokens that are created through the traditional mining process. There are also safeguards that are in place with Peercoin to prevent someone from establishing a monopoly on the process. The safeguard caps the increased chances of adding a block at a 90-day period.
Those who are unfamiliar with the process of mining cryptocurrencies will probably find all of this to be somewhat confusing. This is probably why the success of Peercoin has thus far been muted compared to other altcoins. What one really needs to know can be distilled this way: Peercoin can be mined, and it can also be obtained as a reward for investing in the coin with no expensive mining equipment required.
How to Get Peercoin
The first thing that one must do in order to obtain Peercoin is to create a Peercoin wallet. These wallets are available at the Peercoin website. It is also possible for individuals to read the Peercoin whitepaper that is linked from the website for more information about this digital token. There are versions of the wallet available for Windows, Mac, and Linux. This official method of storing Peercoin would be classified as an online wallet, meaning that the individual needs to have Internet access to maintain it.
Even though Peercoin has not achieved massive popularity, it can still be found on a number of cryptocurrency exchanges. On the exchanges you can buy Peercoin with another cryptocurrency, and some exchanges may also allow you to make purchases with a credit or debit card.
Is Peercoin a Good Investment?
The jury is still out when it comes to Peercoin as an investment. The token really only has value at the present time to those who hold cryptocurrencies against the probability that the value of a token will increase. There are limited options to spend Peercoin, as most retailers that accept cryptocurrencies are sticking with the more popular Bitcoin, Ethereum, and other tokens.
Some argue that the wholesale introduction of new altcoins is making it harder for tokens like Peercoin to succeed. This idea probably has merit. Of all the altcoins that have emerged in recent years, only a few of them have achieved success in terms of investment potential. Peercoin continues to struggle at the bottom of the barrel.
The thing to remember is that blockchain technology is evolving. Peercoin does have some upside as a pioneer of hybrid technology when it comes to the creation of coins. This could certainly offer the potential of growth at some point in the future. When that happens remains to be seen. At the present time Peercoin should be viewed with a healthy does of skepticism as an investment security.