Everyone knows the first person who walked on the moon. Lots of people know the second. But whoever remembers the third?
As the third largest cryptocurrency in the world, peercoin (also know as Peer-to-Peer Coin or PPCoin) is trying to bolster its reputation. It isn't doing too badly having just been accepted as an official currency by new Canadian exchange Vault of Satoshi. A local face-to-face peercoin exchange is also launching, and efforts are been made to get specialist event organizers to use peercoin as their official currency.
Peercoin may be ‘the little altcoin that could’, but it still has a long way to go. Its market cap is the third largest, but it equates to just 37,000 BTC, or around $8.7m at the time of writing (that's about as much as the UK's Barclays bank earned every three hours last year).
Comparatively, litecoin’s market capitalisation is almost eight times as much, and you could fit peercoin into bitcoin 322 times. This shows just how consolidated the cryptocurrency market is.
Nevertheless, peercoin's founder Sunny King is trying hard to make it a success. At this point, following the decreasing involvement of Scott Nadal, who co-authored the white paper on peercoin in August 2012, King is its sole core developer.
Peercoin is based on the same SHA-256 proof of work mechanism that bitcoin uses, but it is also designed to produce coins in another way: proof of stake.
Whereas proof of work generates bitcoins using computational power, proof of stake relies on the coins that people already have in their possession.
The network gives people more coins based on how many they already have, under a minting algorithm that acknowledges the age of a coin (giving a whole new meaning to the phrase ‘old money’).
The idea is to create a system that uses less electricity than a proof of work-based system. Other benefits also include low inflation – transaction fees are destroyed to offset inflation from proof of stake minting – and longer-term stability.
“For the long term, bitcoin's mining generation would tend to zero, so mining would be supported mostly through transaction fees,” King said. “The security of [the] bitcoin network in the long-term would depend on whether transaction fees can sustain a good enough security [sic].”
Bitcoin transaction fees will become more important to the network’s performance as mining rewards reduce, because they will become the miners’ main incentive.
Conversely, because proof of stake requires no transactions and no mining to generate coins, the currency does not have to rely on transaction fees to generate coins, according to King.
That being said, proof of stake still represents a miniscule part of peercoin's overall coin generation system. Most of the coins are still generated by miners, who King explains are needed in the early stage of a coin's development.
After all, you can't easily use proof of stake to generate coins when there are relatively few in existence, unless you start pre-mining, or create some kind of IPO-fuelled genesis block.
The hash rate for peercoin mining has been going up. It first spiked in April, and ranged under 1TH/sec until early September, when it began increasing exponentially.
This increase, aligned with the dramatic increase in bitcoin difficulty following a flood of ASIC miners onto the market, saw the hash rate increase from around 1TH/sec to 16TH/s in a month. It currently rests at around 14TH/s.
“The increase of computation power through ASIC is quite impressive,” said King. “This has accelerated the mining reduction because we use a curve that ties mining output to difficulty.”
That curve is based on this equation: block reward = 9999 / difficulty ^ (1/4). There is still “some time to go” before proof of stake generation overtakes proof of work rewards, he said.
King has big plans for the coin. “In the long term, I think there is a chance that energy efficient systems would surpass bitcoin's market share,” he said.
King isn't going to be able to do all of that on his own, though. Recently, John Manglaviti joined his team, effectively taking on community development.
Manglaviti was at least partly responsible for building the feathercoin community when he was there. He also headed UNOCS, a community initiative that was supposed to bridge feathercoin, worldcoin and the since-imploded phenixcoin.
But then, Manglaviti walked away from both UNOCS and feathercoin, and ruffled a lot of feathers.
“People in the community were not very happy about that, which seemed a bit unfair considering how much time, effort and money he had put into feathercoin,” feathercoin founder Peter Bushnell told CoinDesk when Manglaviti left in September.
“Working with anonymous people is a challenge,” said Manglaviti, who says that he walked away from feathercoin and UNOCS to concentrate on his training business.
Phenixcoin’s development team let him down, he said. “It's hard to really perform due dilligence. I wish I would have done more with phenix.”
People in the feathercoin community may have been upset at Manglaviti, but he says that he talked about leaving the leadership role many times before he departed, so it shouldn’t have been a surprise.
Now, he’s working with King on building the same kind of community that he built around feathercoin before he left. This includes teams of volunteers (he calls them ‘volunpeers’) to help build energy around the coin and to lobby exchanges for inclusion.
But will Manglaviti’s involvement with peercoin last? He admits that he doesn’t know who Sunny King is.
The founder of peercoin is incredibly paranoid (and wouldn’t even talk to us on phone or Skype – only via IRC, or via the peercoin chat room).
There’s a single, anonymous point of failure for this coin, just as there was with phenixcoin. Why should he trust King?
Firstly, King argues that his other coin, primecoin, has a bigger community of developers, and that they will likely contribute to peercoin over time.
Is that happening now? “Not yet. But there are quite a number of good developers working on mining in primecoin. These are the type of talents that can understand [peercoin] code and maintain it as well,” King asserted.
Manglaviti explained that he and Bushnell hired King to develop an advanced checkpointing function for feathercoin, so he already knows the mystery developer’s work.
King introduced checkpointing in peercoin last year, to help secure it in its infancy. It helps to defend against 51% attacks.
"Developers can operate a master node that broadcasts 'checkpoints', which tell other nodes to reach consensus on certain blocks,” he says, adding that it’s essentially a “consistency alert message”.
While King takes care of business at the code level, the peercoin community is also getting things done. 'Fuzzybear', the administrator of Peercointalk.org, is launching LocalPeercoins, an online service much like LocalBitcoins.com, enabling peercoin enthusiasts to find others nearby who can trade currency with them.
The other hurdle is getting a decent merchant network. That, in turn, needs payment processors. Now, it has one.
“Recently we have seen the first payment processor (coinpayments.net) and I think more would come as the market grows,” said King. “John is also in active contacts with many service providers, so working with them is one of our focuses.” Coinpayments went into public beta in mid-August.
And then, there are the Trekkies. Trek Con Springfield is organised by BlackFish Entertainment. Taking place next May, the event expects at least 5,000 attendees, according to organizer Lawrence Blankenship, although it hopes to get up to 20,000. The event is using peercoin as its official currency.
How did all this come about? Because Manglaviti made it so. Blankenship works at JMark, the IT company at which Mangleviti is a trainer.
“We looked at the other coins but I don’t have friends in those coins,” said Blenkenship. “He has a team that will integrate it on the website and take it at the door.” These are the ‘volunpeers’ that Manglaviti talks about.
Coinpayments will handle online transactions, and peercoin is also hoping to have a mobile wallet available to support in-person payments.
That’s fun, but it’ll take a lot more than a single Trekkie conference to make peercoin fly. There are 16 of those events across the Northern US alone in October and November, and they’re hardly mainstream. It’s a start, though.
Manglaviti is also talking to at least one touring rock band to accept peercoin at venues. This is the way things will evolve with him – from the grass roots upwards. It’s an interesting contrast to peercoin’s top-down, single-developer culture.
If Sunny King is Oz behind the curtain, then he needs a community builder to move the coin from the shadows, and shine a light on it. Manglaviti could be that man – as long as history doesn’t repeat itself.
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